Leases

3 Months Ended

Mar. 24, 2020

Leases [Abstract]

Leases

Leases

The Company's material leases consist of restaurant locations and its executive offices with expiration dates through 2044. In general, the leases have remaining terms of 1-20 years, most of which include options to extend the leases for additional five-year periods. The lease term is generally the minimum noncancelable period of the lease. The Company does not include option periods unless the Company determines that it is reasonably certain of exercising the option at inception or when a triggering event occurs.

The Company has subleased certain properties to other third parties where the Company remains primarily liable to the landlord for the performance of all obligations in the event that the sub-lessee does not perform its obligations under the lease. As a

result of the sublease arrangements, future rental commitments under operating leases will be offset by sublease amounts to be paid by the sub-lessee. In general, the terms of the sublease are similar to the terms of the master lease.

The components of lease cost were as follows (in thousands):

	Classification	Twelve Weeks Ended March 24, 2020		Twelve Weeks Ended March 26, 2019
Operating lease cost	Occupancy and other operating expenses, Occupancy and other - franchise subleases and other, Pre-opening costs, Restaurant closure charges, net and General and administrative	$	9,446	$	8,799
Finance lease cost:
Amortization of right of use assets	Depreciation and amortization	55		133
Interest on lease liabilities	Interest expense	12		27
Short-term lease cost	Occupancy and other operating expenses	72		101
Variable lease cost	Occupancy and other operating expenses, Occupancy and other - franchise subleases and other and Restaurant closure charges, net	323		390
Sublease income	Franchise sublease and other income	(1,582)		(912)
Total lease cost		$	8,326	$	8,538

Supplemental balance sheet information related to the Company's operating and finance leases (noting the financial statement caption each is included with) as of March 24, 2020 and December 31, 2019 was as follows (in thousands):

	March 24, 2020		December 31, 2019
Operating lease assets:
Operating lease right-of-use assets	$	258,573	$	258,278
Operating lease liabilities:
Current portion of operating lease liabilities	$	21,107	$	17,848
Operating lease liabilities, excluding current portion	261,781		257,361
Total operating lease liabilities	$	282,888	$	275,209
Finance lease assets:
Buildings under finance leases	$	495	$	871
Accumulated depreciation	(227)		(334)
Finance lease assets, net	$	268	$	537
Finance lease obligations:
Current portion of finance lease obligations and other debt	$	153	$	162
Long-term debt, finance lease obligations and other debt, excluding current portion, net	140		412
Total finance lease obligations	$	293	$	574

Weighted Average Remaining Lease Term (in years)	March 24, 2020
Operating leases	12.7
Finance leases	2.3

Weighted Average Discount Rate	March 24, 2020
Operating leases	6.59	%
Finance leases	10.48	%

Supplemental cash flow information related to leases was as follows (in thousands):

	Twelve Weeks Ended March 24, 2020		Twelve Weeks Ended March 26, 2019
Cash paid for amounts in the measurement of lease liabilities:
Operating cash flows used for operating leases	$	6,012	$	5,835
Operating cash flows used for finance leases	$	12	$	27
Financing cash flows used for finance leases	$	54	$	133

The estimated future lease payments as of March 24, 2020, are as follows (in thousands):

	Finance Lease Liabilities		Operating Lease Liabilities		Operating Subleases		Net Lease Commitments
2020	$	134	$	29,012	$	(4,761)	$	24,385
2021	138		39,100		(6,247)		32,991
2022	19		40,845		(6,802)		34,062
2023	17		35,751		(6,120)		29,648
2024	16		29,975		(5,463)		24,528
Thereafter	4		252,220		(60,760)		191,464
Total lease payments	$	328	$	426,903	$	(90,153)	$	337,078
Amounts representing interest	(35)		(144,015)				(144,050)
Present value of lease obligations	$	293	$	282,888			$	193,028

During the twelve weeks ended March 24, 2020, the Company entered into one sale leaseback arrangement with a third party private investor. The sale-leaseback transaction does not provide for any continuing involvement by the Company other than a normal lease where the Company intends to use the property during the lease term. The lease has been accounted for as an operating lease. The net proceeds from the transactions totaled approximately $1.4 million. Under the arrangement, the Company sold the land and building of an existing restaurant and leased it back for a term of 20 years. The sale of this property resulted in a gain of approximately $0.6 million which is included in loss on disposal of assets and adjustments to assets held for sale, net in the consolidated statements of comprehensive (loss) income.

During the twelve weeks ended March 26, 2019, the Company entered into two sale leaseback arrangements with third party private investors. These sale-leaseback transactions do not provide for any continuing involvement by the Company other than normal leases where the Company intends to use the property during the lease term. The leases have been accounted for as operating leases. The net proceeds from the transactions totaled approximately $10.0 million. Under one of the arrangements, the Company sold the land and building related to a restaurant constructed during 2018 and leased it back for a term of 20 years. Under the other arrangement, the Company sold the land related to a restaurant constructed during 2018 and leased it back for a term of 20 years. The sale of these properties resulted in a loss of approximately $0.1 million which is included in loss on disposal of assets and adjustments to assets held for sale, net in the consolidated statements of comprehensive (loss) income. The assets sold were included in assets held for sale as of January 1, 2019.

In response to the COVID-19 pandemic, subsequent to the twelve weeks ended March 24, 2020, we negotiated temporary deferral of certain second quarter of fiscal 2020 rent payments until future periods. We intend to consider recent FASB staff guidance to account for these lease arrangements.

