CONTINGENCIES

6 Months Ended

Dec. 29, 2021

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 29, 2021 and June 30, 2021, we have outstanding lease guarantees or are secondarily liable for an estimated $31.9 million and $29.2 million, respectively. These amounts represent the maximum potential liability of 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 2022 through fiscal 2027.

We have received notices of default and have been named a party in lawsuits pertaining to some of these leases in circumstances where the current lessee did not pay its rent obligations. 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. As of December 29, 2021, we have recorded contingent liabilities of $4.0 million for our estimated exposure of the lease defaults related to these lease guarantees. These contingent liabilities are classified within Other accrued liabilities in the Consolidated Balance Sheets (Unaudited).

Letters of Credit

We provide letters of credit to various insurers to collateralize obligations for outstanding claims. As of December 29, 2021, we had $5.8 million in undrawn standby letters of credit outstanding. All standby letters of credit are renewable within the next 10 months.

Cyber Security Litigation

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. We settled all claims from payment card companies related to this incident and do not expect material claims in the future. The Company was also named as a defendant in a putative class action lawsuit in the United States District Court for the Middle District of Florida (the “Litigation”) relating to this incident. In the Litigation, plaintiffs assert various claims 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.

On November 16, 2021, we submitted our appellate brief to the 11th Circuit Court of Appeals seeking to overturn the district court’s class certification orders. The US Chamber of Commerce and the Restaurant Law Center/Retail Litigation Center/National Retail Federation filed respective amicus briefs in support of our position two weeks later. Plaintiffs filed their response brief on January 6, 2022. Our reply brief is due on February 28, 2022.

We believe we have defenses and intend to continue defending the Litigation. As such, as of December 29, 2021, 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 process involving 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.