Leases

3 Months Ended

Mar. 27, 2022

7. Leases

The Company leases certain retail store and supply chain center locations, supply chain vehicles, equipment and its corporate headquarters with expiration dates through 2041.

The components of operating and finance lease cost for the first quarter of 2022 and the first quarter of 2021 were as follows:


	Fiscal Quarter Ended
	March 27,		March 28,
	2022		2021
Operating lease cost	$	10,275	$	10,424
Finance lease cost:
Amortization of right-of-use assets		1,208		919
Interest on lease liabilities		1,104		1,026
Total finance lease cost	$	2,312	$	1,945

Rent expense totaled $18.9 million and $18.2 million in the first quarter of 2022 and the first quarter of 2021, respectively. Rent expense includes operating lease cost, as well as expense for non-lease components including common area maintenance, real estate taxes and insurance for the Company’s real estate leases. Rent expense also includes the variable rate per mile driven and fixed maintenance charges for the Company’s supply chain center tractors and trailers and expense for short-term rentals. Rent expense for certain short-term supply chain center tractor and trailer rentals was $2.2 million and $1.8 million in the first quarter of 2022 and the first quarter of 2021, respectively. Variable rent expense and rent expense for other short-term leases were immaterial in both the first quarter of 2022 and the first quarter of 2021.

Supplemental balance sheet information related to the Company’s finance leases as of March 27, 2022 and January 2, 2022 was as follows:


	March 27,			January 2,
	2022			2022
Land and buildings	$	87,019		$	86,965
Accumulated depreciation and amortization		(15,641	)		(14,423	)
Finance lease assets, net	$	71,378		$	72,542

Current portion of long-term debt	$	4,132		$	4,088
Long-term debt, less current portion		71,260			72,250
Total principal payable on finance leases	$	75,392		$	76,338

As of March 27, 2022 and January 2, 2022, the weighted average remaining lease term and weighted average discount rate for the Company’s operating and finance leases were as follows:


	March 27, 2022		January 2, 2022
	Operating	Finance	Operating	Finance
	Leases	Leases	Leases	Leases
Weighted average remaining lease term	7 years	15 years	7 years	15 years
Weighted average discount rate	3.5%	5.8%	3.5%	5.8%

Supplemental cash flow information related to leases for the first quarter of 2022 and the first quarter of 2021 were as follows:


	Fiscal Quarter Ended
	March 27,		March 28,
	2022		2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	10,637	$	10,187
Operating cash flows from finance leases		1,104		1,026
Financing cash flows from finance leases		986		704
Right-of-use assets obtained in exchange for lease obligations:
Operating leases		7,758		4,672
Finance leases		—		399

Maturities of lease liabilities as of March 27, 2022 were as follows:


	Operating			Finance
	Leases			Leases
2022	$	35,957		$	6,078
2023		40,220			7,542
2024		39,100			8,121
2025		33,501			7,942
2026		30,487			8,640
Thereafter		67,721			78,139
Total future minimum rental commitments		246,986			116,462
Less – amounts representing interest		(27,233	)		(41,070	)
Total lease liabilities	$	219,753		$	75,392

As of March 27, 2022, the Company had additional leases for one supply chain center and certain supply chain tractors and trailers that had not yet commenced with estimated future minimum rental commitments of approximately $63.0 million. These leases are expected to commence in 2022 with lease terms of up to 16 years. These undiscounted amounts are not included in the table above.

The Company has guaranteed lease payments related to certain franchisees’ lease arrangements. The maximum amount of potential future payments under these guarantees was $8.6 million and $9.1 million as of March 27, 2022 and January 2, 2022, respectively. The Company does not believe these arrangements have or are likely to have a material effect on its results of operations, financial condition, revenues, expenses or liquidity.