Revenues

6 Months Ended

Jun. 29, 2022

Revenue from Contract with Customer [Abstract]

Revenues

Revenues

Our revenues are derived primarily from two sales channels, which we operate as one segment: company restaurants and franchised and licensed restaurants. The following table disaggregates our revenue by sales channel and type of good or service:

	Quarter Ended				Two Quarters Ended
	June 29, 2022		June 30, 2021		June 29, 2022		June 30, 2021
	(In thousands)
Company restaurant sales	$	49,167	$	47,572	$	93,143	$	81,141
Franchise and license revenue:
Royalties	28,759		27,117		55,284		47,961
Advertising revenue	19,486		18,600		37,692		32,711
Initial and other fees	7,779		2,066		12,286		3,904
Occupancy revenue	9,826		10,810		19,719		21,024
Franchise and license revenue	65,850		58,593		124,981		105,600
Total operating revenue	$	115,017	$	106,165	$	218,124	$	186,741

Franchise occupancy revenue consisted of the following:

	Quarter Ended				Two Quarters Ended
	June 29, 2022		June 30, 2021		June 29, 2022		June 30, 2021
	(In thousands)
Operating lease revenue	$	7,253	$	7,668	$	14,671	$	15,581
Variable lease revenue	2,573		3,142		5,048		5,443
Total occupancy revenue	$	9,826	$	10,810	$	19,719	$	21,024

Balances related to contracts with customers consist of receivables, deferred franchise revenue and deferred gift card revenue. See Note 3 for details on our receivables.

The components of the change in deferred franchise revenue are as follows:

	(In thousands)
Balance, December 29, 2021	$	19,896
Fees received from franchisees	2,224
Franchisee deferred costs (1)	(1,722)
Revenue recognized, net (2)	(1,302)
Balance, June 29, 2022	19,096
Less current portion included in other current liabilities	1,804
Deferred franchise revenue included in other noncurrent liabilities	$	17,292

(1)    Deferred costs are contract assets consisting of incentives given to franchisees related to the rollout of kitchen equipment to all franchise locations.

(2)    Of this amount $1.2 million was included in the deferred franchise revenue balance as of December 29, 2021.

Deferred franchise revenue consists primarily of the unamortized portion of initial franchise fees that are currently being amortized into revenue and amounts related to development agreements and unopened restaurants that we will begin amortizing into revenue when the related restaurants are opened net of certain deferred costs. Deferred franchise revenue represents our remaining performance obligations to our franchisees, excluding amounts of variable consideration related to sales-based royalties and advertising.

The Company has entered into equipment purchase contracts of approximately $19.3 million related to the rollout of kitchen equipment for franchise restaurants, which will be billed to the franchisee and recognized as revenue as the equipment is installed, less approximately $5.7 million in commitments from the Company. Amounts committed from the Company are contract assets that have been netted against deferred revenue and will be recognized as a component of franchise and license revenue over the remaining term of the related franchise agreements. As of June 29, 2022, our remaining obligation under these contracts was approximately $2.5 million, $0.7 million of which is included in accounts payable. As of June 29, 2022, we had approximately $10.7 million in inventory and $1.6 million in contract assets related to the kitchen equipment rollout.

Deferred gift card liabilities consist of the unredeemed portion of gift cards sold in company restaurants and at third party locations. The balance of deferred gift card liabilities represents our remaining performance obligations to our customers. The balance of deferred gift card liabilities as of June 29, 2022 and December 29, 2021 was $5.8 million and $7.2 million, respectively. During the year-to-date period ended June 29, 2022, we recognized revenue of $0.3 million from gift card redemptions at company restaurants.