Acquisition (Notes)

6 Months Ended

Jun. 28, 2021

Mergers, Acquisitions and Dispositions Disclosures [Text Block]

Acquisitions

In 2021, the Company acquired an aggregate of 19 Burger King restaurants from other franchisees in the following transactions (in thousands except number of restaurants):


Closing Date	Number of Restaurants	Purchase Price		Fee-Owned (1)	Market Location
June 17, 2021	14	$	27,603	12	Fort Wayne, Indiana
June 23, 2021	5	3,216		1	Battle Creek, Michigan
	19	$	30,819	13

(1) The 2021 acquisitions included the purchase of 13 fee-owned restaurants, of which 12 are expected to be sold in sale-leaseback transactions during 2021 for net proceeds of approximately $20.1 million, although there is no assurance we will complete such transactions during 2021 or at all.

The Company allocated the aggregate purchase price for the 2021 acquisitions at their estimated fair values. The following table summarizes the preliminary allocation of the aggregate purchase price for the 2021 acquisitions reflected in the condensed consolidated balance sheets as of July 4, 2021:


Inventory	$	229


Land and buildings	21,361
Restaurant equipment	850
Restaurant equipment - subject to finance leases	29
Right-of-use assets	2,997
Leasehold improvements	550
Franchise fees	411
Franchise rights	6,613

Deferred income taxes	106
Goodwill	629
Operating lease liabilities	(2,899)
Finance lease liabilities for restaurant equipment	(35)

Accounts payable	(22)

Net assets acquired	$	30,819

The values of certain assets and liabilities are preliminary in nature at July 4, 2021. The preliminary fair value of franchise rights and goodwill was estimated based on past history of purchase price allocations. When the fair value determination is finalized, changes to the preliminary valuation of assets acquired or liabilities assumed may result in material adjustments to the estimated fair value of identifiable assets acquired, including land and buildings, franchise rights, goodwill, and the related deferred taxes.

Goodwill recorded in connection with the 2021 acquisitions represents costs in excess of fair values assigned to the underlying net assets of acquired restaurants. Acquired goodwill that is expected to be deductible for income tax purposes was $0.6 million in 2021.

The results of operations for the restaurants acquired are included from the closing date of the respective acquisition. The 2021 acquired restaurants contributed restaurant sales of $1.0 million in the three and six months ended July 4, 2021. It is impracticable to disclose net earnings for the post-acquisition period for the acquired restaurants as net earnings of these restaurants were not tracked on a collective basis due to the integration of administrative functions, including field supervision.

The unaudited pro forma impact on the results of operations for the restaurants acquired in 2021 for the three and six months ended July 4, 2021 and June 28, 2020 are included below. The unaudited pro forma results of operations are not necessarily indicative of the results that would have occurred had the acquisitions been consummated at the beginning of the periods presented, nor are they necessarily indicative of any future consolidated operating results. The following table summarizes the Company's unaudited pro forma operating results:


	Three Months Ended				Six Months Ended
	July 4, 2021		June 28, 2020		July 4, 2021		June 28, 2020
Total revenue	$	430,017	$	374,489	$	826,024	$	730,929
Net income (loss)	$	(8,871)	$	8,315	$	(15,574)	$	(13,580)
Basic and diluted net loss per share	$	(0.18)	$	0.14	$	(0.31)	$	(0.27)

This unaudited pro forma financial information does not give effect to any anticipated synergies, operating efficiencies, cost savings or integration costs related to the acquired restaurants. The unaudited pro forma financial results exclude transaction costs recorded as general and administrative expenses of $0.3 million during the three and six months ended July 4, 2021.