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Revenue Recognition | 9 Months Ended
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Sep. 29, 2019
Revenue Recognition |
Revenue Recognition | 6. Revenue Recognition ​ Adoption of Topic 606 ​ The Company adopted Topic 606 in the first quarter of 2018 with an adjustment to retained earnings to reflect the cumulative impact of adoption. The correction of the immaterial error regarding the consolidation of PJMF impacted the cumulative adjustment from adoption as follows: ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | January 1, 2018
(In thousands) | ​ | As Reported | ​ | As Restated
​ | ​ | ​ | ​ | ​ | ​ | ​
Cumulative effect of adoption of Topic 606 | ​ | $ | (21,528) | ​ | $ | (24,359)
​ The change to the cumulative effect of adoption on retained earnings is the result of the consolidation of PJMF in the Company’s consolidated financial statements, as discussed in more detail in Notes 2 and 5. This included a change in the timing of breakage revenue and commission expense recognition under Topic 606. ​ The adoption of the new guidance changed the reporting of contributions made to PJMF from franchisees and the related advertising fund expenditures, which were not previously included in the Condensed Consolidated Statements of Operations. The new guidance requires these advertising fund contributions and expenditures to be reported on a gross basis in the Condensed Consolidated Statements of Operations. ​ Contract Balances ​ Our contract liabilities primarily relate to franchise fees and unredeemed gift card liabilities, which we classify as Deferred revenue and customer loyalty program obligations which are classified as Accrued expenses and other current liabilities. During the three and nine months ended September 29, 2019, the Company recognized $9.0 million and $24.7 million in revenue, respectively, related to deferred revenue and the customer loyalty program, compared to $3.6 million and $10.9 million for the three and nine months ended September 30, 2018, respectively. ​ The contract liability balances are included in the following (in thousands): ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Contract Liabilities
​ | ​ | ​ | September 29, 2019 | ​ | ​ | December 30, 2018 | ​ | ​ | Change
Deferred revenue | ​ | $ | 19,132 | ​ | $ | 23,272 | ​ | $ | (4,140)
Customer loyalty program | ​ | ​ | 14,580 | ​ | ​ | 18,019 | ​ | ​ | (3,439)
Total contract liabilities | ​ | $ | 33,712 | ​ | $ | 41,291 | ​ | $ | (7,579)
​ 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 agreement. ​ The contract assets were approximately $5.8 million and $6.6 million at September 29, 2019 and December 30, 2018, respectively. During the three and nine months ended September 29, 2019, revenue was reduced approximately $900,000 and $2.5 million, respectively, for the amortization of contract assets over the applicable contract terms. Contract assets are included in Other current assets and Other assets. ​ 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 | ​ | $ | 2,349 | ​ | $ | 2,134 | ​ | $ | 1,927 | ​ | $ | 1,665 | ​ | $ | 1,398 | ​ | $ | 3,397 | ​ | $ | 12,870
​ Approximately $2.2 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 of approximately $4.1 million, included in deferred revenue, will be recognized at 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. ​ As of September 29, 2019, the amount allocated to the Papa Rewards loyalty program is $14.6 million and is reflected in the Condensed Consolidated Balance Sheet as part of the contract liability included in Accrued expenses and other current liabilities. This will be recognized as revenue as the points are redeemed, or expire, which is expected to occur within the next year. ​ The Company applies the practical expedient in ASC 606-10-50-14 and does not disclose information about remaining performance obligations that have original expected durations of one year or less.

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- Definition The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -URI http://asc.fasb.org/topic&trid=49130388 + Details
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