Nonconsolidated Variable Interest Entities
|12 Months Ended|
Dec. 31, 2020
|Nonconsolidated Variable Interest Entities|
|Nonconsolidated Variable Interest Entities||
Note 9 – Nonconsolidated Variable Interest Entities
As of December 31, 2020 and 2019, the Company owned interests in the following companies, which directly or indirectly operate restaurants:
Bagatelle Investors is a holding company that has an interest in Bagatelle NY. Both entities were formed in 2011. In the second quarter of 2019, Bagatelle NY notified the Company that it had no intent to renew its sublease with the Company for the restaurant space. As a result, the Company determined that it no longer had the ability to exercise significant influence over its investees, Bagatelle Investors and Bagatelle NY. On June 30, 2019, the Company recorded its retained interests in Bagatelle Investors and Bagatelle NY as investments, with the initial basis being the previous carrying amounts of the investments. Prior to June 30, 2019, the Company had accounted for its investments in these entities under the equity method of accounting based on management’s assessment that it was not the primary beneficiary of these entities because it did not have the power to direct their day to day activities.
On December 31, 2019, the Company determined that, because of the short term remaining on the lease (November 2020) and current market conditions, it was unable to recover the carrying amount of the investments in Bagatelle Investors and Bagatelle NY. As a result, the Company recorded a non-cash write down of $2.7 million related to its investments for the year ended December 31, 2019. As of December 31, 2020 and 2019, the Company did not have a carrying value of the investment in Bagatelle Investors or Bagatelle NY. Upon expiration of the lease in November 2020, the Company exited its contract with Bagatelle.
There was no equity in income of investee companies for the year ended December 31, 2020 and 2019.
Additionally, the Company had a management agreement with Bagatelle NY. Under this agreement, the Company recorded management fee revenue of less than $0.1 million and $0.4 million for the years ended December 31, 2020 and 2019, respectively. The Company also received rental income from Bagatelle NY for restaurant space that it subleased to Bagatelle NY. Rental income of $0.5 million and $0.5 million was recorded from this entity for the year ended December 31, 2020 and 2019, respectively.
Net receivables from the Bagatelle Entities included in due from related parties, net were approximately $0.4 million and $0.3 million as of December 31, 2020 and 2019. These receivables represent the Company’s maximum exposure to loss. The Company has provided no additional types of support to these entities other than what is contractually required.
The entire disclosure for equity method investments and joint ventures. Equity method investments are investments that give the investor the ability to exercise significant influence over the operating and financial policies of an investee. Joint ventures are entities owned and operated by a small group of businesses as a separate and specific business or project for the mutual benefit of the members of the group.
Reference 1: http://www.xbrl.org/2003/role/disclosureRef