Acquisitions

9 Months Ended

Sep. 24, 2013

Acquisitions

Acquisitions

(8) Acquisitions

On December 25, 2012, we acquired two franchise restaurants in Illinois.  Pursuant to the terms of the acquisition agreement, we paid a purchase price of $4.2 million.  This acquisition is consistent with our long-term strategy to increase net income and earnings per share.

This transaction was accounted for using the purchase method as defined in ASC 805, Business Combinations (“ASC 805”). Based on a purchase price of $4.2 million, $2.8 million of goodwill was generated by the acquisition, which is not amortizable for book purposes, but is deductible for tax purposes.

The purchase price has been allocated as follows:

Current assets	$	64
Property and equipment, net	304
Goodwill	2,759
Intangible asset	1,342
Current liabilities	(195		)
Other liabilities	(64		)
Purchase Price	$	4,210

As a result of this acquisition, we recorded an intangible asset associated with reacquired franchise rights of $1.3 million in accordance with ASC 805.  ASC 805 requires that a business combination between two parties that have a preexisting relationship be evaluated to determine if a settlement of a preexisting relationship exists.  ASC 805 also requires that certain reacquired rights (including the rights to the acquirer’s trade name under a franchise agreement) be recognized as intangible assets apart from goodwill.

The fair value of $1.3 million assigned to the intangible asset acquired was determined primarily using valuation methods that discount expected future cash flows to present value using estimates and assumptions determined by management.  The intangible asset has a weighted-average life of approximately 2.6 years based on the remaining term of the franchise agreements.  We recorded amortization expense relating to the intangible asset of approximately $0.4 million for the 39 weeks ended September 24, 2013.  We expect the annual expense for the next four years to be $0.6 million for 2013, $0.5 million for 2014, $0.2 million for 2015 and $0.1 million for 2016.

Pro forma results of operations have not been presented because the effect of the acquisition was not material to our financial position, results of operations or cash flows.