Revenue Recognition | Revenue recognition (a) Disaggregation of revenue Revenues are disaggregated by timing of revenue recognition and reconciled to reportable segment revenues as follows (in thousands): Fiscal year ended ended December 29, 2018 Dunkin' U.S. Baskin-Robbins U.S. Dunkin' International Baskin-Robbins International U.S. Advertising Funds Total reportable segment revenues Other (a) Total revenues Revenues recognized under ASC 606 Revenues recognized over time: Royalty income $ 483,883 29,375 20,111 7,532 — 540,901 15,096 555,997 Franchise fees 18,029 1,276 2,196 844 — 22,345 — 22,345 Advertising fees and related income — — — — 454,608 454,608 18,516 473,124 Other revenues 2,287 10,278 5 8 — 12,578 34,358 46,936 Total revenues recognized over time 504,199 40,929 22,312 8,384 454,608 1,030,432 67,970 1,098,402 Revenues recognized at a point in time: Sales of ice cream and other products — 3,261 — 106,284 — 109,545 (14,348 ) 95,197 Sales at company-operated restaurants — — — — — — — — Other revenues 1,698 257 29 170 — 2,154 985 3,139 Total revenues recognized at a point in time 1,698 3,518 29 106,454 — 111,699 (13,363 ) 98,336 Total revenues recognized under ASC 606 505,897 44,447 22,341 114,838 454,608 1,142,131 54,607 1,196,738 Revenues not subject to ASC 606 Advertising fees and related income — — — — — — 20,466 20,466 Rental income 100,913 2,971 — 529 — 104,413 — 104,413 Total revenues not subject to ASC 606 100,913 2,971 — 529 — 104,413 20,466 124,879 Total revenues $ 606,810 47,418 22,341 115,367 454,608 1,246,544 75,073 1,321,617 (a) Revenues reported as “Other” include revenues earned through certain licensing revenues, revenues generated from online training programs for franchisees, advertising fees and related income from international advertising funds, and breakage and other revenue related to the gift card program, all of which are not allocated to a specific segment. Additionally, the allocation of royalty income from sales of ice cream and other products is reported as “Other.” Fiscal year ended December 30, 2017 Dunkin' U.S. Baskin-Robbins U.S. Dunkin' International Baskin-Robbins International U.S. Advertising Funds Total reportable segment revenues Other (a) Total revenues Revenues recognized under ASC 606 Revenues recognized over time: Royalty income $ 463,874 29,724 17,965 7,009 — 518,572 14,271 532,843 Franchise fees 18,455 978 1,853 1,077 — 22,363 — 22,363 Advertising fees and related income — — — — 440,441 440,441 1,542 441,983 Other revenues 2,185 10,564 7 8 — 12,764 32,893 45,657 Total revenues recognized over time 484,514 41,266 19,825 8,094 440,441 994,140 48,706 1,042,846 Revenues recognized at a point in time: Sales of ice cream and other products — 3,448 — 106,036 — 109,484 (13,096 ) 96,388 Sales at company-operated restaurants — — — — — — — — Other revenues 1,446 405 (55 ) 238 — 2,034 639 2,673 Total revenues recognized at a point in time 1,446 3,853 (55 ) 106,274 — 111,518 (12,457 ) 99,061 Total revenues recognized under ASC 606 485,960 45,119 19,770 114,368 440,441 1,105,658 36,249 1,141,907 Revenues not subject to ASC 606 Advertising fees and related income — — — — — — 29,001 29,001 Rental income 101,073 3,089 — 481 — 104,643 — 104,643 Total revenues not subject to ASC 606 101,073 3,089 — 481 — 104,643 29,001 133,644 Total revenues $ 587,033 48,208 19,770 114,849 440,441 1,210,301 65,250 1,275,551 (a) Revenues reported as “Other” include revenues earned through certain licensing revenues, revenues generated from online training programs for franchisees, advertising fees and related income from international advertising funds, and breakage and other revenue related to the gift card program, all of which are not allocated to a specific segment. Additionally, the allocation of royalty income from sales of ice cream and other products is reported as “Other.” Fiscal year ended December 31, 2016 Dunkin' U.S. Baskin-Robbins U.S. Dunkin' International Baskin-Robbins International U.S. Advertising Funds Total reportable segment revenues Other (a) Total revenues Revenues recognized under ASC 606 Revenues recognized over time: Royalty income $ 448,609 28,909 16,791 6,618 — 500,927 14,315 515,242 Franchise fees 16,608 734 1,849 1,963 — 21,154 — 21,154 Advertising fees and related income — — — — 429,952 429,952 1,484 431,436 Other revenues 2,057 11,107 5 15 — 13,184 28,519 41,703 Total revenues recognized over time 467,274 40,750 18,645 8,596 429,952 965,217 44,318 1,009,535 Revenues recognized at a point in time: Sales of ice cream and other products — 2,632 — 110,628 — 113,260 (12,718 ) 100,542 Sales at company-operated restaurants 11,975 — — — — 11,975 — 11,975 Other revenues 1,296 529 (17 ) 357 — 2,165 1,001 3,166 Total revenues recognized at a point in time 13,271 3,161 (17 ) 110,985 — 127,400 (11,717 ) 115,683 Total revenues recognized under ASC 606 480,545 43,911 18,628 119,581 429,952 1,092,617 32,601 1,125,218 Revenues not subject to ASC 606 Advertising fees and related income — — — — — — 22,117 22,117 Rental income 97,540 2,994 — 458 — 100,992 28 101,020 Total revenues not subject to ASC 606 97,540 2,994 — 458 — 100,992 22,145 123,137 Total revenues $ 578,085 46,905 18,628 120,039 429,952 1,193,609 54,746 1,248,355 (a) Revenues reported as “Other” include revenues earned through certain licensing revenues, revenues generated from online training programs for franchisees, advertising fees and related income from international advertising funds, and breakage and other revenue related to the gift card program, all of which are not allocated to a specific segment. Additionally, the allocation of royalty income from sales of ice cream and other products is reported as “Other.” (b) Contract balances Information about receivables and deferred revenue subject to ASC 606 is as follows (in thousands): December 29, December 30, Balance Sheet Classification Receivables $ 81,609 76,455 Accounts receivable, net and Notes and other receivables, net Deferred revenue: Current $ 24,002 27,724 Deferred revenue—current Long-term 327,333 361,458 Deferred revenue—long term Total $ 351,335 389,182 Receivables relate primarily to payments due for royalties, franchise fees, advertising fees, sales of ice cream and other products, and licensing fees. Deferred revenue primarily represents the Company’s remaining performance obligations under its franchise and license agreements for which consideration has been received or is receivable, and is generally recognized on a straight-line basis over the remaining term of the related agreement. The decrease in the deferred revenue balance as of December 29, 2018 was primarily driven by $30.0 million of revenues recognized that were included in the deferred revenue balance as of December 30, 2017 , as well as franchisee incentives provided during fiscal year 2018, offset by cash payments received or due in advance of satisfying our performance obligations. As of December 29, 2018 and December 30, 2017 , there were no contract assets from contracts with customers. (c) Transaction price allocated to remaining performance obligations Estimated revenue expected to be recognized in the future related to performance obligations that are either unsatisfied or partially satisfied at December 29, 2018 is as follows (in thousands): Fiscal year: 2019 $ 22,627 2020 18,996 2021 19,058 2022 18,981 2023 18,872 Thereafter 217,348 Total $ 315,882 The estimated revenue in the table above does not contemplate future franchise renewals or new franchise agreements for restaurants for which a franchise agreement or SDA does not exist at December 29, 2018 . Additionally, the table above excludes $61.0 million of consideration allocated to restaurants that are not yet open as of December 29, 2018 . The Company has applied the sales-based royalty exemption which permits exclusion of variable consideration in the form of sales-based royalties from the disclosure of remaining performance obligations in the table above. Additionally, the Company has applied the transition practical expedient that allows the Company to omit the above disclosures for the fiscal year ended December 30, 2017 . (d) Systemwide points of distribution The changes in franchised and company-operated points of distribution were as follows: Fiscal year ended December 29, 2018 December 30, 2017 December 31, 2016 Systemwide points of distribution: Franchised points of distribution in operation—beginning of year 20,520 20,080 19,308 Franchised