Leases

Leases

The Company's material leases consist of restaurant locations and its executive offices with expiration dates through 2044. In general, the leases have remaining terms of 1-20 years, most of which include options to extend the leases for additional five-year periods. The lease term is generally the minimum noncancelable period of the lease. The Company does not include option periods unless the Company determines that it is reasonably certain of exercising the option at inception or when a triggering event occurs.

The Company has subleased certain properties to other third parties where the Company remains primarily liable to the landlord for the performance of all obligations in the event that the sub-lessee does not perform its obligations under the lease. As a

result of the sublease arrangements, future rental commitments under operating leases will be offset by sublease amounts to be paid by the sub-lessee. In general, the terms of the sublease are similar to the terms of the master lease.

The components of lease cost were as follows (in thousands):

	Classification	Twelve Weeks Ended March 24, 2020		Twelve Weeks Ended March 26, 2019
Operating lease cost	Occupancy and other operating expenses, Occupancy and other - franchise subleases and other, Pre-opening costs, Restaurant closure charges, net and General and administrative	$	9,446	$	8,799
Finance lease cost:
Amortization of right of use assets	Depreciation and amortization	55		133
Interest on lease liabilities	Interest expense	12		27
Short-term lease cost	Occupancy and other operating expenses	72		101
Variable lease cost	Occupancy and other operating expenses, Occupancy and other - franchise subleases and other and Restaurant closure charges, net	323		390
Sublease income	Franchise sublease and other income	(1,582)		(912)
Total lease cost		$	8,326	$	8,538

Supplemental balance sheet information related to the Company's operating and finance leases (noting the financial statement caption each is included with) as of March 24, 2020 and December 31, 2019 was as follows (in thousands):

	March 24, 2020		December 31, 2019
Operating lease assets:
Operating lease right-of-use assets	$	258,573	$	258,278
Operating lease liabilities:
Current portion of operating lease liabilities	$	21,107	$	17,848
Operating lease liabilities, excluding current portion	261,781		257,361
Total operating lease liabilities	$	282,888	$	275,209
Finance lease assets:
Buildings under finance leases	$	495	$	871
Accumulated depreciation	(227)		(334)
Finance lease assets, net	$	268	$	537
Finance lease obligations:
Current portion of finance lease obligations and other debt	$	153	$	162
Long-term debt, finance lease obligations and other debt, excluding current portion, net	140		412
Total finance lease obligations	$	293	$	574

Weighted Average Remaining Lease Term (in years)	March 24, 2020
Operating leases	12.7
Finance leases	2.3

Weighted Average Discount Rate	March 24, 2020
Operating leases	6.59	%
Finance leases	10.48	%

Supplemental cash flow information related to leases was as follows (in thousands):

	Twelve Weeks Ended March 24, 2020		Twelve Weeks Ended March 26, 2019
Cash paid for amounts in the measurement of lease liabilities:
Operating cash flows used for operating leases	$	6,012	$	5,835
Operating cash flows used for finance leases	$	12	$	27
Financing cash flows used for finance leases	$	54	$	133

The estimated future lease payments as of March 24, 2020, are as follows (in thousands):

	Finance Lease Liabilities		Operating Lease Liabilities		Operating Subleases		Net Lease Commitments
2020	$	134	$	29,012	$	(4,761)	$	24,385
2021	138		39,100		(6,247)		32,991
2022	19		40,845		(6,802)		34,062
2023	17		35,751		(6,120)		29,648
2024	16		29,975		(5,463)		24,528
Thereafter	4		252,220		(60,760)		191,464
Total lease payments	$	328	$	426,903	$	(90,153)	$	337,078
Amounts representing interest	(35)		(144,015)				(144,050)
Present value of lease obligations	$	293	$	282,888			$	193,028

During the twelve weeks ended March 24, 2020, the Company entered into one sale leaseback arrangement with a third party private investor. The sale-leaseback transaction does not provide for any continuing involvement by the Company other than a normal lease where the Company intends to use the property during the lease term. The lease has been accounted for as an operating lease. The net proceeds from the transactions totaled approximately $1.4 million. Under the arrangement, the Company sold the land and building of an existing restaurant and leased it back for a term of 20 years. The sale of this property resulted in a gain of approximately $0.6 million which is included in loss on disposal of assets and adjustments to assets held for sale, net in the consolidated statements of comprehensive (loss) income.

During the twelve weeks ended March 26, 2019, the Company entered into two sale leaseback arrangements with third party private investors. These sale-leaseback transactions do not provide for any continuing involvement by the Company other than normal leases where the Company intends to use the property during the lease term. The leases have been accounted for as operating leases. The net proceeds from the transactions totaled approximately $10.0 million. Under one of the arrangements, the Company sold the land and building related to a restaurant constructed during 2018 and leased it back for a term of 20 years. Under the other arrangement, the Company sold the land related to a restaurant constructed during 2018 and leased it back for a term of 20 years. The sale of these properties resulted in a loss of approximately $0.1 million which is included in loss on disposal of assets and adjustments to assets held for sale, net in the consolidated statements of comprehensive (loss) income. The assets sold were included in assets held for sale as of January 1, 2019.

In response to the COVID-19 pandemic, subsequent to the twelve weeks ended March 24, 2020, we negotiated temporary deferral of certain second quarter of fiscal 2020 rent payments until future periods. We intend to consider recent FASB staff guidance to account for these lease arrangements.