Leases

6 Months Ended

Jun. 30, 2024

Leases

Nature of Leases

The Company operates restaurants that are located on sites owned by us and sites leased by us from third parties. In addition, the Company owns sites and leases sites from third parties, which it leases and/or subleases to franchisees. The Company also leases restaurant, office and transportation equipment. As of June 30, 2024, the nature of restaurants operated by the Company and its franchisees was as follows:


			June 30, 2024
Company-operated restaurants:
Owned land and building			155
Owned building and held long-term land leases			145
Leased land and building			111
Total Company-operated restaurants			411

Franchisee-operated restaurants:
Company-owned properties leased to franchisees			492
Company-leased properties subleased to franchisees			1,173
Other franchisee-operated restaurants			5,185
Total franchisee-operated restaurants			6,850
Total Company-operated and franchisee-operated restaurants			7,261

Company as Lessee

The components of lease cost are as follows:


	Three Months Ended				Six Months Ended
	June 30, 2024		July 2, 2023		June 30, 2024		July 2, 2023
Finance lease cost:
Amortization of finance lease assets	$	4,372	$	4,058	$	8,669	$	8,121
Interest on finance lease liabilities	10,699		10,743		21,357		21,493
	15,071		14,801		30,026		29,614
Operating lease cost	21,524		21,429		43,225		42,878
Variable lease cost (a)	17,365		17,519		33,853		33,600
Short-term lease cost	1,226		1,461		2,620		2,967
Total operating lease cost (b)	40,115		40,409		79,698		79,445
Total lease cost	$	55,186	$	55,210	$	109,724	$	109,059

_______________

(a)Includes expenses for executory costs of $10,033 and $10,172 for the three months ended June 30, 2024 and July 2, 2023, respectively, and $20,254 and $20,020 for the six months ended June 30, 2024 and July 2, 2023, respectively, for which the Company is reimbursed by sublessees.

(b)Includes $32,355 and $32,329 for the three months ended June 30, 2024 and July 2, 2023, respectively, and $64,073 and $62,927 for the six months ended June 30, 2024 and July 2, 2023, respectively, recorded to “Franchise rental expense” for leased properties that are subsequently leased to franchisees. Also includes $7,402 and $7,546 for the three months ended June 30, 2024 and July 2, 2023, respectively, and $14,790 and $15,411 for the six months ended June 30, 2024 and July 2, 2023, respectively, recorded to “Cost of sales” for leases for Company-operated restaurants.

Leases, Company as Lessor

Company as Lessor

The components of lease income are as follows:


	Three Months Ended				Six Months Ended
	June 30, 2024		July 2, 2023		June 30, 2024		July 2, 2023
Sales-type and direct-financing leases:
Selling profit	$	88	$	1,072	$	72	$	1,201
Interest income (a)	7,178		7,868		14,897		15,730

Operating lease income	42,950		40,629		84,447		82,785
Variable lease income	17,688		17,404		34,177		33,055
Franchise rental income (b)	$	60,638	$	58,033	$	118,624	$	115,840

_______________

(a)Included in “Interest expense, net.”

(b)Includes sublease income of $45,049 and $42,961 recognized during the three months ended June 30, 2024 and July 2, 2023, respectively, and $87,832 and $85,912 recognized during the six months ended June 30, 2024 and July 2, 2023, respectively. Sublease income includes lessees’ variable payments to the Company for executory costs of $10,155 and $10,115 for the three months ended June 30, 2024 and July 2, 2023, respectively, and $20,244 and $19,893 for the six months ended June 30, 2024 and July 2, 2023, respectively.