points of distribution—opened 1,213 1,339 1,540 Franchised points of distribution—closed (821 ) (899 ) (819 ) Net transfers from company-operated points of distribution — — 51 Franchised points of distribution in operation—end of year 20,912 20,520 20,080 Company-operated points of distribution—end of year — — — Total systemwide points of distribution—end of year 20,912 20,520 20,080 During fiscal year 2016, the Company sold all remaining company-operated restaurants and recognized gains on sales of $7.6 million , which are included in other operating income, net in our consolidated statement of operations. As of December 29, 2018, December 30, 2017, and December 31, 2016, the Company did not own or operate any restaurants. (e) Change in accounting principle In fiscal year 2018, the Company adopted new revenue recognition guidance which provides a single framework in which revenue is required to be recognized to depict the transfer of goods or services to customers in amounts that reflect the consideration to which a company expects to be entitled in exchange for those goods or services. The Company adopted the guidance using the full retrospective transition method which results in restating each prior reporting period presented, including the notes to the consolidated financial statements herein. The restated amounts include the application of a practical expedient that permitted the Company to reflect the aggregate effect of all modifications that occurred prior to fiscal year 2016 when identifying the satisfied and unsatisfied performance obligations, determining the transaction price, and allocating the transaction price to the satisfied and unsatisfied performance obligations. The Company implemented new business processes, internal controls, and modified information technology systems to assist in the ongoing application of the new guidance. Franchise Fees The adoption of the new guidance changed the timing of recognition of initial franchise fees, including master license and territory fees for our international business, and renewal and transfer fees. Previously, these fees were generally recognized upfront upon either opening of the respective restaurant, when a renewal agreement became effective, or upon transfer of a franchise agreement. The new guidance generally requires these fees to be recognized over the term of the related franchise license for the respective restaurant. Additionally, transfer fees were previously included within other revenues, but are now included within franchise fees and royalty income in the consolidated statements of operations. The new guidance did not materially impact the recognition of royalty income. Advertising The adoption of the new guidance changed the reporting of advertising fund contributions from franchisees and the related advertising fund expenditures, which were not previously included in the consolidated statements of operations. The new guidance requires these advertising fund contributions and expenditures to be reported on a gross basis in the consolidated statements of operations. The assets and liabilities held by the advertising funds, which were previously reported as restricted assets and liabilities of advertising funds, respectively, are now included within the respective balance sheet caption to which the assets and liabilities relate. Additionally, advertising costs that have been incurred by the Company outside of the advertising funds were previously included within general and administrative expenses, net, but are now included within advertising expenses in the consolidated statements of operations. Previously, breakage from Dunkin’ and Baskin-Robbins gift cards was recorded as a reduction to general and administrative expenses, net, to offset the related gift card program costs. In accordance with the new guidance, breakage revenue is now reported on a gross basis in the consolidated statements of operations within advertising fees and related income, and the related gift card program costs are included in advertising expenses. Ice Cream Royalty Allocation The adoption of the new guidance requires a portion of sales of ice cream products to be allocated to royalty income as consideration for the