Commitments and Contingencies

6 Months Ended

Jun. 30, 2013

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Litigation, Claims and Disputes

The Company is subject to various lawsuits, administrative proceedings, audits, and claims arising in the ordinary course of business. Some of these lawsuits purport to be class actions and/or seek substantial damages. The Company is required to record an accrual for litigation loss contingencies that are both probable and reasonably estimable. Legal fees and expenses associated with the defense of all of the Company's litigation are expensed as such fees and expenses are incurred. Management regularly assesses the Company's insurance coverage, analyzes litigation information with the Company's attorneys and evaluates the Company's loss experience in connection with pending legal proceedings. While the Company does not presently believe that any of the legal proceedings to which it is currently a party will ultimately have a material adverse impact on the Company, there can be no assurance that the Company will prevail in all the proceedings the Company is party to, or that the Company will not incur material losses from them.

Lease Guarantees

In connection with the sale of Applebee’s restaurants or previous brands to franchisees and other parties, the Company has, in certain cases, guaranteed or had potential continuing liability for lease payments totaling $439.6 million as of June 30, 2013. This amount represents the maximum potential liability for future payments under these leases. These leases have been assigned to the buyers and expire at the end of the respective lease terms, which range from 2013 through 2048. In the event of default, the indemnity and default clauses in the sale or assignment agreements govern the Company's ability to pursue and recover damages incurred.  No material liabilities have been recorded as of June 30, 2013.

Contingencies

In February 2013, an IHOP franchisee which owns and operates 19 restaurants located in the states of Illinois, Wisconsin and Missouri filed for bankruptcy protection. As a result of an order issued by the bankruptcy court in July, 2013, it is probable that two of the 19 restaurants will be returned to the Company. Accordingly, a non-cash charge of $0.5 million was recorded in the Consolidated Statement of Comprehensive Income for the six months ended June 30, 2013, against deferred rental revenue associated with the leases for those two restaurants. This franchisee currently is operating the remaining 17 restaurants and continues to make payments to us pursuant to our franchise agreement. However, depending on the resolution of the bankruptcy proceedings with respect to the remaining 17 restaurants, the Company may incur additional non-cash charges of up to $5.4 million for deferred rental revenue and equipment leases associated with these restaurants.

In an unrelated matter, in April 2013, an Applebee's franchisee which owned and operated 33 restaurants located in Illinois filed for bankruptcy protection. Pursuant to the bidding procedures approved by the bankruptcy court, 15 of the restaurants were sold in June 2013 to an affiliate of an existing franchisee and operated without interruption during the transition of ownership. The remaining 18 restaurants were closed in June 2013. The Company believes it is entitled to termination payments and other fees in connection with the closure of these restaurants. The amount of these payments is subject to the bankruptcy proceeding and cannot be determined at this time. We do not expect the outcome of the bankruptcy proceeding to have a material adverse impact on our results of operations for the 2013 fiscal year. We have entered into a development agreement with the franchisee that acquired the 15 restaurants to open additional restaurants in Illinois in the future.