Note 3 - Reportable Segments

9 Months Ended

May 06, 2015

Segment Reporting [Abstract]

Segment Reporting Disclosure [Text Block]

Note 3. Reportable Segments

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

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 the 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 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 May 6, 2015 and 174 at August 27, 2014. 

Culinary Contract Services

CCS, branded as Luby’s Culinary 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 21 at May 6, 2015 and 25 at August 27, 2014.  

Franchise Operations

We offer franchises for the Fuddruckers brand only. 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 the Company’s standards and specifications for Fuddruckers, 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 105 at May 6, 2015 and 110 at August 27, 2014.  

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 June 2015, this licensee operated 34 restaurants that are licensed to use the Fuddruckers proprietary marks in Saudi Arabia, Egypt, Lebanon, United Arab Emirates, Qatar, Jordan, Bahrain, Kuwait, Morocco and Malaysia. The Company does not receive revenue or royalties from these restaurants. 

 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 and prepaid expenses.  

	Quarter Ended						Three Quarters Ended
	May 6, 2015			May 7, 2014			May 6, 2015			May 7, 2014
	(12 weeks)			(12 weeks)			(36 weeks)			(36 weeks)
	(In thousands)
Sales:
Company-owned restaurants(1)	$	88,900		$	90,141		$	255,187		$	253,249
Culinary contract services		3,624			4,534			11,993			12,783
Franchise operations		1,578			1,684			4,764			4,744
Total		94,102			96,359			271,944			270,776
Segment level profit:
Company-owned restaurants	$	13,258		$	13,604		$	30,315		$	32,315
Culinary contract services		537			560			1,624			1,641
Franchise operations		1,578			1,684			4,764			4,744
Total		15,373			15,848			36,703			38,700
Depreciation and amortization:
Company-owned restaurants	$	4,038		$	4,062		$	12,510		$	11,675
Culinary contract services		28			93			127			269
Franchise operations		177			177			531			531
Corporate		507			342			1,412			991
Total		4,750			4,674			14,580			13,466
Capital expenditures:
Company-owned restaurants	$	5,023		$	11,780		$	15,368		$	30,277
Culinary contract services		—			43			—			43
Franchise operations		—			—			—			—
Corporate		418			220			1,061			804
Total	$	5,441		$	12,043		$	16,429		$	31,124
Segment level profit	$	15,373		$	15,848		$	36,703		$	38,700
Opening costs		(427	)		(334	)		(2,035	)		(1,365	)
Depreciation and amortization		(4,750	)		(4,674	)		(14,580	)		(13,466	)
General and administrative expenses		(7,312	)		(8,342	)		(23,088	)		(24,526	)
Provision for asset impairments, net		—			—			(218	)		(1,539	)
Net gain on disposition of property and equipment		609			1,023			1,696			956
Interest income		1			1			3			4
Interest expense		(599	)		(410	)		(1,624	)		(955	)
Other income, net		29			250			301			806
Income (loss) before income taxes and discontinued operations	$	2,924		$	3,362		$	(2,842	)	$	(1,385	)

	May 6, 2015		August 27, 2014
Total assets:
Company-owned restaurants(2)	$	223,675	$	222,474
Culinary contract services		1,994		2,724
Franchise operations(3)		13,350		13,906
Corporate(4)		34,951		36,331
Total	$	273,970	$	275,435

(1) Includes vending revenue of $112 and $131 thousand for the quarters ended May 6, 2015 and May 7, 2014, respectively and $355 and $358 thousand for the three quarters ended May 6, 2015 and May 7, 2014, respectively. 

(2) Company-owned restaurants segment includes $10.7 million of Fuddruckers trade name, Cheeseburger in Paradise liquor licenses, and Jimmy Buffett intangibles.

(3) Franchise operations segment includes approximately $12.4 million in royalty intangibles.

(4) Goodwill was disclosed in corporate segment in our fiscal 2014 Annual Report on Form 10-K and our first quarter fiscal 2015 Quarterly Report on Form 10-Q. The current draft reflects a revised classification of goodwill into the Company-owned restaurants segment.