Winmark (WINA)

Revenue Recognition

The Company collects royalties from each retail franchise based on a percentage of retail store gross sales.  The Company recognizes royalties as revenue when earned.  The Company collects initial franchise fees when franchise agreements are signed and recognizes the initial franchise fees as revenue when the franchise is opened, which is when the Company has performed substantially all initial services required by the franchise agreement.  The Company had deferred franchise fee revenue of $855,800 and $984,500 at December 27, 2008 and December 29, 2007, respectively.  The Company recognizes deferred software license fees over the 10-year life of the initial franchise agreement.  The Company had deferred software license fees of $734,300 and $639,800 at December 27, 2008 and December 29, 2007, respectively.  Merchandise sales through the buying group are recognized when the product has been invoiced by the vendor.

39

Revenue
Recognition

The Company collects
royalties from each retail franchise based on a percentage of retail store
gross sales.  The Company recognizes
royalties as revenue when earned.  The
Company collects initial franchise fees when franchise agreements are signed
and recognizes the initial franchise fees as revenue when the franchise is
opened, which is when the Company has performed substantially all initial
services required by the franchise agreement. 
The Company had deferred franchise fee revenue of $855,800 and $984,500
at December 27, 2008 and December 29, 2007, respectively.  The Company recognizes deferred software
license fees over the 10-year life of the initial franchise agreement.  The Company had deferred software license
fees of $734,300 and $639,800 at December 27, 2008 and December 29,
2007, respectively.  Merchandise sales
through the buying group are recognized when the product has been invoiced by
the vendor.

39

Revenue Recognition

The Company collects royalties from each retail franchise based on a percentage of retail store gross sales.  The Company recognizes royalties as revenue when earned.  The Company collects initial franchise fees when franchise agreements are signed and recognizes the initial franchise fees as revenue when the franchise is opened, which is when the Company has performed substantially all initial services required by the franchise agreement.  The Company had deferred franchise fee revenue of $1,048,500 and $1,053,300 at December 29, 2007 and December 30, 2006, respectively.  The Company recognizes deferred software license fees over the 10-year life of the initial franchise agreement.  The Company had deferred software license fees of $639,800 and $504,100 at December 29, 2007 and December 30, 2006, respectively.  Merchandise sales through the buying group are recognized when the product has been invoiced by the vendor.

41

Revenue
Recognition

The Company collects
royalties from each retail franchise based on a percentage of retail store
gross sales.  The Company recognizes
royalties as revenue when earned.  The
Company collects initial franchise fees when franchise agreements are signed
and recognizes the initial franchise fees as revenue when the franchise is
opened, which is when the Company has performed substantially all initial
services required by the franchise agreement. 
The Company had deferred franchise fee revenue of $1,048,500 and
$1,053,300 at December 29, 2007 and December 30, 2006,
respectively.  The Company recognizes
deferred software license fees over the 10-year life of the initial franchise
agreement.  The Company had deferred
software license fees of $639,800 and $504,100 at December 29, 2007 and December 30,
2006, respectively.  Merchandise sales
through the buying group are recognized when the product has been invoiced by
the vendor.

41

Revenue Recognition

The Company collects royalties from each franchise based on retail store gross sales.  The Company recognizes royalties as revenue when earned.  The Company collects initial franchise fees when franchise agreements are signed and recognizes the initial franchise fees as revenue when the franchise is opened, which is when the Company has performed substantially all initial services required by the franchise agreement.  The Company had deferred franchise fee revenue of $1,053,300 and $783,800 at December 30, 2006 and December 31, 2005, respectively.  The Company recognizes deferred software license fees over the 10-year life of the initial franchise agreement.  The Company had deferred software license fees of $504,100 and $384,900 at December 30, 2006 and December 31, 2005, respectively.  Merchandise sales through the buying group are recognized when the product has been invoiced by the vendor.  Revenue from sales at our Company-owned stores were recognized at the time of the merchandise sale.

Revenue Recognition

The Company collects royalties from each franchise based on retail store gross sales. The Company recognizes royalties as revenue when earned. The Company collects initial franchise fees when franchise agreements are signed and recognizes the initial franchise fees as revenue when the store is opened, which is when the Company has performed substantially all initial services required by the franchise agreement. The Company had deferred initial franchise fee revenue of $783,800 and $583,800 at December 31, 2005 and December 25, 2004, respectively. The Company recognizes deferred software license fees over the 10 year life of the initial franchise agreement. The Company had deferred software license fees of $384,900 and $249,900 at December 31, 2005 and December 25, 2004, respectively. Merchandise sales through the buying group are recognized when the product has been shipped.  Revenue from sales at our Company-owned stores are recognized at the time of the merchandise sale.

40

Revenue Recognition

The Company collects royalties from each franchise based on retail store gross sales.  The Company recognizes royalties as revenue when earned.  The Company collects initial franchise fees when franchise agreements are signed and recognizes the initial franchise fees as revenue when the store is opened, which is when the Company has performed substantially all initial services required by the franchise agreement.  The Company had deferred initial franchise fee revenue of $583,800 and $500,790 at December 25, 2004 and December 27, 2003, respectively.  Merchandise sales through the buying group are recognized when the product has been shipped.   Revenue from sales at our Company-owned stores are recognized at the time of the merchandise sale.