Restaurant Closure and Other Related Charges (Tables)

12 Months Ended

Dec. 31, 2019

Jan. 01, 2019

Restructuring and Related Activities [Abstract]

he Company evaluates long-lived assets for indicators of impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The Company considers a triggering event to have occurred related to a specific restaurant if the restaurant’s cash flows are less than a minimum threshold. Long-lived assets are grouped and evaluated for impairment at the lowest level for which there are identifiable cash flows that are independent of the cash flows of other groups of assets. The Company evaluates such cash flows for individual restaurants and franchise agreements on an undiscounted basis. If it is determined that the carrying amounts of such long-lived assets are not recoverable, the assets are written down to their estimated fair values. The Company generally estimates fair value using the discounted value of the estimated cash flows associated with the respective restaurant or agreement, using Level 3 inputs. The impairment charges represent the excess of the aggregate carrying value of a restaurant's operating lease right-of-use asset, furniture, fixtures and equipment and leasehold improvements over its estimated fair value. Impairment charges are allocated to a restaurant's operating lease right-of-use assets, furniture, fixtures and equipment and leasehold improvements on a pro rata basis based on the respective assets' carrying values.

In connection with the adoption of Topic 842, the Company evaluated the operating lease right-of-use assets for impairment, indicating the carrying amount of the operating lease assets for certain restaurants may not be recoverable, and recorded an impairment charge totaling $3.1 million at January 2, 2019 based on the estimates of future recoverable cash flows.

During the fifty-two weeks ended December 31, 2019, the Company evaluated certain restaurants having indicators of impairment based on operating performance and recorded an impairment charge totaling $7.2 million related to seven restaurants. The Company wrote-off a portion of the operating lease right-of-use assets, furniture, fixtures and equipment and leasehold improvements based on the estimate of future recoverable cash flows. During the fifty-two weeks ended January 1, 2019, the Company evaluated certain restaurants that had indicators of impairment based on operating performance and recorded an impairment charge totaling $3.9 million related to five restaurants. The Company wrote-off the value of furniture, fixtures and equipment and leasehold improvements based on the estimate of future recoverable cash flows. No impairment charges were recorded in continuing operations in the accompanying consolidated statements of comprehensive (loss) income for any other periods presented.

Restaurant Closure Charges, Net

At December 31, 2019 and January 1, 2019, the restaurant closure liability was $0.4 million and $2.4 million, respectively. The details of the restaurant closure activities are discussed below.

Restaurant Closures and Lease Reserves

At January 1, 2019, the restaurant closure liability balance was $0.3 million related to restaurants closures prior to 2015. During the fifty-two weeks ended December 31, 2019, in connection with the adoption of Topic 842, the Company reclassified the $0.3 million restaurant closure liability to offset the respective operating lease right-of-use assets.

Restaurant Closure and Other Related Charges for 12 Underperforming Restaurants

During the fourth quarter of 2015, the Company closed 12 company-operated restaurants. During the fifty-two weeks ended December 31, 2019, in connection with the adoption of Topic 842, the Company reclassified approximately $1.9 million of the lease related closure liability to offset the respective operating lease right-of-use assets. A summary of the restaurant closure liability activity, which relates to contract termination costs, for these 12 closed restaurants consisted of the following (in thousands):

Closure Liability Activity for 12 Closed Restaurants



	Total
Balance at January 3, 2017	$	1,773
Charges for accretion in current period	70
Cash payments	(376		)
Adjustment to estimates based on current activity	144
Balance at January 2, 2018	1,611
Charges for accretion in current period	61
Cash payments	(327		)
Adjustment to estimates based on current activity	747
Balance at January 1, 2019	2,092
Reclassified to operating lease right-of-use assets	(1,900		)
Cash payments	(263		)
Adjustment to estimates based on current activity	508
Balance at December 31, 2019	$	437