REVENUE RECOGNITION:

3 Months Ended

Sep. 30, 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 the lease 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 September 30, 2020				Three Months Ended September 30, 2019
	Franchise		Company-owned		Franchise		Company-owned
	(Dollars in thousands)
Revenue recognized at a point in time:
Service	$	—	$	36,408	$	—	$	141,941
Product	13,742		11,007		13,105		32,551
Total revenue recognized at a point in time	$	13,742	$	47,415	$	13,105	$	174,492
Revenue recognized over time:
Royalty and other franchise fees	$	13,447	$	—	$	17,592	$	—
Advertising fund fees	4,509		—		10,425		—
Franchise rental income	32,283		—		31,424		—
Total revenue recognized over time	50,239		—		59,441		—
Total revenue	$	63,981	$	47,415	$	72,546	$	174,492

Information about receivables, broker fees and deferred revenue subject to the revenue recognition guidance is as follows:

	September 30, 2020		June 30, 2020		Balance Sheet Classification
	(Dollars in thousands)
Receivables from contracts with customers, net	$	28,306	$	22,991	Accounts receivable, net
Broker fees	$	20,442	$	20,516	Other assets
Deferred revenue:
Current
Gift card liability	$	2,530	$	2,543	Accrued expenses
Deferred franchise fees unopened salons	37		77		Accrued expenses
Deferred franchise fees open salons	5,679		5,537		Accrued expenses
Total current deferred revenue	$	8,246	$	8,157
Non-current
Deferred franchise fees unopened salons	$	11,398	$	11,855	Other non-current liabilities
Deferred franchise fees open salons	33,550		33,623		Other non-current liabilities
Total non-current deferred revenue	$	44,948	$	45,478

Receivables relate primarily to payments due for royalties, franchise fees, advertising fees, rent, 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. The following table is a rollforward of the allowance for doubtful accounts for the period:

Balance as of June 30, 2020	$	6,899
Provision for doubtful accounts (1)	2,289
Provision for franchisee rent (2)	512
Write-offs	(297)
Balance as of September 30, 2020	$	9,403

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(1)The provision for doubtful accounts is recognized as General and administrative expense in the unaudited Condensed Consolidated Statement of Operations.

(2)The provision for franchisee rent is recognized as Rent expense in the unaudited Condensed Consolidated Statement of Operations.

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 period:

Balance as of June 30, 2020	$	20,516
Additions	703
Amortization	(777)
Write-offs	—
Balance as of September 30, 2020	$	20,442

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 September 30, 2020 and 2019 was $0.3 and $0.8 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 September 30, 2020 and 2019 was $1.6 and $1.2 million, respectively. Estimated revenue expected to be recognized in the future related to deferred franchise fees for open salons as of September 30, 2020 is as follows (in thousands):

Remainder of 2021	$	4,391
2022	5,734
2023	5,558
2024	5,099
2025	4,737
Thereafter	13,710
Total	$	39,229