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Current Expected Credit Losses ("CECL") | 12 Months Ended
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Dec. 31, 2022
Credit Loss [Abstract] |
Current Expected Credit Losses ("CECL") | Current Expected Credit Losses (“CECL”) The CECL reserve methodology requires companies to measure expected credit losses on financial instruments based on the total estimated amount to be collected over the lifetime of the instrument. Under the CECL model, reserves may be established against financial asset balances even if the risk of loss is remote or has not yet manifested itself. In applying the CECL methodology, the Company developed its estimated loss reserves in the following manner. The Company continued to record specific reserves against account balances of franchisees deemed “at-risk” when a potential loss is likely or imminent as a result of prolonged payment delinquency (greater than 90 days past due) and where notable credit deterioration has become evident. For financial assets that are not currently deemed “at-risk,” an allowance is recorded based on expected loss rates derived pursuant to the following CECL methodology that assesses four components: (1) historical losses, (2) current conditions, (3) reasonable and supportable forecasts, and (4) reversion to history, if applicable. Historical Losses Historical loss rates over a five-year span were calculated for financial assets with common risk characteristics. The Company determined historical loss rate data for each franchise brand concept was more relevant than a single blended rate. Historical losses were determined based on the average charge-off method. Historical loss rates are further adjusted by factors related to current conditions and forecasts of future economic conditions. Current Conditions The Company identified three metrics that it believes provide the most relevant reflection of the current risks inherent in the Company’s franchisee-based restaurant business, as follows: (1) delinquency status, (2) system-wide same-restaurant sales, and (3) restaurant unit-level economics. The current conditions adjustment factor was adjusted to account for the impact of the COVID-19 pandemic. Reasonable and Supportable Forecasts The third component in the CECL methodology involves consideration of macroeconomic conditions that can impact the estimate of expected credit losses in the future. The Company has not developed an internal methodology in this regard; rather, the Company utilizes existing, publicly accessible sources of economic data, primarily forecasts of overall unemployment rate as well as consumer spending based on the personal consumption expenditure index. Reversion to History The Company has determined that reversion to history was not required since the remaining average lives of the Company’s financial assets are not exceedingly lengthy. The Company considers its portfolio segments to be the following: Accounts Receivable (Franchise-Related) Most of the Company’s short-term receivables due from franchisees are derived from royalty, advertising and other franchise-related fees. Gift Card Receivables Gift card receivables consist primarily of amounts due from third-party vendors. Receivables related to gift card sales are subject to seasonality and usually peak around year end as a result of the December holiday season. Notes Receivable Notes receivable balances primarily relate to the conversion of certain Applebee's franchisee accounts receivable to notes receivable, cash loans to franchisees for working capital purposes, a note receivable in connection with the sale of IHOP company restaurants in June 2017, and IHOP franchise fee and other notes. The notes are typically collateralized by the franchise. The notes generally have a term from one to eight years and bear interest averaging 5.3% and 4.0% per annum at December 31, 2022 and 2021, respectively. Due to the risk inherent in Applebee's notes that were converted from previously delinquent franchisee accounts receivable balances, a significant portion of these notes have specific reserves recorded against them totaling $8.8 million as of December 31, 2022. Equipment Leases Receivable Equipment leases receivable primarily relate to IHOP franchise development activity prior to 2003. IHOP provided the financing for the leasing of the equipment. Equipment lease contracts are collateralized by the equipment in the restaurant. Equipment lease contracts are due in equal weekly installments, and bear interest averaging 9.8% and 9.9% per annum at December 31, 2022 and 2021, respectively. The term of an equipment lease contract typically coincides with the term of the corresponding restaurant building lease. The weighted average remaining life of the Company’s equipment leases is 3.9 years as of December 31, 2022. The estimated fair value of the equipment collateralizing these lease contracts are not deemed to be significant given the very seasoned and mature nature of this portfolio. Real Estate Leases Receivable Real estate lease receivable also primarily relate to IHOP franchise development activity prior to 2003 when IHOP typically leased or purchased the restaurant site, built and equipped the restaurant, and