Commitments and Contingencies

3 Months Ended

Mar. 28, 2020

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and contingencies

(a) Supply chain guarantees

The Company has entered into various agreements with suppliers of franchisee products, the majority of which contain guarantees by the Company related to franchisees' purchases of certain volumes of products over specified periods. The Company's guarantees decrease as franchisees purchase products over their respective terms of the agreements. The guarantees have varying terms, many of which are one year or less, and the latest of which expires in 2022. As of March 28, 2020 and December 28, 2019, the Company was contingently liable under such supply chain agreements for approximately $80.3 million and $100.9 million, respectively. The Company assesses the risk of performing under each of these guarantees on a quarterly basis, and, based on various factors including internal forecasts, prior history, and ability to extend contract terms, the Company accrued an inconsequential amount of reserves related to supply chain guarantees as of March 28, 2020 and December 28, 2019.

(b) Letters of credit

As of each of March 28, 2020 and December 28, 2019, the Company had standby letters of credit outstanding for a total of $33.1 million. There were no amounts drawn down on these letters of credit as of December 28, 2019.

(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 each of March 28, 2020 and December 28, 2019, an inconsequential amount was accrued related to outstanding litigation.