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Revenues
6 Months Ended
Jun. 30, 2023
Revenues [Abstract]  
Revenues Revenues
The following tables disaggregate our revenue for the periods ended June 30, 2023 and 2022:
 Three Months Ended June 30, 2023
 
Rent-A-Center
AcimaMexicoFranchisingConsolidated
(in thousands)
Store
Rentals and fees$421,625 $368,576 $17,355 $— $807,556 
Merchandise sales28,298 95,513 892 — 124,703 
Installment sales15,900 — — — 15,900 
Other368 269 207 704 1,548 
Total store revenues466,191 464,358 18,454 704 949,707 
Franchise
Merchandise sales— — — 22,869 22,869 
Royalty income and fees— — — 6,587 6,587 
Total revenues$466,191 $464,358 $18,454 $30,160 $979,163 
 Six Months Ended June 30, 2023
 
Rent-A-Center
AcimaMexicoFranchisingConsolidated
(in thousands)
Store
Rentals and fees$847,694 $732,742 $33,837 $— $1,614,273 
Merchandise sales71,086 214,884 1,722 — 287,692 
Installment sales31,747 — — — 31,747 
Other672 580 324 1,417 2,993 
Total store revenues951,199 948,206 35,883 1,417 1,936,705 
Franchise
Merchandise sales— — — 45,696 45,696 
Royalty income and fees— — — 12,823 12,823 
Total revenues$951,199 $948,206 $35,883 $59,936 $1,995,224 
 Three Months Ended June 30, 2022
 
Rent-A-Center
AcimaMexicoFranchisingConsolidated
(In thousands)
Store
Rentals and fees$436,371 $405,184 $15,743 $— $857,298 
Merchandise sales34,952 124,888 929 — 160,769 
Installment sales18,548 — — — 18,548 
Other314 98 29 627 1,068 
Total store revenues490,185 530,170 16,701 627 1,037,683 
Franchise
Merchandise sales— — — 26,505 26,505 
Royalty income and fees— — — 7,067 7,067 
Total revenues$490,185 $530,170 $16,701 $34,199 $1,071,255 
 Six Months Ended June 30, 2022
 
Rent-A-Center
AcimaMexicoFranchisingConsolidated
(In thousands)
Store
Rentals and fees$879,066 $830,655 $30,624 $— $1,740,345 
Merchandise sales93,246 298,670 1,733 — 393,649 
Installment sales35,637 — — — 35,637 
Other741 221 56 1,340 2,358 
Total store revenues1,008,690 1,129,546 32,413 1,340 2,171,989 
Franchise
Merchandise sales— — — 45,026 45,026 
Royalty income and fees— — — 13,961 13,961 
Total revenues$1,008,690 $1,129,546 $32,413 $60,327 $2,230,976 
Lease Purchase Agreements
Rent-A-Center, Acima, and Mexico
Rentals and Fees. Rental merchandise is leased to customers pursuant to lease-to-own agreements, which provide for weekly, bi-weekly, semi-monthly or monthly terms with non-refundable lease payments. At the expiration of each lease term, customers may renew the lease-to-own agreement for the next lease term. Generally, the customer has the right to acquire title of the merchandise either through a purchase option or through payment of all required lease terms. Customers can terminate the lease-to-own agreement at the end of any lease term without penalty. Therefore, lease-to-own agreements are accounted for as operating leases.
Lease payments received at our Rent-A-Center stores, certain Acima staffed locations formerly operating under the Preferred Lease brand, and Mexico stores must be prepaid in advance of the next lease term. Under the Acima Holdings business model, revenues may be earned prior to the lease payment due date, in which case revenue is accrued prior to receipt of the lease payment, net of estimated returns and uncollectible renewal payments. Under both models, rental revenue is recognized over the lease term. See Note 3 for additional information regarding accrued lease revenue.
Cash received for rental payments, including fees, prior to the period in which it should be recognized, is deferred and recognized according to the lease term. At June 30, 2023 and December 31, 2022, we had $48.0 million and $54.9 million, respectively, in deferred revenue included in accrued liabilities related to our lease-to-own agreements. Revenue related to various payment, reinstatement or late fees is recognized when paid by the customer at the point service is provided. Rental merchandise in our Rent-A-Center stores, certain Acima staffed locations formerly operating under the Preferred Lease brand, and Mexico stores is depreciated using the income forecasting method and recognized in cost of rentals and fees in our Consolidated Statement of Operations over the lease term. Lease merchandise under Acima Holdings is depreciated over the lease term using a straight-line depreciation method. Under the income forecasting method, the consumption of lease merchandise occurs during periods of rental and depreciation directly coincides with the receipt of rental revenue over the lease-to-own contract period. Depreciation under the straight-line method is recognized each period over the term of the lease-to-own contract irrespective of receipt of revenue payments from the customer.
We also offer additional product plans along with our lease-to-own agreements which provide customers with liability protection against significant damage or loss of a product, and club membership benefits, including various discount programs and product service and replacement benefits in the event merchandise is damaged or lost, and payment insurance in the event eligible customers become unemployed. Customers renew product plans in conjunction with their rental term renewals, and can cancel the plans at any time. Revenue for product plans is recognized over the term of the plan. Costs incurred related to product plans are primarily recognized in cost of sales.
Revenue from contracts with customers
Rent-A-Center, Acima, and Mexico
Merchandise Sales. Merchandise sales include payments received for the exercise of the early purchase options offered through our lease-to-own agreements or merchandise sold through point of sale transactions. Revenue for merchandise sales is
recognized when payment is received and ownership of the merchandise passes to the customer. The remaining net value of merchandise sold is recorded to cost of sales at the time of the transaction.
Installment Sales. Revenue from the sale of merchandise in our retail installment stores is recognized when the installment note is signed and control of the merchandise has passed to the customer. The cost of merchandise sold through installment agreements is recognized in cost of sales at the time of the transaction. We offer extended service plans with our installment agreements which are administered by third parties and provide customers with product service maintenance beyond the term of the installment agreement. Payments received for extended service plans are deferred and recognized, net of related costs, when the installment payment plan is complete and the service plan goes into effect. Customers can cancel extended service plans at any time during the installment agreement period and receive a refund for payments previously made towards the plan. At June 30, 2023 and December 31, 2022, we had $1.5 million and $2.0 million, respectively, in deferred revenue included in accrued liabilities related to extended service plans.
Other. Other revenue consists of revenue generated by other miscellaneous product plans offered to our rental and installment customers. Revenue for other product plans is recognized in accordance with the terms of the applicable plan agreement.
Franchising
Merchandise Sales. Revenue from the sale of rental merchandise is recognized upon shipment of the merchandise to the franchisee.
Royalty Income and Fees. Franchise royalties, including franchisee contributions to corporate advertising funds, represent sales-based royalties calculated as a percentage of gross rental payments and sales. Royalty revenue is accrued and recognized as rental payments and merchandise sales occur. Franchise fees are initial fees charged to franchisees for new or converted franchise stores. Franchise fee revenue is recognized on a straight-line basis over the term of the franchise agreement. At June 30, 2023 and December 31, 2022, we had $3.2 million and $3.4 million, respectively, in deferred revenue included in accrued liabilities related to franchise fees.