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REVENUE RECOGNITION | 6 Months Ended
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Dec. 31, 2020
Revenue from Contract with Customer [Abstract] |
REVENUE RECOGNITION | REVENUE RECOGNITION: Revenue Recognition and Deferred Revenue: Revenue recognized at point of sale Company-owned salon revenues are recognized at the time when the services are provided. Product revenues for company-owned salons are recognized when the guest receives and pays for the merchandise. Revenues from purchases made with gift cards are also recorded when the guest takes possession of the merchandise or services are provided. Gift cards issued by the Company are recorded as a liability (deferred revenue) upon sale and recognized as revenue upon redemption by the customer. Gift card breakage, the amount of gift cards which will not be redeemed, is recognized proportional to redemptions using estimates based on historical redemption patterns. Product sales by the Company to franchisees are included within product revenues in the unaudited Condensed Consolidated Statement of Operations and recorded at the time product is delivered to the franchisee. Payment for franchisee product revenue is generally collected within 30 to 90 days of delivery. Revenue recognized over time Franchise revenues primarily include royalties, advertising fund cooperatives fees, franchise fees and other fees. Royalty and advertising fund revenues represent sales-based royalties that are recognized in the period in which the sales occur. Generally, royalty and advertising fund revenue is billed and collected monthly in arrears. Advertising fund revenues and expenditures, which must be spent on marketing and related activities per the franchise agreements, are recorded on a gross basis within the unaudited Condensed Consolidated Statement of Operations. This increases both the gross amount of reported franchise revenue and site operating expense and generally has no impact on operating income and net income. Franchise fees are billed and received upon the signing of the franchise agreement. Recognition of these fees is deferred until the salon opening and is then recognized over the term of the franchise agreement, typically ten years. Franchise rental income is a result of the Company signing leases on behalf of franchisees and entering into a sublease arrangement with the franchisee. The Company recognizes franchise rental income and expense when it is due to the landlord. The following table disaggregates revenue by timing of revenue recognition and is reconciled to reportable segment revenues as follows:
|  | Three Months Ended December 31, 2020 |  | Three Months Ended December 31, 2019
|  | Franchise |  | Company-owned |  | Franchise |  | Company-owned
|  | (Dollars in thousands)
Revenue recognized at a point in time: |  |  |  |  |  |  |  |
Service |  | $ | — |  |  | $ | 28,987 |  |  | $ | — |  |  | $ | 101,805 |
Product |  | 14,236 |  |  | 8,910 |  |  | 16,864 |  |  | 27,119 |
Total revenue recognized at a point in time |  | $ | 14,236 |  |  | $ | 37,897 |  |  | $ | 16,864 |  |  | $ | 128,924 |
Revenue recognized over time: |  |  |  |  |  |  |  |
Royalty and other franchise fees |  | $ | 15,187 |  |  | $ | — |  |  | $ | 18,644 |  |  | $ | — |
Advertising fund fees |  | 4,715 |  |  | — |  |  | 10,703 |  |  | — |
Franchise rental income |  | 32,285 |  |  | — |  |  | 33,630 |  |  | — |
Total revenue recognized over time |  | 52,187 |  |  | — |  |  | 62,977 |  |  | — |
Total revenue |  | $ | 66,423 |  |  | $ | 37,897 |  |  | $ | 79,841 |  |  | $ | 128,924 |
|  | Six Months Ended December 31, 2020 |  | Six Months Ended December 31, 2019
|  | Franchise |  | Company-owned |  | Franchise |  | Company-owned
|  | (Dollars in thousands)
Revenue recognized at a point in time: |  |  |  |  |  |  |  |
Service |  | $ | — |  |  | $ | 65,395 |  |  | $ | — |  |  | $ | 243,746 |
Product |  | 27,978 |  |  | 19,917 |  |  | 29,969 |  |  | 59,670 |
Total revenue recognized at a point in time |  | $ | 27,978 |  |  | $ | 85,312 |  |  | $ | 29,969 |  |  | $ | 303,416 |
Revenue recognized over time: |  |  |  |  |  |  |  |
Royalty and other franchise fees |  | $ | 28,634 |  |  | $ | — |  |  | $ | 36,235 |  |  | $ | — |
Advertising fund fees |  | 9,224 |  |  | — |  |  | 21,129 |  |  | — |
Franchise rental income |  | 64,568 |  |  | — |  |  | 65,054 |  |  | — |
Total revenue recognized over time |  | 102,426 |  |  | — |  |  | 122,418 |  |  | — |
Total revenue |  | $ | 130,404 |  |  | $ | 85,312 |  |  | $ | 152,387 |  |  | $ | 303,416 |
Information about receivables, broker fees and deferred revenue subject to the amended revenue recognition guidance is as follows:
