RAVE RESTAURANT GROUP, INC.RAVE
RAVE RESTAURANT GROUP, INC. Revenue Disclosure
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 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 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.
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):
| Fiscal Year Ended | |||||||||||
| June 29, 2025 | June 30, 2024 | June 25, 2023 | |||||||||
|
Franchise royalties
|
$ | 4,620 | $ | 4,844 | $ | 4,978 | |||||
|
Supplier and distributor incentive revenues
|
4,940 | 4,833 | 4,418 | ||||||||
|
Franchise license fees
|
153 | 281 | 152 | ||||||||
|
Area development exclusivity fees and foreign master license fees
|
13 | 15 | 18 | ||||||||
|
Advertising fund contributions
|
2,031 | 1,814 | 1,943 | ||||||||
|
Supplier convention funds
|
217 | 217 | 172 | ||||||||
|
Rental income
|
53 | 131 | 186 | ||||||||
|
Other
|
12 | 15 | 22 | ||||||||
| $ | 12,039 | $ | 12,150 | $ | 11,889 | ||||||
The following table reflects the changes in deferred franchise and development fees for the fiscal years ended on June 29, 2025 and June 30, 2024 (in thousands):
|
June 29,
2025
|
June 30,
2024
| ||||||
|
Beginning balance
|
$ | 549 | $ | 718 | |||
|
Additions
|
77 | 127 | |||||
|
Amount recognized to franchise revenues
|
(166 | ) | (296 | ) | |||
|
Ending balance
|
$ | 460 | $ | 549 |
The following table illustrates franchise and development fees expected to be recognized in the future related to performance obligations that were unsatisfied or partially satisfied as of June 29, 2025 (in thousands):
| Fiscal Year |
Franchise and Development Fees Revenue Recognition | ||
| $ | 76 | ||
| 59 | |||
| 52 | |||
| 50 | |||
| 39 | |||
| 184 | |||
| $ | 460 |
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Sep 25, 2025 | Showing above |
| 2024 | Sep 26, 2024 | |
| 2023 | Sep 21, 2023 | |
| 2022 | Sep 23, 2022 | |
| 2021 | Sep 21, 2021 | |
| 2020 | Sep 28, 2020 | |
About Revenue Disclosures
Revenue disclosures under ASC 606 explain how a company identifies performance obligations, allocates transaction prices, and determines when revenue is recognized. This section is essential for understanding whether reported revenue reflects genuine economic activity or aggressive accounting choices. Analysts examine the mix of point-in-time versus over-time recognition, which directly affects revenue timing and comparability.
Key signals: rising contract liabilities (deferred revenue) suggest strong future revenue visibility, while declining contract assets may indicate slowing project milestones. Watch for variable consideration estimates — rebates, returns, and performance bonuses that require management judgment. Significant changes in disaggregated revenue by geography or product line can reveal shifting business mix before it appears in headline numbers. Compare revenue growth against contract liability growth to assess sustainability, and scrutinize any changes in the timing of recognition that coincide with earnings pressure.