Revenue Recognition

3 Months Ended

Mar. 31, 2024

Revenue from Contract with Customer [Abstract]

Revenue Recognition

5. Revenue Recognition

Contract Balances

Our contract liabilities primarily relate to franchise fees, unredeemed gift card liabilities, and loyalty program obligations, which we classify as Deferred revenue on the Condensed Consolidated Balance Sheets. During the three months ended March 31, 2024 and March 26, 2023, the Company recognized $8.1 million and $8.4 million in revenue, respectively, related to deferred revenue.

The following table includes a breakout of contract liability balances (in thousands):

	Contract Liabilities
	March 31, 2024		December 31, 2023		Change
Franchise fee liabilities	$	20,068	$	20,564	$	(496)
Unredeemed gift card liabilities	6,255		6,955		(700)
Customer loyalty program obligations	13,184		13,274		(90)
Total contract liabilities	$	39,507	$	40,793	$	(1,286)

Our contract assets consist primarily of equipment incentives provided to franchisees. Equipment incentives are related to the future value of commissary revenue the Company will receive over the term of the incentive agreement. Contract assets were approximately $7.9 million at both March 31, 2024 and December 31, 2023. For the three months ended March 31, 2024 and March 26, 2023, revenue was reduced approximately $1.2 million and $0.9 million respectively, for the amortization of contract assets over the applicable contract terms. Contract assets are included in Prepaid expenses and other current assets and Other assets on the Condensed Consolidated Balance Sheets.

Transaction Price Allocated to the Remaining Performance Obligations

The following table (in thousands) includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied at the end of the reporting period.

	Performance Obligations by Period
	Less than 1 Year		1-2 Years		2-3 Years		3-4 Years		4-5 Years		Thereafter		Total
Franchise fees	$	2,792	$	2,582	$	2,413	$	2,187	$	1,951	$	4,841	$	16,766

At March 31, 2024, approximately $3.3 million of area development fees related to unopened stores and international unearned royalties are included in Deferred revenue. Timing of revenue recognition is dependent upon the timing of store openings and franchisees’ revenues. Gift card liabilities, which are included in Deferred revenue, will be recognized in Company-owned restaurant revenues when gift cards are redeemed. The Company will recognize redemption fee revenue in Other revenues when cards are redeemed at franchised restaurant locations.

The Company applies the practical expedient in ASC 606, “Revenue Recognition” and does not disclose information about remaining performance obligations that have original expected durations of one year or less.