|  | December 31, 2020 |  | June 30, 2020 |  | Balance Sheet Classification
|  | (Dollars in thousands) |  |
Receivables from contracts with customers, net |  | $ | 27,457 |  |  | $ | 22,991 |  |  | Accounts receivable, net
Broker fees |  | 20,345 |  |  | 20,516 |  |  | Other assets
Deferred revenue: |  |  |  |  |  |
Current |  |  |  |  |  |
Gift card liability |  | $ | 2,536 |  |  | $ | 2,543 |  |  | Accrued expenses
Deferred franchise fees unopened salons |  | 69 |  |  | 77 |  |  | Accrued expenses
Deferred franchise fees open salons |  | 5,854 |  |  | 5,537 |  |  | Accrued expenses
Total current deferred revenue |  | $ | 8,459 |  |  | $ | 8,157 |  |  |
Non-current |  |  |  |  |  |
Deferred franchise fees unopened salons |  | $ | 10,306 |  |  | $ | 11,855 |  |  | Other non-current liabilities
Deferred franchise fees open salons |  | 33,674 |  |  | 33,623 |  |  | Other non-current liabilities
Total non-current deferred revenue |  | $ | 43,980 |  |  | $ | 45,478 |  |  |
Receivables relate primarily to payments due for royalties, franchise fees, advertising fees, rent, franchise product sales and sales of salon services and product paid by credit card. The receivables balance is presented net of an allowance for expected losses (i.e., doubtful accounts), primarily related to receivables from franchisees. The following table is a rollforward of the allowance for doubtful accounts for the period (in thousands):
Balance as of June 30, 2020 |  | $ | 6,899 |
Provision for doubtful accounts (1) |  | 1,627 |
Provision for franchisee rent (2) |  | 853 |
Write-offs |  | (632) |
Balance as of December 31, 2020 |  | $ | 8,747 |
_______________________________________________________________________________ (1)The provision for doubtful accounts is recognized as General and administrative expense in the unaudited Condensed Consolidated Statement of Operations. (2)The provision for franchisee rent is recognized as Rent in the unaudited Condensed Consolidated Statement of Operations. Broker fees are the costs associated with using external brokers to identify new franchisees. These fees are paid upon the signing of the franchise agreement and recognized as General and Administrative expense over the term of the agreement. The following table is a rollforward of the broker fee balance for the periods indicated (in thousands):
Balance as of June 30, 2020 |  | $ | 20,516 |
Additions |  | 1,418 |
Amortization |  | (1,565) |
Write-offs |  | (24) |
Balance as of December 31, 2020 |  | $ | 20,345 |
Deferred revenue includes the gift card liability and deferred franchise fees for unopened salons and open salons. Gift card revenue for the three months ended December 31, 2020 and 2019 was $0.1 and $0.7 million, respectively, and for the six months ended December 31, 2020 and 2019 was $0.4 and $1.5 million, respectively. Deferred franchise fees related to open salons are generally recognized on a straight-line basis over the term of the franchise agreement. Franchise fee revenue for the three months ended December 31, 2020 and 2019 was $1.6 and $1.3 million, respectively, and for the six months ended December 31, 2020 and 2019 was $3.3 and $2.4 million, respectively. Estimated revenue expected to be recognized in the future related to deferred franchise fees for open salons as of December 31, 2020 is as follows (in thousands):
Remainder of 2021 |  | $ | 2,959 |
2022 |  | 5,799 |
2023 |  | 5,622 |
2024 |  | 5,387 |
2025 |  | 4,993 |
Thereafter |  | 14,768 |
Total |  | $ | 39,528 |

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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 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -SubTopic 10 -Section 50 -Paragraph 10 -URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130551-203045 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -SubTopic 10 -Section 50 -Paragraph 13 -Subparagraph (b)(2) -URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130556-203045 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -SubTopic 10 -Section 50 -Paragraph 12 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130550-203045 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -SubTopic 10 -Section 50 -Paragraph 12 -Subparagraph (e) -URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -SubTopic 10 -Section 50 -Paragraph 12 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -SubTopic 10 -Section 50 -Paragraph 12 -Subparagraph (d) -URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130558-203045 Reference 10: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -SubTopic 10 -Section 50 -Paragraph 12 -Subparagraph (c) -URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045 + Details
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