Leases

12 Months Ended

Jan. 01, 2023

(5)

Leases

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

The components of operating and finance lease cost for 2022, 2021 and 2020 were as follows:


	2022		2021		2020
Operating lease cost	$	47,039	$	44,913	$	44,679

Finance lease cost:
Amortization of right-of-use assets		5,235		4,373		2,186
Interest on lease liabilities		4,369		4,233		3,340
Total finance lease cost	$	9,604	$	8,606	$	5,526

Rent expense totaled $79.6 million, $78.6 million and $73.7 million in 2022, 2021 and 2020, 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 $7.0 million, $8.0 million and $4.2 million in 2022, 2021 and 2020, respectively. Variable rent expense and rent expense for other short-term leases were immaterial for 2022, 2021 and 2020.

Supplemental balance sheet information related to the Company’s finance leases as of January 1, 2023 and January 2, 2022 was as follows:


	January 1, 2023			January 2, 2022
Land and buildings	$	83,902		$	86,965
Equipment		1,606			—
Finance lease assets		85,508			86,965
Accumulated depreciation and amortization		(19,405	)		(14,423	)
Finance lease assets, net	$	66,103		$	72,542

Current portion of long-term debt	$	3,313		$	4,088
Long-term debt, less current portion		70,886			72,250
Total principal payable on finance leases	$	74,199		$	76,338

As of January 1, 2023 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:


	2022						2021
	Operating			Finance			Operating			Finance
	Leases			Leases			Leases			Leases
Weighted average remaining lease term	7 years			14 years			7 years			15 years
Weighted average discount rate		3.9	%		6.0	%		3.5	%		5.8	%

Supplemental cash flow information related to leases for 2022, 2021 and 2020 was as follows:


	2022		2021		2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	45,082	$	44,176	$	43,679
Operating cash flows from finance leases		4,369		4,233		3,340
Financing cash flows from finance leases		4,176		3,212		2,058
Right-of-use assets obtained in exchange for new lease obligations:
Operating leases		64,660		29,549		37,375
Finance leases		478		18,991		42,894

Maturities of lease liabilities as of January 1, 2023 were as follows:


	Operating			Finance
	Leases			Leases
2023	$	44,066		$	7,471
2024		42,298			8,007
2025		37,360			7,823
2026		35,556			8,489
2027		29,074			7,930
Thereafter		81,025			68,701
Total future minimum rental commitments		269,379			108,421
Less, amounts representing interest		(39,258	)		(34,222	)
Total lease liabilities	$	230,121		$	74,199

As of January 1, 2023, the Company had additional leases for one storage warehouse facility and certain supply chain and U.S. Company-owned store vehicles that had not yet commenced with estimated future minimum rental commitments of $48.6 million. These leases are expected to commence in 2023 with lease terms of up to 11 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 $24.5 million and $9.1 million as of January 1, 2023 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 or expenses, capital expenditures or liquidity.