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REVENUE RECOGNITION | 9 Months Ended
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Mar. 31, 2024
Revenue from Contract with Customer [Abstract] |
REVENUE RECOGNITION | REVENUE RECOGNITION: Revenue Recognition and Deferred Revenue: Revenue recognized over time 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 revenues are 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 Statements of Operations. The treatment increases both the gross amount of reported revenue and 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 opens and is then recognized over the term of the franchise agreement, which is typically 10 years. Franchise rental income is a result of the Company signing leases on behalf of franchisees and entering into sublease arrangements with the franchisees. The Company recognizes franchise rental income and expense when it is due to the landlord and it has no impact on net income. Revenue recognized at point of sale Company-owned salon revenues are recognized at the time when the services are provided, or 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 guest. 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 to franchisees and other partners are recorded at the time product is delivered. Information about receivables, broker fees and deferred revenue subject to the current revenue recognition guidance is as follows:
|  | March 31, 2024 |  | June 30, 2023 |  | Balance Sheet Classification
|  | (Dollars in thousands) |  |
Receivables from contracts with customers, net |  | $ | 6,746 |  |  | $ | 5,683 |  |  | Receivables, net
Broker fees |  | 10,054 |  |  | 12,471 |  |  | Other assets
Deferred revenue: |  |  |  |  |  |
Current |  |  |  |  |  |
Gift card liability |  | $ | 1,675 |  |  | $ | 1,823 |  |  | Accrued expenses
Deferred franchise fees open salons |  | 4,973 |  |  | 5,325 |  |  | Accrued expenses
Total current deferred revenue |  | $ | 6,648 |  |  | $ | 7,148 |  |  |
Non-current |  |  |  |  |  |
Deferred franchise fees unopened salons |  | $ | 1,930 |  |  | $ | 2,312 |  |  | Other non-current liabilities
Deferred franchise fees open salons |  | 16,294 |  |  | 20,839 |  |  | Other non-current liabilities
Total non-current deferred revenue |  | $ | 18,224 |  |  | $ | 23,151 |  |  |
Receivables relate primarily to payments due for royalties, advertising fees and rent. The receivables balance is presented net of an allowance for expected credit losses (i.e., doubtful accounts). Provisions for credit losses are recorded based on management’s judgment regarding our ability to collect as well as the age of the receivables. Receivable are written off when they are deemed uncollectible. As of March 31, 2024 and June 30, 2023, the allowance for doubtful accounts was $6.9 million and $7.3 million, respectively. The Company offers financing to SmartStyle® franchisees when they remodel their salons. Included in Other assets is a receivable of $1.0 million, partially offset by a credit loss reserve of $0.2 million, related to this financing program. 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 franchise agreement. The following table is a rollforward of the broker fee balance for the periods indicated:
|  | Nine Months Ended March 31,
|  | 2024 |  | 2023
|  | (Dollars in thousands)
Balance at beginning of period |  | $ | 12,471 |  |  | $ | 15,592 |
Amortization |  | (2,099) |  |  | (2,374) |
Write-offs |  | (318) |  |  | — |
Balance at end of period |  | $ | 10,054 |  |  | $ | 13,218 |
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 March 31, 2024 and 2023 was $1.7 million and $1.6 million, respectively, and for the nine months ended March 31, 2024 and 2023 was $5.0 million and $4.8 million, respectively. Estimated revenue expected to be recognized in the future related to deferred franchise fees for open salons as of March 31, 2024 is as follows (dollars in thousands):
Remainder of 2024 |  | $ | 1,243 |
2025 |  | 4,763 |
2026 |  | 4,297 |
2027 |  | 3,834 |
2028 |  | 3,004 |
Thereafter |  | 4,126 |
Total |  | $ | 21,267 |

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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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