XML 80 R9.htm IDEA: XBRL DOCUMENT v3.20.1
REVENUE RECOGNITION:
 9 Months Ended
Mar. 31, 2020
Revenue from Contract with Customer [Abstract]  
REVENUE RECOGNITION REVENUE RECOGNITION:
        
Revenue Recognition and Deferred Revenue:

Revenue recognized at point of sale
Company-owned salon revenues are recognized at the time when the services are provided. Product revenues for company-owned salons are recognized when the guest receives and pays for the merchandise. Revenues from purchases made with gift cards are also recorded when the guest takes possession of the merchandise or services are provided. Gift cards issued by the Company are recorded as a liability (deferred revenue) upon sale and recognized as revenue upon redemption by the customer. Gift card breakage, the amount of gift cards which will not be redeemed, is recognized proportional to redemptions using estimates based on historical redemption patterns. Product sales by the Company to franchisees are included within product revenues in the unaudited Condensed Consolidated Statement of Operations and recorded at the time product is delivered to the franchisee. Payment for franchisee product revenue is generally collected within 30 to 90 days of delivery.

Revenue recognized over time
Franchise revenues primarily include royalties, advertising fund cooperatives fees, franchise fees and other fees. Royalty and advertising fund revenues represent sales-based royalties that are recognized in the period in which the sales occur. Generally,
royalty and advertising fund revenue is billed and collected monthly in arrears. Advertising fund revenues and expenditures, which must be spent on marketing and related activities per the franchise agreements, are recorded on a gross basis within the unaudited Condensed Consolidated Statement of Operations. This increases both the gross amount of reported franchise revenue and site operating expense and generally has no impact on operating income and net income. Franchise fees are billed and received upon the signing of the franchise agreement. Recognition of these fees is deferred until the salon opening and is then recognized over the term of the franchise agreement, typically ten years. Franchise rental income is a result of the Company signing leases on behalf of franchisees and entering into a sublease arrangement with the franchisee. The Company recognizes franchise rental income and expense when it is due to the landlord.

The following table disaggregates revenue by timing of revenue recognition and is reconciled to reportable segment revenues as follows:
Three Months Ended March 31, 2020Three Months Ended March 31, 2019
 FranchiseCompany-ownedFranchiseCompany-owned
(Dollars in thousands)
Revenue recognized at a point in time:
Service$—  $78,387  $—  $181,809  
Product15,318  19,559  14,339  39,427  
Total revenue recognized at a point in time$15,318  $97,946  $14,339  $221,236  
Revenue recognized over time:
Royalty and other franchise fees$16,487  $—  $14,339  $—  
Advertising fund (refunds) fees(7,789) —  8,429  —  
Franchise rental income31,821  —  —  —  
Total revenue recognized over time40,519  —  22,768  —  
Total revenue$55,837  $97,946  $37,107  $221,236  
Nine Months Ended March 31, 2020Nine Months Ended March 31, 2019
 FranchiseCompany-ownedFranchiseCompany-owned
(Dollars in thousands)
Revenue recognized at a point in time:
Service$—  $322,133  $—  $580,076  
Product45,287  79,229  47,786  125,220  
Total revenue recognized at a point in time$45,287  $401,362  $47,786  $705,296  
Revenue recognized over time:
Royalty and other franchise fees$52,721  $—  $43,495  $—  
Advertising fund (refunds) fees13,341  —  24,272  —  
Franchise rental income96,875  —  —  —  
Total revenue recognized over time162,937  —  67,767  —  
Total revenue$208,224  $401,362  $115,553  $705,296  

Information about receivables, broker fees and deferred revenue subject to the amended revenue recognition guidance is as follows:
March 31,
2020		June 30,
2019		Balance Sheet Classification
(Dollars in thousands)
Receivables from contracts with customers, net$16,083  $23,210  Accounts receivable, net
Broker fees$21,193  $17,819  Other assets
Deferred revenue:
     Current
Gift card liability$2,616  $3,050  Accrued expenses
Deferred franchise fees unopened salons44  193  Accrued expenses
Deferred franchise fees open salons5,466  4,164  Accrued expenses
Total current deferred revenue$8,126  $7,407  
     Non-current
Deferred franchise fees unopened salons$11,840  $15,173  Other non-current liabilities
Deferred franchise fees open salons33,821  24,194  Other non-current liabilities
Total non-current deferred revenue$45,661  $39,367  
Receivables relate primarily to payments due for royalties, franchise fees, advertising fees, franchise product sales and sales of salon services and product paid by credit card. The receivables balance is presented net of an allowance for expected losses (i.e., doubtful accounts), primarily related to receivables from franchisees. As of March 31, 2020 and June 30, 2019, the balance in the allowance for doubtful accounts was $2.6 and $2.0 million, respectively. Broker fees are the costs associated with using external brokers to identify new franchisees. These fees are paid upon the signing of the franchise agreement and recognized as General and Administrative expense over the term of the agreement.

The following table is a rollforward of the broker fee balance for the periods indicated (in thousands):
Balance as of June 30, 2019$17,819  
Additions5,499  
Amortization(2,092) 
Write-offs(33) 
Balance as of March 31, 2020$21,193  

Deferred revenue includes the gift card liability and deferred franchise fees for unopened salons and open salons. Gift card revenue for the three months ended March 31, 2020 and 2019 was $0.8 and $1.8 million, respectively, and for the nine months ended March 31, 2020 and 2019 was $2.3 and $4.0 million, respectively. Deferred franchise fees related to open salons are generally recognized on a straight-line basis over the term of the franchise agreement. Franchise fee revenue for the three months ended March 31, 2020 and 2019 was $1.4 and $0.9 million, respectively, and for the nine months ended March 31, 2020 and 2019 was $3.8 and $2.6 million, respectively. Estimated revenue expected to be recognized in the future related to deferred franchise fees for open salons as of March 31, 2020 is as follows (in thousands):

Remainder of 2020$1,359  
20215,348  
20225,228  
20235,051  
20244,816  
Thereafter17,485  
Total$39,287