Leases

The Company utilizes land and buildings in its operations under various lease agreements. The Company does not consider any one of these individual leases material to the Company's operations. Initial lease terms are generally for twenty years, and in many cases, provide for renewal options and in most cases rent escalations. Certain leases require contingent rent, determined as a percentage of sales as defined by the terms of the applicable lease agreement. For most locations, the Company is obligated for occupancy related costs including payment of property taxes, insurance and utilities.

The right-of-use (“ROU”) lease assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make payments in exchange for that right of use. As the rate implicit within our leases is not readily determinable, the Company uses market term specific incremental borrowing rates which consider the rate of interest we expect to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms. The ROU asset is also reduced by lease incentives, initial direct costs and adjusted by favorable lease assets and unfavorable lease liabilities. Variable lease components represent amounts that are contractually fixed as a percentage of sales and are recognized in expense as incurred and also amounts for real estate. Leases with an initial term of 12 months or less are not recorded on the balance sheet and are recognized as lease expense on a straight-line basis over the lease term. The Company does not account for lease components (e.g., fixed payments including rent, real estate taxes and insurance costs) separately from the non-lease components.

In addition, the Company utilizes certain restaurant equipment under various finance lease agreements with initial terms of generally eight years. The Company does not consider any one of these individual leases material to the Company's operations.

For certain leases where rent escalates based upon a change in a financial index, such as the Consumer Price Index, the difference between the rate at lease inception and the subsequent fluctuations in that rate are included in variable lease costs. Additionally, because the Company has elected to not separate lease and non-lease components, in limited instances variable costs also include payments to the landlord for common area maintenance, real estate taxes, insurance and other operating expenses. Lease expense is recognized on a straight-line basis over the lease term, with variable lease payments recognized in the period those payments are incurred.

During the years ended December 29, 2019, December 30, 2018 and December 31, 2017, the Company sold 27, five and three restaurant properties, respectively, in sale-leaseback transactions for net proceeds of $48.4 million, $8.4 million and $4.3 million, respectively. These leases have been classified as operating leases and generally contain a twenty-year initial term plus renewal options.

Minimum rent commitments under finance and non-cancelable operating leases at December 29, 2019 were as follows:



Fiscal year ending:	Operating Leases			Finance Leases
January 3, 2021	$	97,950		$	1,746
January 2, 2022	96,555			583
January 1, 2023	95,802			240
December 31, 2023	94,928			68
December 29, 2024	93,806			42
Thereafter	892,944			87
Total minimum lease payments	1,371,985			2,766
Less: imputed interest	(522,888		)	(242		)
Present value of lease liabilities	849,097			2,524
Less: current portion	(40,805		)	(1,616		)
Total long-term lease liabilities	$	808,292		$	908

Lease Cost

The components and classification of lease expense for the twelve months ended December 29, 2019 are as follows:



		Twelve months ended
Lease cost	Classification	December 29, 2019
Operating lease cost (1)	Restaurant rent expense	$	90,718
Operating lease cost	General and administrative	$	579
Variable lease cost - variable rent	Restaurant rent expense	$	16,454
Variable lease cost - common area maintenance	Other restaurant operating expenses	$	617
Sublease income	Restaurant rent expense	$	(25	)
Finance lease cost:
Amortization of right-of-use assets	Depreciation and amortization	$	1,778
Interest on lease liabilities	Interest expense	$	256
Total lease cost		$	110,377


(1)	Includes short-term leases which are not material.

Total rent expense for the years ended December 30, 2018 and December 31, 2017 on operating leases, including contingent rent on both operating and finance leases, was as follows:



	Year ended
	December 30, 2018		December 31, 2017
Minimum rent on real property	$	72,206	$	68,329
Contingent rent on real property	9,203		7,619
Restaurant rent expense	81,409		75,948
Administrative and equipment rent	273		328
	$	81,682	$	76,276

Lease Position

Supplemental balance sheet information related to leases was as follows as of December 29, 2019:



		As of
Leases	Classification	December 29, 2019
Assets
Operating leases	Operating right-of-use assets, net	$	811,016
Finance leases	Property and equipment, net	1,882
Total leased assets		$	812,898

Liabilities
Current
Operating leases	Current portion of operating lease liabilities	$	40,805
Finance leases	Current portion of long-term debt and finance lease liabilities	1,616
Long-term
Operating leases	Operating lease liabilities	808,292
Finance leases	Long-term debt and finance lease liabilities, net	908
Total lease liabilities		$	851,621

Weighted Average Remaining Lease Term
Operating leases		14.5 years
Finance leases		2.0 years

Weighted Average Discount Rate
Operating leases		7.0		%
Finance leases		7.9		%

Other Information

Supplemental cash flow information related to leases for the year ended December 29, 2019 are as follows:



	Twelve months ended
	December 29, 2019
Gain on sale-leaseback transactions	$	636
Lease assets and liabilities resulting from lease modifications and new leases	76,878
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	87,220
Operating cash flows from finance leases	256
Financing cash flows from finance leases	2,170

Disclosures Related to Periods Prior to Adoption of the New Lease Standard

As previously disclosed in the Company's Annual Report on Form 10-K for the fiscal year ended December 30, 2018 and under the previous lease accounting standard, the maturities of lease liabilities at December 30, 2018 were as follows:



Fiscal year ending:	Operating Leases		Capital Leases
December 29, 2019	$	73,304	$	2,180
January 3, 2021	71,764		1,454
January 2, 2022	70,607		345
January 1, 2023	70,160		190
December 31, 2023	69,221		68
Thereafter	640,793		129
Total minimum lease payments	$	995,849	$	4,366
Less: amount representing interest			(425		)
Total obligations under capital leases			3,941
Less: current portion			(1,948		)
Long-term obligations under capital leases			$	1,993

Deferred gains from sale-leaseback transactions of restaurant properties of $206 and $716 were recognized during the years ended December 30, 2018 and December 31, 2017, respectively, and were being amortized over the term of the related leases. The amortization of deferred gains from sale-leaseback transactions was $1.6 million for each of the years ended December 30, 2018 and December 31, 2017.