use of the franchise license. As such, a portion of sales of ice cream and other products has been reclassified to franchise fees and royalty income in the consolidated statements of operations under the new guidance. This allocation has no impact on the timing of recognition of the related sales of ice cream products or royalty income. Other Revenue Transactions The adoption of the new guidance requires certain fees generated by licensing of our brand names and other intellectual property to be recognized over the term of the related agreement, including a one-time upfront license fee recognized in connection with the Dunkin’ K-Cup® pod licensing agreement in fiscal year 2015. Additionally, gains associated with the refranchise, sale, or transfer of restaurants that were not company-operated to new or existing franchisees are recognized over the term of the related agreement under the new guidance, instead of upon closing of the sale transaction or transfer. Impacts to Prior Period Information The new guidance for revenue recognition impacted the Company's previously reported financial statements as follows: Consolidated Balance Sheets December 30, 2017 (In thousands) Adjustments for new revenue recognition guidance Previously reported Franchise fees Advertising Other revenue transactions Restated Assets Current assets: Cash and cash equivalents $ 1,018,317 — — — 1,018,317 Restricted cash 94,047 — — — 94,047 Accounts receivables, net 51,442 — 18,075 — 69,517 Notes and other receivables, net 51,082 — 1,250 — 52,332 Restricted assets of advertising funds 47,373 — (47,373 ) — — Prepaid income taxes 21,879 — 48 — 21,927 Prepaid expenses and other current assets 32,695 — 15,498 — 48,193 Total current assets 1,316,835 — (12,502 ) — 1,304,333 Property, equipment, and software, net 169,005 — 12,537 — 181,542 Equity method investments 140,615 — — — 140,615 Goodwill 888,308 — — — 888,308 Other intangibles assets, net 1,357,157 — — — 1,357,157 Other assets 65,464 — 14 — 65,478 Total assets $ 3,937,384 — 49 — 3,937,433 Liabilities and Stockholders’ Equity (Deficit) Current liabilities: Current portion of long-term debt $ 31,500 — — — 31,500 Capital lease obligations 596 — — — 596 Accounts payable 16,307 — 37,110 — 53,417 Liabilities of advertising funds 58,014 — (58,014 ) — — Deferred revenue 39,395 1,502 (550 ) 4,529 44,876 Other current liabilities 326,078 — 29,032 — 355,110 Total current liabilities 471,890 1,502 7,578 4,529 485,499 Long-term debt, net 3,035,857 — — — 3,035,857 Capital lease obligations 7,180 — — — 7,180 Unfavorable operating leases acquired 9,780 — — — 9,780 Deferred revenue 11,158 328,183 (7,518 ) 29,635 361,458 Deferred income taxes, net 315,249 (91,488 ) — (9,416 ) 214,345 Other long-term liabilities 77,823 — 30 — 77,853 Total long-term liabilities 3,457,047 236,695 (7,488 ) 20,219 3,706,473 Stockholders’ equity (deficit) Preferred stock — — — — — Common stock 90 — — — 90 Additional paid-in-capital 724,114 — — — 724,114 Treasury stock, at cost (1,060 ) — — — (1,060 ) Accumulated deficit (705,007 ) (238,197 ) (196 ) (24,748 ) (968,148 ) Accumulated other comprehensive loss (9,690 ) — 155 — (9,535 ) Stockholders’ equity (deficit) 8,447 (238,197 ) (41 ) (24,748 ) (254,539 ) Total liabilities and stockholders’ equity (deficit) $ 3,937,384 — 49 — 3,937,433 Consolidated Statements of Operations Fiscal year ended December 30, 2017 (In thousands, except per share data) Adjustments for new revenue recognition guidance Previously reported Franchise fees Advertising Ice cream royalty allocation Other revenue transactions Restated Revenues: Franchise fees and royalty income $ 592,689 (51,754 ) — 14,271 — 555,206 Advertising fees and related income — — 470,984 — — 470,984 Rental income 104,643 — — — — 104,643 Sales of ice cream and other products 110,659 — — (14,271 ) — 96,388 Other revenues 52,510 (5,838 ) — — 1,658 48,330 Total revenues 860,501 (57,592 ) 470,984 — 1,658 1,275,551 Operating costs and expenses: Occupancy expenses—franchised restaurants 60,301 — — — — 60,301 Cost of ice cream and other products 77,012 — — — — 77,012 Advertising expenses — — 476,157 — — 476,157 General and administrative expenses, net 248,975 — (5,147 ) — — 243,828 Depreciation 20,084 — — — — 