Commitments and Contingencies

9 Months Ended

Sep. 28, 2019

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and contingencies

(a) Supply chain commitments

The Company has various supply chain agreements that provide for purchase commitments, the majority of which result in the Company being contingently liable upon early termination of the agreement. As of September 28, 2019 and December 29, 2018, the Company was contingently liable under such supply chain agreements for approximately $106.9 million and $119.4 million, respectively. For certain supply chain commitments, as product is purchased by the Company’s franchisees over the term of the agreement, the amount of the guarantee is reduced. The Company assesses the risk of performing under each of these purchase agreements on a quarterly basis, and, based on various factors including internal forecasts, prior history, and ability to extend contract terms, we accrued an inconsequential amount of reserves related to supply chain commitments as of September 28, 2019 and December 29, 2018.

(b) Letters of credit

As of September 28, 2019 and December 29, 2018, the Company had standby letters of credit outstanding for a total of $33.1 million and $32.4 million, respectively. There were no amounts drawn down on these letters of credit.

(c) Legal matters

The Company is engaged in several matters of litigation arising in the ordinary course of its business as a franchisor. Such matters include disputes related to compliance with the terms of franchise and development agreements, including claims or threats of claims of breach of contract, negligence, and other alleged violations by the Company. As of September 28, 2019 and December 29, 2018, an inconsequential amount was accrued related to outstanding litigation.