Impairment Of Long-Lived Assets And Other Lease Charges (Notes)

6 Months Ended

Jun. 28, 2020

Asset Impairment Charges [Abstract]

Asset Impairment Charges [Text Block]

Impairment of Long-Lived Assets and Other Lease Charges

The Company reviews its long-lived assets, principally property and equipment, for impairment at the restaurant level. If an indicator of impairment exists for any of its assets, an estimate of the undiscounted future cash flows over the life of the primary asset for each restaurant is compared to that long-lived asset’s carrying value. If the carrying value is greater than the undiscounted cash flow, the Company then determines the fair value of the asset and 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. For closed restaurant locations, the Company reviews the future minimum lease payments and related ancillary costs from the date of the restaurant closure to the end of the remaining lease term and records a lease charge for the lease liabilities to be incurred, net of any estimated sublease recoveries.

The Company determined the fair value of restaurant equipment, for those restaurants reviewed for impairment, based on current economic conditions. The Company determines the fair value of right-of-use lease assets based on an assessment of market rents and a discounted future cash flow model. These fair value asset measurements rely on significant unobservable inputs and are considered Level 3 in the fair value hierarchy.

During the three months ended June 28, 2020, the Company recorded impairment and other lease charges of $2.9 million consisting of $2.6 million of initial impairment charges for six underperforming restaurants, capital expenditures of $0.1 million at underperforming restaurants, and $0.2 million of other lease charges. During the six months ended June 28, 2020, the Company recorded impairment and other lease charges of $5.8 million consisting of $4.1 million related to initial impairment charges for nine underperforming restaurants, capital expenditures of $0.3 million at previously impaired restaurants and $1.4 million of other lease charges primarily from nine restaurants closed during the first quarter of 2020.

During the three months ended June 30, 2019, the Company recorded impairment and other lease charges of $0.4 million consisting of $0.2 million related to initial impairment charges for one underperforming restaurant, capital expenditures of $0.1 million at previously impaired restaurants, and $0.1 million associated with the closure of one underperforming restaurant. During the six months ended June 30, 2019, the Company also recorded impairment and other lease charges of $1.3 million consisting of $0.9 million related to initial impairment charges for three underperforming restaurants, capital expenditures of $0.2 million at underperforming restaurants and $0.2 million of other lease charges primarily due to the de-imaging of six restaurants closed during the first quarter.