Intangible Assets (Notes)

9 Months Ended

Oct. 01, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill And Franchise Rights [Text Block]

Intangible Assets

Goodwill. The Company is required to review goodwill for impairment annually, or more frequently when events and circumstances indicate that the carrying amount may be impaired. If the determined fair value of goodwill is less than the related carrying amount, an impairment loss is recognized. The Company performs its annual impairment assessment as of the last day of its fiscal year and does not believe circumstances have changed since the last assessment date which would make it necessary to reassess its value. There have been no recorded goodwill impairment losses during the three or nine months ended October 1, 2017 or October 2, 2016. The change in goodwill for the nine months ended October 1, 2017 is summarized below:



Balance at January 1, 2017	$	22,869
Acquisitions of restaurants (Note 2)	13,477
Balance at October 1, 2017	$	36,346

Franchise Rights. Amounts allocated to franchise rights for each acquisition of Burger King restaurants are amortized using the straight-line method over the average remaining term of the acquired franchise agreements plus one twenty-year renewal period.

The Company assesses the potential impairment of franchise rights whenever events or changes in circumstances indicate that the carrying value may not be recoverable. If an indicator of impairment exists, an estimate of the aggregate undiscounted cash flows from the acquired restaurants is compared to the respective carrying value of franchise rights for each acquisition. If an asset is determined to be impaired, the loss is measured by the excess of the carrying amount of the asset over its fair value. No impairment charges were recorded related to the Company’s franchise rights for the three or nine months ended October 1, 2017 and October 2, 2016. The change in franchise rights for the nine months ended October 1, 2017 is summarized below:



Balance at January 1, 2017	$	134,153
Acquisitions of restaurants (Note 2)	24,156
Amortization expense	(5,040		)
Balance at October 1, 2017	$	153,269

Amortization expense related to franchise rights was $1.8 million and $1.5 million for the three months ended October 1, 2017 and October 2, 2016, respectively, and $5.0 million and $4.4 million for the nine months ended October 1, 2017 and October 2, 2016, respectively. The Company expects annual amortization expense to be $6.8 million in 2017 and $7.1 million in each of the following five years.

Favorable and Unfavorable Leases. Amounts allocated to favorable and unfavorable leases are being amortized using the straight-line method over the remaining terms of the underlying lease agreements as a net reduction of restaurant rent expense. Additions to favorable lease assets and unfavorable lease liabilities from the 2017 acquisitions included in Note 2 totaled $1.1 million and $3.0 million for the nine months ended October 1, 2017, respectively.

The net reduction of rent expense related to the amortization of favorable and unfavorable leases was $0.2 million each of the three months ended October 1, 2017 and October 2, 2016 and $0.7 million in the each of the nine months ended October 1, 2017 and October 2, 2016. The Company expects the net annual reduction of rent expense to be $0.8 million in 2017, $0.9 million in 2018, $0.8 million in 2019, $0.7 million in 2020 and $0.6 million in 2021 and 2022, respectively.

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

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