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Revenues | 9 Months Ended
--- | ---
Sep. 27, 2023
Revenue from Contract with Customer [Abstract] |
Revenues | Revenues The following table disaggregates our revenue by sales channel and type of good or service:
| Quarter Ended |  | Three Quarters Ended
| September 27, 2023 |  | September 28, 2022 |  | September 27, 2023 |  | September 28, 2022
| (In thousands)
Company restaurant sales | $ | 53,153 |  |  | $ | 52,211 |  |  | $ | 161,486 |  |  | $ | 145,354 |
Franchise and license revenue: |  |  |  |  |  |  |
Royalties | 29,703 |  |  | 28,992 |  |  | 90,106 |  |  | 84,276 |
Advertising revenue | 19,297 |  |  | 18,950 |  |  | 58,818 |  |  | 56,642 |
Initial and other fees | 3,388 |  |  | 7,749 |  |  | 10,994 |  |  | 20,035 |
Occupancy revenue | 8,642 |  |  | 9,554 |  |  | 27,165 |  |  | 29,273 |
Franchise and license revenue | 61,030 |  |  | 65,245 |  |  | 187,083 |  |  | 190,226 |
Total operating revenue | $ | 114,183 |  |  | $ | 117,456 |  |  | $ | 348,569 |  |  | $ | 335,580 |
Franchise occupancy revenue consisted of the following:
| Quarter Ended |  | Three Quarters Ended
| September 27, 2023 |  | September 28, 2022 |  | September 27, 2023 |  | September 28, 2022
| (In thousands)
Operating lease revenue | $ | 6,461 |  |  | $ | 7,074 |  |  | $ | 20,015 |  |  | $ | 21,745 |
Variable lease revenue | 2,181 |  |  | 2,480 |  |  | 7,150 |  |  | 7,528 |
Total occupancy revenue | $ | 8,642 |  |  | $ | 9,554 |  |  | $ | 27,165 |  |  | $ | 29,273 |
Balances related to contracts with customers consist of receivables, contract assets, deferred franchise revenue and deferred gift card revenue. See Note 3 for details on our receivables. Deferred franchise revenue consists primarily of the unamortized portion of initial franchise fees that are currently being amortized into revenue and amounts related to development agreements and unopened restaurants that will begin amortizing into revenue when the related restaurants are opened. Deferred franchise revenue represents our remaining performance obligations to our franchisees, excluding amounts of variable consideration related to sales-based royalties and advertising. The components of the change in deferred franchise revenue are as follows:
| (In thousands)
Balance, December 28, 2022 | $ | 20,751 |
Fees received from franchisees | 1,243 |
Revenue recognized (1) | (2,387) |
Balance, September 27, 2023 | 19,607 |
Less current portion included in other current liabilities | 2,179 |
Deferred franchise revenue included in other noncurrent liabilities | $ | 17,428 |
(1) Of this amount $2.0 million was included in the deferred franchise revenue balance as of December 28, 2022. We record contract assets related to incentives and subsidies provided to franchisees related to new unit openings and/or equipment upgrades. These amounts will be recognized as a component of franchise and license revenue over the remaining term of the related franchise agreements. The components of the change in contract assets are as follows:
| (In thousands)
Balance, December 28, 2022 | $ | 5,361 |
Franchisee deferred costs | 2,371 |
Contract asset amortization | (1,032) |
Balance, September 27, 2023 | 6,700 |
Less current portion included in other current assets | 1,016 |
Contract assets included in other noncurrent assets | $ | 5,684 |
The Company purchases equipment related to various programs for franchise restaurants, including kitchen and point-of-sale system equipment. We bill our franchisees and recognize revenue when the related equipment is installed, less amounts contributed from the Company, which have been deferred as contract assets in the table above. We recognized $1.7 million and $4.6 million of revenue, recorded as a component of initial and other fees, related to the sale of equipment to franchisees during the quarter and year-to-date period ended September 27, 2023, respectively. We recognized $5.8 million and $13.8 million of revenue, recorded as a component of initial and other fees, related to the sale of equipment to franchisees during the quarter and year-to-date period ended September 28, 2022, respectively. As of September 27, 2023, we had $0.8 million in inventory and $0.6 million in receivables related to the purchased equipment. As of December 28, 2022, we had $3.6 million in inventory and $6.6 million in receivables related to the kitchen equipment rollout. Deferred gift card liabilities consist of the unredeemed portion of gift cards sold in company restaurants and at third party locations. The balance of deferred gift card liabilities represents our remaining performance obligations to our customers. The balance of deferred gift card liabilities as of September 27, 2023 and December 28, 2022 was $5.7 million and $7.7 million, respectively. During the year-to-date period ended September 27, 2023, we recognized revenue of $0.4 million from gift card redemptions at company restaurants.

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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 -Topic 606 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 9 -Publisher FASB -URI https://asc.fasb.org//1943274/2147479806/606-10-50-9 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 606 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 10 -Publisher FASB -URI https://asc.fasb.org//1943274/2147479806/606-10-50-10 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Topic 606 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 15 -Publisher FASB -URI https://asc.fasb.org//1943274/2147479806/606-10-50-15 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Topic 606 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 12 -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org//1943274/2147479806/606-10-50-12 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Topic 606 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 12 -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147479806/606-10-50-12 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Topic 606 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 12 -Subparagraph (c) -Publisher FASB -URI https://asc.fasb.org//1943274/2147479806/606-10-50-12 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Topic 606 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 12 -Subparagraph (d) -Publisher FASB -URI https://asc.fasb.org//1943274/2147479806/606-10-50-12 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Topic 606 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 12 -Subparagraph (e) -Publisher FASB -URI https://asc.fasb.org//1943274/2147479806/606-10-50-12 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Topic 606 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 13 -Subparagraph (b)(2) -Publisher FASB -URI https://asc.fasb.org//1943274/2147479806/606-10-50-13 Reference 10: http://www.xbrl.org/2003/role/disclosureRef -Name Accounting Standards Codification -Topic 606 -Publisher FASB -URI https://asc.fasb.org//606/tableOfContent + Details
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