Leases

9 Months Ended

Sep. 29, 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 September 29, 2024, the nature of restaurants operated by the Company and its franchisees was as follows:


			September 29, 2024
Company-operated restaurants:
Owned land and building			154
Owned building and held long-term land leases			145
Leased land and building			112
Total Company-operated restaurants			411

Franchisee-operated restaurants:
Company-owned properties leased to franchisees			492
Company-leased properties subleased to franchisees			1,161
Other franchisee-operated restaurants			5,228
Total franchisee-operated restaurants			6,881
Total Company-operated and franchisee-operated restaurants			7,292

Company as Lessee

The components of lease cost are as follows:


	Three Months Ended				Nine Months Ended
	September 29, 2024		October 1, 2023		September 29, 2024		October 1, 2023
Finance lease cost:
Amortization of finance lease assets	$	4,779	$	4,111	$	13,448	$	12,232
Interest on finance lease liabilities	10,921		10,664		32,278		32,157
	15,700		14,775		45,726		44,389
Operating lease cost	21,496		21,577		64,721		64,455
Variable lease cost (a)	17,087		16,889		50,940		50,489
Short-term lease cost	1,478		1,466		4,098		4,433
Total operating lease cost (b)	40,061		39,932		119,759		119,377
Total lease cost	$	55,761	$	54,707	$	165,485	$	163,766

_______________

(a)Includes expenses for executory costs of $10,108 and $9,777 for the three months ended September 29, 2024 and October 1, 2023, respectively, and $30,362 and $29,797 for the nine months ended September 29, 2024 and October 1, 2023, respectively, for which the Company is reimbursed by sublessees.

(b)Includes $32,197 and $31,824 for the three months ended September 29, 2024 and October 1, 2023, respectively, and $96,270 and $94,751 for the nine months ended September 29, 2024 and October 1, 2023, respectively, recorded to “Franchise rental expense” for leased properties that are subsequently leased to franchisees. Also includes $7,299 and $7,570 for the three months ended September 29, 2024 and October 1, 2023, respectively, and $22,089 and $22,981 for the nine months ended September 29, 2024 and October 1, 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				Nine Months Ended
	September 29, 2024		October 1, 2023		September 29, 2024		October 1, 2023
Sales-type and direct-financing leases:
Selling profit	$	67	$	354	$	139	$	1,555
Interest income (a)	7,110		7,853		22,007		23,583

Operating lease income	41,882		40,567		126,329		123,352
Variable lease income	17,432		17,000		51,609		50,055
Franchise rental income (b)	$	59,314	$	57,567	$	177,938	$	173,407

_______________

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

(b)Includes sublease income of $43,698 and $42,545 recognized during the three months ended September 29, 2024 and October 1, 2023, respectively, and $131,530 and $128,457 recognized during the nine months ended September 29, 2024 and October 1, 2023, respectively. Sublease income includes lessees’ variable payments to the Company for executory costs of $10,112 and $9,811 for the three months ended September 29, 2024 and October 1, 2023,

respectively, and $30,356 and $29,704 for the nine months ended September 29, 2024 and October 1, 2023, respectively.