REVENUE

4 Months Ended

Jan. 22, 2023

Revenue from Contract with Customer [Abstract]

REVENUE

REVENUE

Nature of products and services — We derive revenue from retail sales at Jack in the Box and Del Taco company-operated restaurants and rental revenue, royalties, advertising, and franchise and other fees from franchise-operated restaurants.

Our franchise arrangements generally provide for an initial franchise fee per restaurant for a 20-year term, and generally require that franchisees pay royalty and marketing fees based upon a percentage of gross sales. The agreements also require franchisees to pay technology fees, as well as sourcing fees for Jack in the Box franchise agreements.

Disaggregation of revenue — The following table disaggregates revenue by segment and primary source for the quarter ended January 22, 2023 (in thousands):

	Sixteen Weeks Ended
	Jack in the Box		Del Taco		Total
Company restaurant sales	$	126,142	$	144,049	$	270,191
Franchise rental revenues	106,096		2,734		108,830
Franchise royalties	67,569		6,934		74,503
Marketing fees	60,344		5,654		65,998
Technology and sourcing fees	4,969		718		5,687
Franchise fees and other services	1,797		90		1,887
Total revenue	$	366,917	$	160,179	$	527,096

The following table disaggregates revenue by segment and primary source for the quarter ended January 23, 2022 (in thousands):

	Sixteen Weeks Ended
	Jack in the Box		Del Taco		Total
Company restaurant sales	$	120,056	$	—	$	120,056
Franchise rental revenues	103,099		—		103,099
Franchise royalties	57,648		—		57,648
Marketing fees	55,801		—		55,801
Technology and sourcing fees	5,000		—		5,000
Franchise fees and other services	3,107		—		3,107
Total revenue	$	344,711	$	—	$	344,711

In October 2022, a franchise operator paid the Company $7.3 million in order to sell his restaurants to a new franchisee at the current standard royalty rate, which is lower than the royalty rate in the existing franchise agreements. The payment represented the difference between the existing royalty rate and the new royalty rate based on projected future sales for the remaining term of the existing agreements. The payment is non-refundable and not subject to any adjustments based on actual future sales. The Company determined the transaction represented the termination of the existing agreement rather than the transfer of an agreement between franchisees. As such, the $7.3 million was recognized in franchise royalty revenue during the first quarter of 2023.

Contract liabilities — Our contract liabilities consist of deferred revenue resulting from initial franchise and development fees received from franchisees for new restaurant openings or new franchise terms, which are recognized over the franchise term. We classify these contract liabilities as “Accrued liabilities” and “Other long-term liabilities” in our condensed consolidated balance sheets.

A summary of significant changes in our contract liabilities is presented below (in thousands):

	Sixteen Weeks Ended
	January 22, 2023		January 23, 2022
Deferred franchise and development fees at beginning of period	$	46,449	$	40,435
Revenue recognized	(1,639)		(1,742)
Additions	2,240		680
Deferred franchise and development fees at end of period	$	47,050	$	39,373

As of January 22, 2023, approximately $6.1 million of development fees related to unopened stores are included in deferred revenue. Timing of revenue recognition is dependent upon the timing of store openings and are recognized over the franchise term at the date of opening.

The following table reflects the estimated franchise fees to be recognized in the future related to performance obligations that are unsatisfied as of January 22, 2023 (in thousands):

Remainder of 2023	$	3,508
2024	4,897
2025	4,661
2026	4,334
2027	3,976
Thereafter	19,583
	$	40,959

We have applied the optional exemption, as provided for under ASC Topic 606, Revenue from Contracts with Customers, which allows us to not disclose the transaction price allocated to unsatisfied performance obligations when the transaction price is a sales-based royalty.