CONTINGENCIES

6 Months Ended

Dec. 23, 2020

Commitments and Contingencies Disclosure [Abstract]

Contingencies

Lease Commitments

We have, in certain cases, divested brands or sold restaurants to franchisees and have not been released from lease guarantees for the related restaurants. As of December 23, 2020 and June 24, 2020, we have outstanding lease guarantees or are secondarily liable for $35.5 million and $39.7 million, respectively. These amounts represent the maximum potential liability of future rent payments under the leases. These leases have been assigned to the buyers and expire at the end of the respective lease terms, which range from fiscal 2021 through fiscal 2027. In the event of default under a lease by a franchisee or owner of a divested brand, the indemnity and default clauses in our agreements with such third parties and applicable laws govern our ability to pursue and recover amounts we may pay on behalf of such parties.

Letters of Credit

We provide letters of credit to various insurers to collateralize obligations for outstanding claims. As of December 23, 2020, we had $29.5 million in undrawn standby letters of credit outstanding. All standby letters of credit are renewable within the next 4 to 10 months.

Cyber Security Incident

In fiscal 2018, we discovered malware at certain Chili’s restaurants that may have resulted in unauthorized access or acquisition of customer payment card data.

Cyber Security Related Charges

To limit our exposure to cyber security events, we maintain cyber liability insurance coverage. Our cyber liability insurance policy contained a $2.0 million insurance retention that was fully accrued during fiscal 2018. Since the incident, through December 23, 2020, we have incurred total cumulative costs of $8.6 million related to the cyber security incident. This includes the $2.0 million retention recorded, $2.2 million in costs that have been reimbursed by our insurance carriers, $3.9 million of receivables for costs incurred that we believe are reimbursable and probable of recovery under our insurance coverage and $0.5 million of costs not reimbursable by our insurance

carriers. We have settled claims from three payment card companies, and the settlement amounts are included in these costs. We do not expect material claims from payment card companies in the future.

Cyber Security Litigation

The Company was named as a defendant in a putative class action lawsuit in the United States District Court for the Middle District of Florida styled In re: Brinker Data Incident Litigation, Case No. 18-cv-00686-TJC-MCR (the “Litigation”) relating to the cyber security incident described above. In the Litigation, plaintiffs assert various claims stemming from the cyber security incident at the Company’s Chili’s restaurants involving customer payment card information and seek monetary damages in excess of $5.0 million, injunctive and declaratory relief, and attorney’s fees and costs.

Briefing on Plaintiffs’ motion for class certification is complete. A hearing on Plaintiffs’ motion is scheduled for February 25, 2021. Brinker filed a motion to exclude Plaintiffs’ damages expert. Briefing on that is also complete and the parties await the court’s ruling. Mediation was held on November 18, 2020 but was unsuccessful.

We believe we have defenses and intend to continue defending the Litigation. As such, as of December 23, 2020, we have concluded that a loss, or range of loss, from this matter is not determinable, therefore, we have not recorded a liability related to the Litigation. We will continue to evaluate this matter based on new information as it becomes available.

Legal Proceedings

Evaluating contingencies related to litigation is a complex process involving subjective judgment on the potential outcome of future events, and the ultimate resolution of litigated claims may differ from our current analysis. Accordingly, we review the adequacy of accruals and disclosures pertaining to litigated matters each quarter in consultation with legal counsel and we assess the probability and range of possible losses associated with contingencies for potential accrual in the Consolidated Financial Statements.

We are engaged in various legal proceedings and have certain unresolved claims pending. Liabilities have been established based on our best estimates of our potential liability in certain of these matters. Based upon consultation with legal counsel, management is of the opinion that there are no matters pending or threatened which are expected to have a material adverse effect, individually or in the aggregate, on the consolidated financial condition or results of operations.