20,084 Amortization of other intangible assets 21,335 — — — — 21,335 Long-lived asset impairment charges 1,617 — — — — 1,617 Total operating costs and expenses 429,324 — 471,010 — — 900,334 Net income of equity method investments 15,198 — — — — 15,198 Other operating income, net 627 — — — — 627 Operating income 447,002 (57,592 ) (26 ) — 1,658 391,042 Other income (expense), net: Interest income 3,313 — — — — 3,313 Interest expense (104,423 ) — — — — (104,423 ) Loss on debt extinguishment and refinancing transactions (6,996 ) — — — — (6,996 ) Other income, net 391 — — — — 391 Total other expense, net (107,715 ) — — — — (107,715 ) Income before income taxes 339,287 (57,592 ) (26 ) — 1,658 283,327 Provision (benefit) for income taxes (a) (11,622 ) 18,656 — — 5,084 12,118 Net income $ 350,909 (76,248 ) (26 ) — (3,426 ) 271,209 Earnings per share—basic $ 3.86 2.99 Earnings per share—diluted 3.80 2.94 (a) Adjustments for “Franchise fees” and “Other revenue transactions” include tax expense of $42.2 million and $4.3 million , respectively, related to the enactment of the Tax Cuts and Jobs Act, consisting of the re-measurement of the related deferred tax balances using the lower enacted corporate tax rate. Consolidated Statements of Operations Fiscal year ended December 31, 2016 (In thousands, except per share data) Adjustments for new revenue recognition guidance Previously reported Franchise fees Advertising Ice cream royalty allocation Other revenue transactions Restated Revenues: Franchise fees and royalty income $ 549,571 (27,490 ) — 14,315 — 536,396 Advertising fees and related income — — 453,553 — — 453,553 Rental income 101,020 — — — — 101,020 Sales of ice cream and other products 114,857 — — (14,315 ) — 100,542 Sales at company-operated restaurants 11,975 — — — — 11,975 Other revenues 51,466 (5,072 ) — — (1,525 ) 44,869 Total revenues 828,889 (32,562 ) 453,553 — (1,525 ) 1,248,355 Operating costs and expenses: Occupancy expenses—franchised restaurants 57,409 — — — — 57,409 Cost of ice cream and other products 77,608 — — — — 77,608 Company-operated restaurant expenses 13,591 — — — — 13,591 Advertising expenses — — 458,568 — — 458,568 General and administrative expenses, net 246,814 — (4,990 ) — — 241,824 Depreciation 20,458 — — — — 20,458 Amortization of other intangible assets 22,079 — — — — 22,079 Long-lived asset impairment charges 149 — — — — 149 Total operating costs and expenses 438,108 — 453,578 — — 891,686 Net income of equity method investments 14,552 — — — — 14,552 Other operating income, net 9,381 — — — — 9,381 Operating income 414,714 (32,562 ) (25 ) — (1,525 ) 380,602 Other income (expense), net: Interest income 582 — — — — 582 Interest expense (100,852 ) — — — — (100,852 ) Other loss, net (1,195 ) — — — — (1,195 ) Total other expense, net (101,465 ) — — — — (101,465 ) Income before income taxes 313,249 (32,562 ) (25 ) — (1,525 ) 279,137 Provision for income taxes 117,673 (13,205 ) — — (620 ) 103,848 Net income $ 195,576 (19,357 ) (25 ) — (905 ) 175,289 Earnings per share—basic $ 2.14 1.91 Earnings per share—diluted 2.11 1.89 The adoption of the new revenue recognition guidance had no impact on the Company’s total cash flows. Adjustments presented in the cash flow information below result from full consolidation of the advertising funds, and reflect the investing activities, consisting solely of additions to property, equipment, and software, of such funds. Select Cash Flow Information (In thousands) Fiscal year ended December 30, 2017 Previously reported Adjustments for new revenue recognition guidance Restated Net cash provided by operating activities $ 276,908 6,449 283,357 Net cash used in investing activities (13,854 ) (6,449 ) (20,303 ) Net cash provided by financing activities 418,641 — 418,641 Increase in cash, cash equivalents, and restricted cash 682,267 — 682,267 Fiscal year ended December 31, 2016 Previously reported Adjustments for new revenue recognition guidance Restated Net cash provided by operating activities $ 276,827 5,652 282,479 Net cash provided by (used in) investing activities 1,343 (5,652 ) (4,309 ) Net cash used in financing activities (179,178 ) — (179,178 ) Increase in cash, cash equivalents, and restricted cash 98,717 — 98,717 |