Accounting Policies, by Policy (Policies) |
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Mar. 30, 2025 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of Significant Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Principles of Consolidation | Principles of Consolidation
The consolidated financial statements include the accounts of Rave Restaurant Group, Inc. and its subsidiaries, all of which are wholly owned. All appropriate inter-company balances and transactions have been eliminated.
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| Cash and Cash Equivalents | Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.
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| Short Term Investments | Short-Term Investments The Company holds short-term investments in U.S. Treasury bills, classified as trading securities. Accordingly, interest income is recorded through the Condensed Consolidated Statements of Income, when earned. Management has elected to classify all U.S. Treasury bills as short-term, regardless of their maturity dates, as these are readily available to fund current operations and can be liquidated at any time at the discretion of the Company. As of March 30, 2025 and June 30, 2024, the Company held U.S. Treasury bills valued at approximately $8.0 million and $4.9 million, respectively, which are included within short-term investments on the accompanying Condensed Consolidated Balance Sheets.
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| Fair Value Measurements | Fair Value Measurements
Assets and liabilities carried at fair value are categorized based on the level of judgment associated with the inputs used to measure their fair value. Authoritative guidance for fair value measurements establishes a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into the following three levels:
Level 1:
Inputs are unadjusted quoted market prices in active markets for identical assets or liabilities at the measurement date.
Level 2:
Inputs (other than quoted prices included in Level 1) that are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date for the duration of the instrument’s anticipated life.
Level 3:
Inputs are unobservable and therefore reflect management’s best estimate of the assumptions that market participants would use in pricing the asset or liability.
The fair value of the Company’s investments in U.S. Treasury bills at March 30, 2025 and June 30, 2024, was determined using Level 1 observable inputs. Management believes the carrying amounts of other financial instruments at March 30, 2025 and June 30, 2024, including accounts receivable, accounts payable, and accrued expenses are representative of their fair values due to their short-term maturities.
The following table summarizes the Company’s financial assets and financial liabilities measured at fair value (in thousands):
The Company has no financial assets or liabilities classified within Level 3 of the valuation hierarchy.
These items are classified in their entirety based on the lowest priority level of input that is significant to the fair value measurement. The assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the placement of assets and liabilities within the levels of the fair value hierarchy.
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| Accounts Receivable and Allowance for Credit Losses | Accounts Receivable and Allowance for Credit Losses Accounts receivable consist primarily of receivables generated from franchise royalties and supplier concessions. The Company records an allowance for credit losses to allow for any amounts that may be unrecoverable based upon an analysis of the Company’s prior collection experience, customer creditworthiness and current economic trends. After all attempts to collect a receivable have failed, the receivable is written off against the allowance. Finance charges may be accrued at a rate of 18% per year, or up to the maximum amount allowed by law, on past due receivables. The interest income recorded from finance charges is immaterial. The Company monitors franchisee receivable balances and adjusts credit terms when necessary to minimize the Company’s exposure to high-risk accounts receivable. For the three month period ended March 30, 2025, recoveries for credit losses were $14 thousand compared to provision for credit losses of $10 thousand for the same period in the prior fiscal year. For the nine month period ended March 30, 2025, recoveries for credit losses were $22 thousand compared to provision for credit losses of $46 thousand for the same period in the prior fiscal year. Changes in the allowance for credit losses from continuing operations consisted of the following (in thousands):
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| Fiscal Quarters | Fiscal Quarters
The three and nine month periods ended March 30, 2025 and March 24, 2024 each contained 13 weeks and 39 weeks, respectively.
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| Use of Management Estimates | Use of Management Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the Company’s management to make estimates and assumptions that affect its reported amounts of assets, liabilities, revenues, expenses and related disclosure of contingent liabilities. The Company bases its estimates on historical experience and other various assumptions that it believes are reasonable under the circumstances. Estimates and assumptions are reviewed periodically. Actual results could differ materially from estimates.
