Fair Value Measurements

12 Months Ended

Dec. 25, 2016

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

The framework for measuring fair value provides a fair value hierarchy that prioritizes the inputs to the valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy under Accounting Standards Codification 820 are described as follows:

• Level 1 – Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access.

• Level 2 – Inputs to the valuation methodology include:

◦ Quoted prices for similar assets or liabilities in active markets

◦ Quoted prices for identical or similar assets or liabilities in inactive markets

◦ Inputs other than quoted prices that are observable for the asset or liability

◦ Inputs that are derived principally from or corroborated by observable market data by correlation or other means

If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability.

• Level 3 – Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The asset or liability's fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques maximize the use of relevant observable inputs and minimize the use of unobservable inputs.

The following table summarizes the financial instruments measured at fair value in our consolidated balance sheet as of December 25, 2016:

	Level 1		Level 2	Level 3	Total
Assets
Deferred Compensation - Mutual Funds	$	9,134	—	—	9,134
Contingent Consideration	—		—	2,140	2,140
Liabilities
Deferred Compensation - Mutual Funds	9,014		—	—	9,014

The following table summarizes the financial instruments measured at fair value in our consolidated balance sheet as of December 27, 2015:

	Level 1	Level 2	Level 3	Total
Assets
Deferred Compensation - Mutual Funds	9,043	—	—	9,043
Liabilities
Contingent Consideration	—	—	1,551	1,551
Deferred Compensation - Mutual Funds	8,958	—	—	8,958

Our deferred compensation assets and liabilities were composed of investments held for future needs of our non-qualified deferred compensation plan and are reported at fair market value, using the “market approach” valuation method. The “market approach” valuation method uses prices and other relevant information observable in market transactions involving identical assets and is a Level 1 approach. Our contingent consideration assets and liabilities represent amounts due and owed in association with a fiscal year 2015 acquisition. These assets and liabilities were valued using a Level 3 approach that utilizes the projected future performance of certain restaurants we acquired. The future performance of these acquired restaurants will ultimately determine the settlement amount of these assets and liabilities. Estimates of fair value are inherently uncertain and represent only management's reasonable expectation regarding future developments. These estimates and the judgments and assumptions upon which the estimates are based will, in all likelihood, differ in some respects from actual future results.

The following table summarizes the activity within Level 3 instruments:

	Fiscal Years Ended
	December 25, 2016		December 27, 2015
Beginning balance	(1,551	)	—
Mark to market adjustment	3,691		(1,551	)
Ending balance	2,140		(1,551	)

Adjustments to the contingent consideration assets and liabilities are recognized in interest and other expense on the consolidated statements of earnings.

There were no significant transfers between the levels of the fair value hierarchy during the fiscal years ended December 25, 2016 and December 27, 2015.

Our financial assets and liabilities requiring a fair-value measurement on a non-recurring basis were not significant as of December 25, 2016 or December 27, 2015.

Non-financial assets and liabilities that are measured at fair value on a recurring basis

At December 25, 2016, we did not have any significant non-financial assets or liabilities that required a fair-value measurement on a recurring basis.

Non-financial assets and liabilities that are measured at fair value on a non-recurring basis

In regards to our impairment analysis, we generally estimate long-lived asset fair values, including property, plant and equipment and leasehold improvements, using the income approach. The inputs used to determine fair value relate primarily to future assumptions regarding restaurant sales and profitability and our discount rate assumption. These inputs are categorized as Level 3 inputs. The inputs used represent management’s assumptions about what information market participants would use in pricing the assets and are based upon the best information available at the balance sheet date.

During 2016 and 2015, we recorded an impairment charge of $2,830 and $1,458, respectively, for our underperforming restaurants.

In regards to our goodwill analysis, the fair value of the reporting unit is calculated using a market approach. The primary input used to determine fair value is the Company's stock price, which is an unadjusted quoted price in and active market that the Company has the ability to access. This inputs is categorized as a Level 1 input. During 2016 and 2015, we did not record any goodwill impairment charges.

Certain of our financial assets and liabilities are recorded at their carrying amounts which approximate fair value, based on their short-term nature or variable interest rate. These financial assets and liabilities include cash, accounts receivable, accounts payable, long-term debt, and other current assets and liabilities.