Commitments and Contingent Liabilities

Lease Commitments

The Company is obligated under operating leases for its bakery-cafes, fresh dough facilities and trucks, and support centers. Lease terms for its trucks are generally for five to seven years. The reasonably assured lease term for most bakery-cafe and support center leases is the initial non-cancelable lease term plus one renewal option period, which generally equates to an aggregate of 15 years. The reasonably assured lease term for most fresh dough facility leases is the initial non-cancelable lease term plus one to two renewal periods, which generally equates to an aggregate of 20 years. Lease terms generally require the Company to pay a proportionate share of real estate taxes, insurance, common area, and other operating costs. Certain bakery-cafe leases provide for contingent rental (i.e., percentage rent) payments based on sales in excess of specified amounts, scheduled rent increases during the lease terms, and/or rental payments commencing at a date other than the date of initial occupancy.

Aggregate minimum requirements under non-cancelable operating leases, excluding contingent payments, as of December 31, 2013, were as follows (in thousands):



Fiscal Years
2014		2015	2016	2017	2018	Thereafter	Total
$	134,614	132,736	131,825	128,690	125,926	676,126	$	1,329,917

Rental expense under operating leases was approximately $130.0 million, $114.8 million, and $100.6 million, in fiscal 2013, fiscal 2012, and fiscal 2011, respectively, which included contingent (i.e., percentage rent) expense of $2.2 million, $2.0 million, and $1.6 million, respectively.

In accordance with the accounting guidance for asset retirement obligations the Company complies with lease obligations at the end of a lease as it relates to tangible long-lived assets. The liability as of December 31, 2013 and December 25, 2012 was $10.2 million and $9.2 million, respectively, and is included in other long-term liabilities in the Consolidated Balance Sheets.

In connection with the Company’s relocation of its St. Louis, Missouri support center in the third quarter of fiscal 2010, it simultaneously entered into a capital lease for certain personal property and purchased municipal industrial revenue bonds of a similar amount from St. Louis County, Missouri. As of the fiscal years ended December 31, 2013 and December 25, 2012, the Company held industrial revenue bonds and had recorded a capital lease of $1.3 million and $1.5 million in the Consolidated Balance Sheets, respectively.

During the fiscal year ended December 31, 2013, the Company completed sale-leaseback transactions of the leasehold improvements and land for three Company-owned bakery-cafes for cash proceeds of $6.1 million. The leases have been classified as operating leases and have initial terms of 15 years, with renewal options of up to 20 years. The Company realized gains on these sales totaling $0.3 million, which have been deferred and are being recognized on a straight-line basis over the reasonably assured lease term for the leases.

During the fiscal year ended December 25, 2012, the Company completed sale-leaseback transactions of the leasehold improvements and land for two Company-owned bakery-cafes for cash proceeds of $4.5 million. The leases have been classified as either capital or operating leases, depending on the substance of the transaction, and have initial terms of 15 years, with renewal options of up to 15 years. The Company realized gains on these sales totaling $1.0 million, which have been deferred and are being recognized on a straight-line basis over the reasonably assured lease term for the leases.

Lease Guarantees

As of December 31, 2013, the Company guaranteed the operating leases of 25 franchisee or affiliate locations, which the Company accounted for in accordance with the accounting requirements for guarantees. These guarantees are primarily a result of the Company's sales of Company-owned bakery-cafes to franchisees and affiliates, pursuant to which the Company exercised its right to assign the lease or sublease for the bakery-cafe but remains liable to the landlord for the remaining lease term in the event of a default by the assignee. These leases have terms expiring on various dates from January 31, 2014 to September 30, 2027 and have a potential amount of future rental payments of approximately $20.1 million as of December 31, 2013. The obligation from these leases will decrease over time as these operating leases expire. The Company has not recorded a liability for certain of these guarantees as they arose prior to the implementation of the accounting requirements for guarantees and, unless modified, are exempt from its requirements. The Company has not recorded a liability for those guarantees issued after the effective date of the accounting requirements because the fair value of these lease guarantees was determined by the Company to be insignificant individually, and in the aggregate, based on analysis of the facts and circumstances of each such lease and each such assignee’s performance, and the Company did not believe it was probable that it would be required to perform under any guarantees at the time the guarantees were issued. The Company has not had to make any payments related to any of these guaranteed leases. Applicable assignees continue to have primary liability for these operating leases. As of December 31, 2013, future commitments under these leases were as follows (in thousands):



Fiscal Years
2014		2015	2016	2017	2018	Thereafter	Total
$	3,518	2,569	2,140	2,066	1,984	7,856	$	20,133

Employee Commitments

The Company has executed confidential and proprietary information and non-competition agreements (“non-compete agreements”) with certain employees. These non-compete agreements contain a provision whereby employees would be due a certain number of weeks of their salary if their employment was terminated by the Company as specified in the non-compete agreement. The Company has not recorded a liability for these amounts potentially due employees. Rather, the Company will record a liability for these amounts when an amount becomes due to an employee in accordance with the appropriate authoritative literature. As of December 31, 2013, the total amount potentially owed employees under these non-compete agreements was $21.6 million.

Legal Proceedings

From time to time, the Company is subject to various legal proceedings, claims, and litigation that arise in the ordinary course of its business. As of the date of this Annual Report on Form 10-K, the Company is not a party to any litigation, the outcome of which, if determined adversely to the Company, would individually or in the aggregate be reasonably expected to have a material adverse effect on the Company's results of operations, cash flows, financial position or brand.

Other

The Company is subject to on-going federal and state income tax audits and sales and use tax audits. The Company does not believe the ultimate resolution of these actions will have a material adverse effect on its consolidated financial statements. However, a significant increase in the number of these audits, or one or more audits under which the Company incurs greater liabilities than is currently anticipated, could materially and adversely affect its consolidated financial statements. The Company believes reserves for these matters are adequately provided for in its consolidated financial statements.