Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 29, 2013 |
Accounting Policies [Abstract] | ' |
Summary of Significant Accounting Policies | ' |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Description of Business — As of December 29, 2013, Bravo Brio Restaurant Group, Inc. (the “Company”) operated 108 restaurants under the trade names “Bravo! Cucina Italiana®,” “Brio Tuscan Grille™,” and “Bon Vie®.” Of the 108 restaurants the Company operates, there are 47 Bravo! Cucina Italiana® restaurants, 60 Brio Tuscan Grille™ restaurants, and one Bon Vie® restaurant in operation in 33 states throughout the United States of America. The Company owns all of its restaurants with the exception of one BRIO restaurant, which it operates under a management agreement and for which operation it receives a management fee. |
Fiscal Year End — The Company utilizes a 52- or 53-week accounting period which ends on the last Sunday of the calendar year. The fiscal year ended December 29, 2013 is a 52 week year while the fiscal year ended December 30, 2012 is a 53 week year and fiscal year ended December 25, 2011 is a 52 week year. |
Accounting Estimates — The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company bases its estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances at the time. Actual amounts may differ from those estimates. |
Cash and Cash Equivalents — The Company considers all cash and short-term investments with original maturities of three months or less as cash equivalents. All cash is principally deposited in one bank. |
Receivables — Receivables, which the Company classifies within current assets, consist primarily of amounts due from landlords for tenant incentives and credit card processors. Management believes outstanding amounts to be collectible. |
Inventories — Inventories are valued at the lower of cost or market, using the first-in, first-out method and consist principally of food and beverage items. |
Pre-opening Costs — Restaurant pre-opening costs consist primarily of wages and salaries, recruiting, meals, training, travel and lodging. Pre-opening costs include an accrual for straight-line rent recorded during the period between the date of possession and the restaurant opening date for the Company’s leased restaurant locations. The Company expenses all such costs as incurred. These costs will vary depending on the number of restaurants under development in a reporting period. |
Property and Equipment — Property and equipment are recorded at cost, less accumulated depreciation. Equipment consists primarily of restaurant equipment, furniture, fixtures and small wares. Depreciation is calculated using the straight-line method over the estimated useful life of the related asset. Leasehold improvements are amortized using the straight-line method over the shorter of the lease term, including option periods which are reasonably assured of renewal, or the estimated useful life of the asset. The useful life of property and equipment involves judgment by management, which may produce materially different amounts of depreciation expense than if different assumptions were used. Property and equipment costs may fluctuate based on the number of new restaurants under development or opened, as well as any additional capital projects that are completed in a given period. The Company incurred depreciation expense of $20.0 million, $18.9 million and $16.9 million for the years ended December 29, 2013, December 30, 2012 and December 25, 2011, respectively. |
Leases — The Company currently leases all but four of its owned restaurant locations. The Company evaluates each lease to determine its appropriate classification as an operating or capital lease for financial reporting purposes. All of the Company’s leases are classified as operating leases. The Company records the lease payments for its operating leases on a straight-line basis over the lease term, including option periods which in the judgment of management are reasonably assured of renewal. The lease term commences on the date that the lessee obtains control of the property, which is normally when the property is ready for tenant improvements. Contingent rent expense is recognized as incurred and is usually based on either a percentage of restaurant sales or a percentage of restaurant sales in excess of a defined amount. The Company’s lease costs will change based on the lease terms of its lease renewals as well as leases that the Company enters into with respect to its new restaurants. |
Leasehold improvements financed by the landlord through tenant improvement allowances are capitalized as leasehold improvements with the tenant improvement allowances recorded as deferred lease incentives. Deferred lease incentives are amortized on a straight-line basis over the lease term, including option periods which in the judgment of management are reasonably assured of renewal (same lease term that is used for related leasehold improvements) and are recorded as a reduction of occupancy expense. As part of the initial lease terms, the Company negotiates with its landlords to secure these tenant improvement allowances. |
Other Assets — Other assets include liquor licenses, trademarks, and loan costs and are stated at cost, less amortization, if any. The trademarks are used in the advertising and marketing of the restaurants and are widely recognized and accepted by consumers. |
Impairment of Long-Lived Assets —The Company reviews long-lived assets, such as property and equipment and intangibles subject to amortization, for impairment when events or circumstances indicate the carrying value of the assets may not be recoverable. In determining the recoverability of the asset value, an analysis is performed at the individual restaurant level and primarily includes an assessment of historical cash flows, and other relevant factors and circumstances. As part of the review we also take into account that our business is sensitive to seasonal fluctuations, such as the holiday season at the end of the fourth quarter, which significantly impacts our short and long term projections for each location. The Company evaluates future cash flow projections in conjunction with qualitative factors and future operating plans and we regularly review any restaurants that are cash flow negative for the previous four quarters to determine if impairment testing is necessary. Based on this analysis, if the Company believes the carrying amount of the assets is not recoverable, an impairment charge is recognized based upon the amount by which the assets’ carrying value exceeds estimated fair value, which we estimate as the discounted future cash flows of the location. |
