Leases

12 Months Ended

Dec. 31, 2023

Leases

Leases

3. Leases

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):

	Year Ended December 31,
	2023			2022			2021
Lease Cost
Operating lease cost (a)(b)	$	10,833		$	11,377		$	11,565
Sublease income (a)		(2,555)			(2,159)			(1,999)
Short-term lease cost (c)		8,882			10,023			5,436
Total lease cost	$	17,160		$	19,241		$	15,002
Other information
Cash paid for amounts included in the measurement of lease liabilities
Operating cash outflows from operating leases		9,819			9,406			9,071
Weighted-average remaining lease term in years - operating leases		4.4			5.3			6.4
Weighted-average discount rate - operating leases		6.3	%		6.2	%		6.3	%

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

(b) Includes approximately $3.5 million, $3.6 million and $3.5 million of taxes, insurance and maintenance for the years ended December 31, 2023, 2022, and 2021 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, 2023, 2022 and 2021.

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

	Rent Payments		Sublease Receipts		Total Cash Outflows
Year ending December 31:
2024	$	10,145		(2,138)	$	8,007
2025		10,368		(1,220)		9,148
2026		10,465		(1,077)		9,388
2027		10,441		(1,099)		9,342
2028		3,225		(371)		2,854
Thereafter		598		—		598
Total lease payments	$	45,242	$	(5,905)	$	39,337
Less: imputed interest		5,843
Present value of lease liabilities	$	39,399

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.

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.