Note 3 - Reportable Segments

3 Months Ended

Nov. 19, 2014

Segment Reporting [Abstract]

Segment Reporting Disclosure [Text Block]

Note 3. Reportable Segments

The Company has three reportable segments: Company-owned restaurants, franchise operations and Culinary Contract Services (“CCS”).

Company-owned restaurants

Company-owned restaurants consists of several brands which are aggregated into one reportable segment because the nature of the products and services, the production processes, the customers, the methods used to distribute the products and services, the nature of the regulatory environment and store level profit margin are similar. The chief operating decision maker analyzes Company-owned restaurants at store level profit which is revenue less cost of food, payroll and related costs, other operating expenses and occupancy costs. The primary brands are Luby’s Cafeterias, Fuddruckers and Cheeseburger in Paradise, with a couple of non-core restaurant locations under other brand names (i.e., Koo Koo Roo Chicken Bistro and Bob Luby’s Seafood). All company-owned restaurants are casual dining restaurants. Each restaurant is an operating segment because operating results and cash flow can be determined for each restaurant.

The total number of Company-owned restaurants was 175 at November 19, 2014 and 174 at August 27, 2014.

Culinary Contract Services

CCS, branded as Luby’s Culinary Contract Services, consists of a business line servicing healthcare, higher education and corporate dining clients. The healthcare accounts are full service and typically include in-room delivery, catering, vending, coffee service and retail dining. CCS has contracts with long-term acute care hospitals, acute care medical centers, ambulatory surgical centers, behavioral hospitals, business and industry clients, and higher education institutions. CCS has the unique ability to deliver quality services that include facility design and procurement as well as nutrition and branded food services to our clients. The costs of CCS on the Consolidated Statements of Operations include all food, payroll and related costs and other operating expenses related to CCS sales.

The total number of CCS contracts was 26 at November 19, 2014 and 25 at August 27, 2014.

Franchise Operations

We offer franchises for only the Fuddruckers brand. Franchises are sold in markets where expansion is deemed advantageous to the development of the Fuddruckers concept and system of restaurants. Initial franchise agreements have a term of 20 years. Franchise agreements typically grant franchisees an exclusive territorial license to operate a single restaurant within a specified area, usually a four-mile radius surrounding the franchised restaurant.

Franchisees bear all direct costs involved in the development, construction and operation of their restaurants. In exchange for a franchise fee, the Company provides franchise assistance in the following areas: site selection, prototypical architectural plans, interior and exterior design and layout, training, marketing and sales techniques, assistance by a Fuddruckers “opening team” at the time a franchised restaurant opens, and operations and accounting guidelines set forth in various policies and procedures manuals.

All franchisees are required to operate their restaurants in accordance with Fuddruckers’ standards and specifications, including controls over menu items, food quality and preparation. The Company requires the successful completion of its training program by a minimum of three managers for each franchised restaurant. In addition, franchised restaurants are evaluated regularly by the Company for compliance with franchise agreements, including standards and specifications through the use of periodic, unannounced, on-site inspections and standard evaluation reports.

The number of franchised restaurants was 110 at November 19, 2014 and at August 27, 2014.  

The table on the following page shows financial information as required by Accounting Standards Codification Topic 280 (“ASC 280”) for segment reporting. ASC 280 requires depreciation and amortization be disclosed for each reportable segment, even if not used by the chief operating decision maker. The table also lists total assets for each reportable segment. Corporate assets include cash and cash equivalents, tax refunds receivable, property and equipment, assets related to discontinued operations, property held for sale, deferred tax assets, prepaid expenses, intangible assets and goodwill.

Licensee

In November 1997, a prior owner of the Fuddruckers – World’s Greatest Hamburgers ® brand granted to a licensee the exclusive right to use the Fuddruckers proprietary marks, trade dress and system to develop Fuddruckers restaurants in a territory consisting of certain countries in Africa, the Middle East and parts of Asia. As of November 2014, this licensee operated 31 restaurants that are licensed to use the Fuddruckers Proprietary Marks in Saudi Arabia, Egypt, Lebanon, United Arab Emirates, Qatar, Jordon, Bahrain and Kuwait. The Company does not receive revenue or royalties from these restaurants.

	Quarter Ended
	November 19,2014			November 20,2013
	(12 weeks)			(12 weeks)
	(In thousands)
Sales:
Company-owned restaurants (1)	$	80,682		$	80,064
Culinary Contract Services		4,598			4,270
Franchise Operations		1,581			1,514
Total		86,861			85,848
Segment level profit:
Company-owned restaurants	$	7,418		$	9,199
Culinary Contract Services		647			598
Franchise Operations		1,581			1,514
Total		9,646			11,311
Depreciation and amortization:
Company-owned restaurants	$	4,374		$	3,734
Culinary Contract Services		69			89
Franchise Operations		177			177
Corporate		438			319
Total		5,058			4,319
Total assets:
Company-owned restaurants	$	229,860		$	214,647
Culinary Contract Services		1,796			1,952
Franchise Operations		12,952			13,699
Corporate		31,303			26,193
Total		275,911			256,491
Capital expenditures:
Company-owned restaurants	$	3,169		$	9,058
Culinary Contract Services		—			—
Franchise Operations		—			—
Corporate		420			149
Total		3,589			9,207
Loss before income taxes and discontinued operations:
Segment level profit	$	9,646		$	11,311
Opening costs		(925	)		(350	)
Depreciation and amortization		(5,058	)		(4,319	)
General and administrative expenses		(7,703	)		(8,067	)
Provision for asset impairments		—			(210	)
Net loss on disposition of property and equipment		(290	)		(51	)
Interest income		1			2
Interest expense		(456	)		(253	)
Other income, net		187			296
Total	$	(4,598	)	$	(1,641	)

⁽¹⁾ Includes vending revenue of $125 thousand and $112 thousand for the quarters ended November 19, 2014 and November 20, 2013, respectively.