As a result of the above mentioned review process, the Company recognized an asset impairment charge of approximately $14.2 million related to five restaurants in fiscal 2013, an impairment charge of $4.1 million related to two restaurants in fiscal 2012 and an impairment charge of $2.2 million related to one restaurant in fiscal 2011. The Company’s impairment charges have occurred as a result of locations that have had lower than anticipated traffic near the restaurant and locations that have opened in areas with lower than normal retail co-tenancy. |
The Company’s impairment assessment process requires the use of estimates and assumptions regarding future cash flows and operating outcomes, which are based upon a significant degree of management’s judgment. The estimates used in the impairment analysis represent a Level 3 fair value measurement. The Company continues to assess the performance of restaurants and monitors the need for future impairment. Changes in the economic environment, real estate markets, capital spending, and overall operating performance could impact these estimates and result in future impairment charges. There can be no assurance that future impairment tests will not result in additional charges to earnings. |
Estimated Fair Value of Financial Instruments — The carrying amounts of cash and cash equivalents, receivables, trade and construction payables, and accrued liabilities at December 29, 2013 and December 30, 2012, approximate their fair value due to the short-term maturities of these financial instruments. The carrying amount of the long-term debt under the revolving credit facility and variable rate notes and loan agreements approximate the fair values at December 29, 2013 and December 30, 2012 due to short term maturities of the underlying LIBOR agreements. This represents a Level 2 fair value measurement. |
Revenue Recognition — Revenue from restaurant operations is recognized upon payment by the customer at the time of sale. Revenues are reflected net of sales tax and certain discounts and allowances. |
The Company records a liability upon the sale of gift cards and recognizes revenue upon redemption by the customer. Revenue is recognized on unredeemed gift cards (breakage) based upon historical redemption patterns when the Company determines the likelihood of redemption of the gift card by the customer is remote and there is no legal obligation to remit the value of unredeemed gift cards to the relevant jurisdiction. Breakage is reported within revenues in the consolidated statements of operations. For the fiscal years ended 2013, 2012 and 2011, the Company recorded gift card breakage of an immaterial amount. |
In 2012, the Company launched its loyalty program for each brand and with the program, offers discounted products to its loyal guests. Rewards that are not redeemed expire after 14 to 60 days. In 2013, due to the nature of the offers of the loyalty program, the discounts were recorded as incurred. |
Advertising — The Company expenses the cost of advertising (including production costs) the first time the advertising takes place. Advertising expense was $4.2 million, $4.1 million, and $3.1 million for fiscal years ended 2013, 2012 and 2011, respectively. |
Self-Insurance Reserves — The Company maintains various insurance policies, including workers’ compensation and general liability. As outlined in these policies, the Company is responsible for losses up to certain limits. The Company records a liability for the estimated exposure for aggregate losses. This liability is based on estimates of the ultimate costs to be incurred to settle known claims and claims not reported as of the balance sheet date. The estimated liability is not discounted and is based on a number of assumptions, including actuarial assumptions, historical trends and economic conditions. If actual claims trends, including the severity or frequency of claims, differ from the Company’s estimates and historical trends, the Company’s financial results could be impacted. |
Income Taxes — Income tax provisions are comprised of federal and state taxes currently due, plus deferred taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Recognition of deferred tax assets is limited to amounts considered by management to be more likely than not realized in future periods. Future taxable income, adjustments in temporary differences, available carry forward periods and changes in tax laws could affect these estimates. |
The Company recognizes a tax position in the financial statements when it is more likely than not that the position will be sustained upon examination by tax authorities that have full knowledge of all relevant information. |
In 2011, the Company reduced the valuation allowance for federal and state taxes previously provided against its net deferred tax assets by $62.8 million as the Company deemed it more likely than not the existing net deferred tax assets and tax credits would be realized (See Note 11). |
Stock-Based Compensation — The Company maintains equity compensation incentive plans that provide for the grant of nonqualified stock options and restricted stock. Options are granted with exercise prices equal to the fair value of the Company’s common shares at the date of grant. Fair value of the outstanding shares of restricted stock is based on the average of the high and low price of the Company’s shares on the date immediately preceding the date of grant. The cost of employee service, net of the estimated forfeiture rate, is recognized as a compensation expense over the period that an employee provides service in exchange for the award, also known as the vesting period. The Company reviews the forfeiture rate as necessary to determine if a change in estimate is necessary. Currently, the Company grants shares of restricted stock to its employees. The related compensation cost is being recorded over the four year vesting period of each restricted stock grant (See Note 10). |
Segment Reporting — The Company operates upscale affordable Italian dining restaurants under two brands, exclusively in the United States, that have similar economic characteristics, nature of products and service, class of customer and distribution methods. The Company believes it meets the criteria for aggregating its operating segments into a single reportable segment. |
Recently Adopted Accounting Pronouncements — The Company reviewed all newly issued accounting pronouncements and concluded that they either are not applicable to its operations or that no material effect is expected on its financial statements as a result of future adoption. |