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| Recent Accounting Pronouncements | Recent Accounting Pronouncements
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU” or “standard”) 2023-07, Segment Reporting: Improvements to Reportable Segment Disclosures (Topic 280). The Company will adopt this standard, which requires companies to enhance disclosure of significant reportable segment expenses. The new guidance is effective for the Company's fiscal year beginning after December 15, 2023 and for interim periods beginning after December 15, 2024. Management believes that upon adoption, this standard will not have a material impact on the Company's consolidated financial statements and related disclosures as a result of adopting this standard.
In December 2023, FASB issued ASU 2023-09, Income Taxes: Improvements to Income Tax Disclosures (Topic 740), which requires companies to provide a more granular breakdown of the components that make up their effective tax rate and additional disclosures about the nature and effect of significant reconciling items. The new guidance is effective for the Company's fiscal year beginning after December 15, 2024. Management believes that adopting this standard will not have a material impact on the Company's consolidated financial statements and related disclosures as a result of adopting this standard.
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| Revenue Recognition | Revenue Recognition
Revenue is measured based on consideration specified in contracts with customers and excludes incentives and amounts collected on behalf of third parties, primarily sales tax. The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a customer. Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction that are collected by the Company from a customer are excluded from revenue.
The following describes principal activities, separated by major product or service, from which the Company generates its revenues:
Franchise Revenues
Franchise revenues consist of 1) franchise royalties, 2) supplier and distributor incentive revenues, 3) franchise license fees, 4) area development exclusivity fees and foreign master license fees, 5) advertising fund contributions, and 6) supplier convention funds.
Franchise royalties, which are based on a percentage of net retail sales, are recognized as sales occur.
Supplier and distributor incentive revenues are recognized when title to the underlying commodities transfer.
Franchise license fees are typically billed upon execution of the franchise agreement and amortized over the term of the franchise agreement, which typically range from five to 20 years. Fees received for renewal periods are amortized over the life of the renewal period. In the event of a closed franchise or terminated development agreement, the remaining balance of unamortized license fees will be recognized in entirety as of the date of the closure or termination.
Area development exclusivity fees and foreign master license fees are typically billed upon execution of the area development and foreign master license agreements. Area development exclusivity fees are included in deferred revenue in the accompanying Condensed Consolidated Balance Sheets and allocated on a pro rata basis to all stores opened under that specific development agreement as the stores are opened. Area development exclusivity fees that include rights to sub-franchise are amortized as revenue over the term of the contract.
Advertising fund contributions for Pizza Inn and Pie Five units represent contributions collected where we have control over the activities of the fund. Contributions are based on a percentage of net retail sales. We have determined that we are the principal in these arrangements, and advertising fund contributions and expenditures are, therefore, reported on a gross basis in the Condensed Consolidated Statements of Income. In general, we expect such advertising fund contributions and expenditures to be largely offsetting and, therefore, do not expect a significant impact on our reported income before income taxes. Our obligation related to these funds is to develop and conduct advertising activities. Pizza Inn and Pie Five marketing fund contributions are billed and collected weekly or monthly.
Supplier convention funds are deferred until the obligations of the agreement are met and the event takes place.
Rental Income
The Company had subleased some of its restaurant space to a third-party. The Company’s last remaining sublease term ended in January 2025 and the Company has no plans to enter into future sublease arrangements. The sublease agreements were non-cancelable through the end of the term and both parties had substantive rights to terminate the lease when the term is complete. Sublease agreements are not capitalized and are recorded as rental income in the period that rent is received.
Total revenues consist of the following (in thousands):
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| Stock-Based Compensation | Stock-Based Compensation
The Company accounts for stock options using the fair value recognition provisions of the authoritative guidance on stock-based payments. The Company uses the Black-Scholes formula to estimate the value of stock-based compensation for options granted to employees and directors and expects to continue to use this acceptable option valuation model in the future. The authoritative guidance also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow.
Restricted stock units (“RSUs”) represent the right to receive shares of common stock upon the satisfaction of vesting requirements, performance criteria and other terms and conditions. Compensation cost for RSUs is measured as an amount equal to the fair value of the RSUs on the date of grant and is expensed over the vesting period if achievement of the performance criteria is deemed probable, with the amount of the expense recognized based on the best estimate of the ultimate achievement level.
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