The Company leases corporate offices, a distribution center, billboards and certain equipment. The Company’s only significant lease is for its corporate headquarters office building (the “Headquarters Lease”) and expires in 2028. The Company pays an annual base rent that escalates 3% each year and the Headquarters Lease has two 10-year optional renewal periods at the Company’s discretion, which is not reasonably certain to be exercised in 2028. The Company also acts as the lessor for six sublease agreements on the Headquarters Lease, each of which include a renewal option for the lessee to extend the length of the lease, with varying options to renew. The Company does not recognize leases for any offices used by the Company’s franchisees as all franchisees are independently owned and operated.

A summary of the Company’s lease cost is as follows (in thousands, except for weighted-averages):

(a)	All the Company’s material leases are classified as operating leases.

(b)	Includes approximately $3.6 million, $3.5 million and $3.6 million of taxes, insurance and maintenance for the years ended December 31, 2022, 2021, and 2020 respectively.

(c)	Includes expenses associated with short-term leases of billboard advertisements and is included in “Marketing Funds expenses” on the Consolidated Statements of Income (Loss) for the years ended December 31, 2022, 2021 and 2020.

Maturities under non-cancellable leases were as follows (in thousands):


	Rent Payments		Sublease Receipts		Total Cash Outflows
Year ending December 31:
2023	$	9,665		(1,951)	$	7,714
2024		9,923		(2,138)		7,785
2025		10,140		(1,220)		8,920
2026		10,230		(1,077)		9,153
2027		10,201		(1,099)		9,102
Thereafter		2,989		(372)		2,617
Total lease payments	$	53,148	$	(7,857)	$	45,291
Less: imputed interest		8,091
Present value of lease liabilities	$	45,057

Lease Impairment

During the first and third quarters of 2022, the Company subleased portions of its corporate headquarters. As a result, the Company performed impairment tests on the portions subleased. Based on a comparison of undiscounted cash flows to the right of use (“ROU”) asset, the Company determined that the asset was impaired, driven largely by the difference between the existing lease rate on the Company’s corporate headquarters and the sublease rates received. This resulted in impairment charges of $3.7 million for the first quarter 2022 and $2.5 million for the third quarter 2022, or a total reduction to basic earnings per share of $0.15 per share for the year ended December 31, 2022, which reflect the excess of the ROU asset carrying value over its fair value.

During the third quarter of 2020, the Company began executing on a plan to both refresh its corporate headquarters and sublease space made available through the refresh. As a result, the Company changed its asset grouping for its headquarters ROU asset to separate the portion that it intends to sublease from the portion it will continue to occupy and performed an impairment test on the portion it intends to sublease. Based on a comparison of undiscounted cash flows to the ROU asset, the Company determined that the asset was impaired, driven largely by the difference between the existing lease rate on the Company’s corporate headquarters and expected sublease rates available in the market. This

resulted in an impairment charge of $7.9 million and a reduction to basic earnings per share of $0.20 per share, for the year ended December 31, 2020, which reflects the excess of the ROU asset over its fair value.

Lease Termination

During the second quarter of 2022, the Company terminated its booj office lease, which was owned by an entity controlled by former employees of the Company. As a result, the Company wrote off an ROU asset of $2.7 million and derecognized $1.5 million of lease liability associated with the terminated lease. The Company also recognized a loss on termination of $2.5 million, which included a lease termination payment of $1.3 million.