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Related Parties
12 Months Ended
Dec. 30, 2018
Related Party Transactions [Abstract]  
Related Party Transactions Disclosure [Text Block]
Transactions with Related Parties
In connection with an acquisition of restaurants from BKC in 2012, the Company issued to BKC 100 shares of Series A Convertible Preferred Stock, which was exchanged for 100 shares of newly issued Series B Convertible Preferred Stock in 2018, and as of December 30, 2018 is convertible into approximately 20.3% of the outstanding shares of the Company's common stock after giving effect to the conversion of the Series B Preferred Stock. See Note 12—Stockholder's Equity for further information. Pursuant to the terms of the Series B Convertible Preferred Stock, BKC also has two representatives on the Company's board of directors.
Each of the Company's restaurants operates under a separate franchise agreement with BKC. These franchise agreements generally provide for an initial term of twenty years and currently have an initial franchise fee of $50. Any franchise agreement, including renewals, can be extended at the Company's discretion for an additional 20 year term, with BKC's approval, provided that, among other things, the restaurant meets the current Burger King® image standard and the Company is not in default under terms of the franchise agreement. In addition to the initial franchise fee, the Company generally pays BKC a monthly royalty at a rate of 4.5% of sales. Royalty expense was $50.5 million, $46.4 million, and $40.0 million for the years ended December 30, 2018, December 31, 2017 and January 1, 2017, respectively.
The Company is also generally required to contribute 4% of restaurant sales from the Company's restaurants to an advertising fund utilized by BKC for its advertising, promotional programs and public relations activities, and amounts for additional local advertising in markets that approve such advertising. Advertising expense associated with these expenditures was $47.0 million, $43.5 million and $40.2 million for the years ended December 30, 2018, December 31, 2017 and January 1, 2017, respectively.
As of December 30, 2018, December 31, 2017, and January 1, 2017, the Company leased 244, 251 and 275 of its restaurant locations from BKC, respectively. As of December 30, 2018, for 117 of the restaurants, the terms and conditions of the lease with BKC are identical to those between BKC and their third-party lessor. Aggregate rent under these BKC leases for the years ended December 30, 2018, December 31, 2017 and January 1, 2017 was $27.2 million, $27.6 million, and $27.8 million, respectively. The Company believes the related party lease terms have not been significantly affected by the fact that the Company and BKC are deemed to be related parties.
As of December 30, 2018, the Company owed BKC $9.3 million related to the payment of advertising, royalties and rent, which is remitted on a monthly basis.
The Company has entered into an Area Development and Remodeling Agreement with BKC which will be subject to the closing of the transactions contemplated by the Merger Agreement and will supersede the amended operating agreement. See Note 19 - Subsequent Events for further information.