then franchised the restaurant to a franchisee. IHOP provided the financing for leasing or subleasing the site. Real estate lease receivables at December 31, 2022, were comprised of 48 leases with a weighted average remaining life of 10.2 years, and relate to locations that IHOP is leasing from third parties and subleasing to franchisees. Where applicable, building leases and equipment contracts contain cross-default provisions wherein a default under one constitutes a default under all. Distributor Receivables Receivables due from distributors are related to the sale of IHOP’s proprietary pancake and waffle dry mix to franchisees through the Company’s network of suppliers and distributors and are included as part of Other receivables. Total receivables balances at December 31, 2022 and 2021 were as follows:
Receivables | 2022 |  | 2021
| (In millions)
Accounts receivable | $ | 67.5 |  |  | $ | 63.6 |
Gift card receivables | 34.6 |  |  | 33.4 |
Notes receivable | 17.2 |  |  | 19.7 |
Financing receivables: |  |  |
Equipment leases receivable | 26.6 |  |  | 33.4 |
Real estate leases receivable | 18.5 |  |  | 16.7 |
Other receivables | 5.6 |  |  | 7.6 |
| 170.0 |  |  | 174.4 |
Less: allowance for doubtful accounts and notes receivable | (10.3) |  |  | (11.9) |
| 159.7 |  |  | 162.5 |
Less: current portion | (120.0) |  |  | (120.0) |
Long-term receivables | $ | 39.7 |  |  | $ | 42.5 |
Changes in the allowance for credit losses during the years ended December 31, 2022 and 2021 were as follows:
| Accounts Receivable |  | Notes receivable, short-term |  | Notes receivable, long-term |  | Lease Receivables |  | Equipment Receivables |  | Other (1) |  | Total
| (In millions)
Balance, December 31, 2020 | $ | 11.2 |  |  | $ | 3.6 |  |  | $ | 5.3 |  |  | $ | 0.4 |  |  | $ | 2.3 |  |  | $ | 0.3 |  |  | $ | 23.1 |
Bad debt (credit) expense | (8.2) |  |  | 1.4 |  |  | 1.1 |  |  | 0.1 |  |  | 0.8 |  |  | (0.1) |  |  | (4.9) |
Advertising provision adjustment | (1.8) |  |  | (0.3) |  |  | 0.2 |  |  | — |  |  | — |  |  | — |  |  | (1.9) |
Write-offs | (0.2) |  |  | (0.9) |  |  | — |  |  | (0.5) |  |  | (3.0) |  |  | — |  |  | (4.6) |
Recoveries | 0.0 |  |  | — |  |  | — |  |  | 0.2 |  |  | — |  |  | — |  |  | 0.2 |
Balance, December 31, 2021 | $ | 1.0 |  |  | $ | 3.8 |  |  | $ | 6.6 |  |  | $ | 0.2 |  |  | $ | 0.1 |  |  | $ | 0.2 |  |  | $ | 11.9 |
Bad debt (credit) expense | (0.1) |  |  | 1.4 |  |  | (1.1) |  |  | 0.0 |  |  | (0.0) |  |  | 0.0 |  |  | 0.3 |
Advertising provision adjustment | 0.5 |  |  | (0.8) |  |  | (0.2) |  |  | — |  |  | — |  |  | — |  |  | (0.5) |
Write-offs | (0.3) |  |  | (0.9) |  |  | — |  |  | (0.0) |  |  | (0.0) |  |  | (0.3) |  |  | (1.5) |
Recoveries | 0.1 |  |  | — |  |  | — |  |  | 0.0 |  |  | 0.0 |  |  | 0.0 |  |  | 0.1 |
Balance, December 31, 2022 | $ | 1.2 |  |  | $ | 3.5 |  |  | $ | 5.3 |  |  | $ | 0.2 |  |  | $ | 0.1 |  |  | $ | (0.1) |  |  | $ | 10.3 |
_________________________________ (1) Primarily consists of distributor receivables, gift card receivables, and credit card receivables. The Company's primary credit quality indicator for all portfolio segments is delinquency. The delinquency status of receivables (other than accounts receivable, gift card receivables and distributor receivables) at December 31, 2022 was as follows:
| Notes receivable, short-term |  | Notes receivable, long-term |  | Lease Receivables |  | Equipment Receivables |  | Other (1) |  | Total
| (In millions)
Current | $ | 4.9 |  |  | $ | 10.7 |  |  | $ | 18.5 |  |  | $ | 26.6 |  |  | $ | 0.0 |  |  | $ | 60.7 |
30-59 days | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
60-89 days | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
90-119 days | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
120+ days | 1.6 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 1.6 |
Total | $ | 6.5 |  |  | $ | 10.7 |  |  | $ | 18.5 |  |  | $ | 26.6 |  |  | 0.0 |  |  | $ | 62.3 |
_________________________________ (1) Primarily consists of credit card receivables. The year of origination of the Company's financing receivables at December 31, 2022 as follows:
| Notes receivable, short and long-term |  | Lease Receivables |  | Equipment Receivables |  | Total
| (In millions)
2022 | $ | 1.6 |  |  | $ | 8.5 |  |  | $ | — |  |  | $ | 10.1 |
2021 | 10.1 |  |  | 2.5 |  |  | — |  |  | 12.6 |
2020 | 0.4 |  |  | 1.3 |  |  | — |  |  | 1.7 |
2019 | — |  |  | 0.7 |  |  | — |  |  | 0.7 |
2018 | — |  |  | — |  |  | — |  |  | 0.0 |
Prior | 5.1 |  |  | 5.5 |  |  | 26.6 |  |  | 37.2 |
Total | $ | 17.2 |  |  | $ | 18.5 |  |  | $ | 26.6 |  |  | $ | 62.3 |
The Company does not place its financing receivables in non-accrual status.

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- Definition The entire disclosure for claims held for amounts due a entity, excluding financing receivables. Examples include, but are not limited to, trade accounts receivables, notes receivables, loans receivables. Includes disclosure for allowance for credit losses. + References Reference 1: http://www.xbrl.org/2009/role/commonPracticeRef -Publisher FASB -Name Accounting Standards Codification -Topic 310 -SubTopic 10 -URI https://asc.fasb.org/subtopic&trid=2196772 + Details
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