Texas Roadhouse, Inc. and SubsidiariesNotes to Consolidated Financial Statements(Tabular amounts in thousands, except share and per share data)F-17
as revenue as the corresponding franchise restaurant sales occur.
Franchise fees are all remaining fees from our franchisees including initial fees, upfront fees from international
agreements, fees paid to our domestic marketing and advertising fund, and fees for supervisory and administrative
services. Our franchise agreements typically require the franchisee to pay an initial, non-refundable fee. Subject to our
approval and payment of a renewal fee, a franchisee may generally renew the franchise agreement upon its expiration.
These initial fees and renewal fees are deferred and recognized over the term of the agreement. We also enter into area
development agreements for the development of international Texas Roadhouse restaurants. Upfront fees from
development agreements are deferred and recognized on a pro-rata basis over the term of the individual restaurant
franchise agreement as restaurants under the development agreement are opened. Our domestic franchise agreement
also requires our franchisees to remit 0.3% of sales to our system-wide marketing and advertising fund. These amounts
are recognized as revenue as the corresponding franchise restaurant sales occur. Finally, we perform supervisory and
administrative services for certain franchise restaurants for which we receive management fees, which are recognized as
the services are performed. Total deferred revenue related to our franchise agreements is included in other liabilities in
our consolidated balance sheets and was approximately $1.8 million as of December 25, 2018 and December 26, 2017.
We recognized revenue of approximately $0.3 million for the year ended December 25, 2018 related to the amount in
deferred revenue as of December 26, 2017.
(4) Acquisitions
On December 3, 2018, we acquired one franchise restaurant in Florida which was subsequently relocated. Pursuant
to the terms of the acquisition agreement, we paid a total purchase price of $2.2 million, net of a $0.3 million charge to
settle a pre-existing relationship. This transaction was accounted for using the purchase method as defined in ASC 805,
Business Combinations. As a result of this acquisition, $2.2 million of goodwill was generated, which is not amortizable
for book purposes, but is deductible for tax purposes.
The purchase price has been preliminarily allocated as follows:Current assets .......................................................... $ 42
Property and equipment .................................................. 43
Goodwill .............................................................. 2,180
Current liabilities.... .................................................... (97)
$ 2,168On December 28, 2016, we acquired four franchise restaurants in Florida and Georgia. Pursuant to the terms of the
acquisition agreements, we paid a total purchase price of $16.5 million, net of cash acquired. Two of the acquired
restaurants are wholly-owned and the remaining two restaurants are majority-owned. For the two majority-owned
restaurants, we received a noncontrolling interest contribution of $3.5 million.
These transactions were accounted for using the purchase method as defined in ASC 805. Based on a purchase price
of $16.5 million, $4.5 million of goodwill was generated by the acquisition, which is not amortizable for book purposes,
but is deductible for tax purposes.
The purchase price has been allocated as follows:Current assets .......................................................... $ 170
Property and equipment .................................................. 12,281
Goodwill .............................................................. 4,469
Current liabilities.... .................................................... (392)
$ 16,528