Intangible Assets (Notes)

9 Months Ended

Oct. 03, 2021

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. During the third quarter of 2021, the Company evaluated the impact of the decline in market value below the Company’s net asset value to determine whether there was a triggering event requiring it to perform a goodwill impairment test. The Company determined a triggering event occurred and performed an interim goodwill quantitative impairment test for its reporting units. As part of this interim goodwill impairment test, the Company considered certain qualitative factors, such as the Company’s performance, business forecasts and expansion plans. In addition, revisions to projected cash flows and future revenue for reporting units were compared to the results of the Company’s annual quantitative impairment test performed during the last quarter of 2020. Using both the income approach and the market approach, the Company compared the fair value of each of its reporting units to carrying value. Based on the results of this analysis, the fair value of each reporting unit exceeded carrying value and goodwill was not impaired as of October 3, 2021. There were no recorded goodwill impairment losses during the three and nine months ended October 3, 2021 and September 27, 2020. The change in goodwill for the nine months ended October 3, 2021 is summarized below:

Balance at January 3, 2021	$	122,619
Acquisitions of restaurants (Note 2)	1,352
Balance at October 3, 2021	$	123,971

Franchise Rights. Amounts allocated to franchise rights for each acquisition of Burger King and Popeyes 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, which include consideration of the impact of a decline in the Company's market value. 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 and nine months ended October 3, 2021 and September 27, 2020. The change in franchise rights for the nine months ended October 3, 2021 is summarized below:

Balance at January 3, 2021	$	334,597
Acquisitions of restaurants (Note 2)	5,629
Amortization expense	(10,377)
Balance at October 3, 2021	$	329,849

Amortization expense related to franchise rights was $3.5 million and $3.4 million for the three months ended October 3, 2021 and September 27, 2020, respectively, and $10.4 million and $10.7 million for the nine months ended October 3, 2021 and September 27, 2020, respectively. The Company expects annual amortization expense to be $13.9 million in 2021 and $14.2 million in each of the following five years.