Commitments and Contingencies

12 Months Ended

Dec. 31, 2013

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

The Company leases certain restaurant equipment and buildings under operating leases. The majority of the Company’s leases contain renewal options for one to five years. The remaining leases may be renewed upon negotiation, however the table below does not include amounts related to unexercised lease renewal option periods. Future minimum lease payments, including non-operating assets, at December 31, 2013 consisted of the following (in thousands):

Fiscal year
2014	$	56,581
2015	51,523
2016	43,809
2017	33,508
2018	27,911
Thereafter	152,979
Total minimum lease commitments(1)	$	366,310

^{_____________________} 

⁽¹⁾ Minimum lease payments have been reduced by aggregate minimum non-cancelable sublease rentals of $0.9 million.

The Company’s rent expense, including contingent rent based on a percentage of sales when applicable, is comprised of the following (in thousands):

	Successor				Predecessor
	53 Weeks Ending		52 Weeks Ending
	December 31, 2013		December 25, 2012		December 27, 2011
Minimum rents	$	52,113	$	51,360	$	49,966
Contingent rents	1,290		1,285		1,274
	$	53,403	$	52,645	$	51,240

Under the Company’s franchise agreements, the Company is required to rebuild a substantial number of restaurants, depending upon certain criteria as defined in the franchise agreements. Certain of the assets to be rebuilt are currently paying royalties of 6.5% of sales, as defined in the franchise agreements, and will qualify for a reduction in royalty rate of up to 2.5% of sales depending upon the timing and nature of the asset action. The Company expects to incur capital expenditures of approximately $14.0 million in 2014 and 2015 to meet this requirement. As part of the location franchise agreements entered into as a result of the various acquisitions of Pizza Hut units from PHI, the Company is required to complete certain MAA’s extending through February 2022 and expects to incur approximately $9.9 million over the next 10 years to meet these requirements.

In conjunction with the acquisition of Wendy’s units, NPCQB is required to complete certain agreed upon improvements to the facilities. NPCQB estimates the cost of these improvements to be approximately $2.8 million for the Kansas City area acquisitions. Wendy’s Company has agreed to reimburse the Company for up to $1.2 million of such amounts incurred. This amount has been included as a receivable on the balance sheet. NPCQB estimates the cost of such improvements to the Salt Lake City units to be approximately $1.2 million excluding the effect of a $0.6 million contribution from the Wendy’s Company provided in the form of a purchase price reduction. Additionally, NPCQB is required to complete Image Activations (defined as a refresh, remodel or scrape and rebuild) at 27 of the units acquired from Wendy’s Company by December 31, 2018 and expects to incur approximately $12.3 million. A development agreement was also entered into between NPCQB and Wendy’s Company whereby NPCQB agreed to develop five units in the Kansas City metropolitan area and five units in the Salt Lake City metropolitan area over the next five years. The Company expects to incur approximately $16.0 million by December 31, 2018 to meet these requirements.

Concurrently with the closing of the Acquisition, certain members of management purchased common stock of NPC Holdings for $4.1 million. Under the terms of the Stockholders Agreement of NPC Holdings, the common stock is required to be repurchased by NPC Holdings upon the termination of the employment of the employee. However, the amount of this liability is determined based upon the circumstances of the termination of employment. The Company does not have a contractual obligation to fund the purchase of the mandatorily redeemable stock; however, the Company could be required to provide a distribution to NPC Holdings to fund the repurchase in the event of an employee’s termination of employment from the Company. The value of this contingent obligation is subject to a formula defined in the Stockholders Agreement. Based on the financial results for fiscal year 2013, the common stock held by management has a combined value of approximately $4.1 million to $6.5 million.

As part of the Acquisition, the Company had an obligation to the former owners of Holdings of approximately $10.9 million for contingent consideration representing amounts due to the sellers for future tax benefits which the Company realized a significant portion of during 2013 and subsequently paid on January 28, 2014, extinguishing the liability.

Upon completion of the Transactions in 2012, the Company entered into an advisory agreement with Olympus. Under the agreement Olympus or its affiliates will continue to provide financial, investment banking, management advisory and other services on the Company’s behalf for an annual fee of $1.0 million, paid in quarterly installments in arrears on the last day of each calendar quarter. See Note 14 - Related Party Transactions.