Intangible Assets (Notes)

12 Months Ended

Jan. 02, 2022

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill, Franchise Rights, Favorable and Unfavorable Leases

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. The Company evaluated the impact of the initial decline in market value below the Company’s net asset value during the third quarter of 2021 to determine whether there was a triggering event requiring it to perform a goodwill impairment test. The Company determined a triggering event occurred given this initial decline and performed a quantitative goodwill impairment test for its reporting units. As part of this 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 disclosed in Note 2, the interim impairment test performed at the end of the third quarter will also serve as the Company's 2021 annual goodwill impairment test. The Company assessed events and circumstances from the date of its annual goodwill impairment test through January 2, 2022 and there were no indicators representing a further triggering event. There were no goodwill impairment losses recorded during the years ended January 2, 2022, January 3, 2021 and December 29, 2019.

Goodwill at December 29, 2019	$	122,619
Acquisitions of restaurants (Note 3)	—
Goodwill at January 3, 2021	122,619
Acquisitions of restaurants (Note 3)	1,832
Goodwill at January 2, 2022	$	124,451

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. No impairment charges were recorded related to the Company’s franchise rights during the years ended January 2, 2022, January 3, 2021 and December 29, 2019.

The following is a summary of the Company’s franchise rights as of the respective balance sheet dates:

Balance at December 29, 2019	$	348,941
Amortization expense	(14,344)
Balance at January 3, 2021	334,597
Acquisitions of restaurants (Note 3)	6,025
Amortization expense	(13,853)
Balance at January 2, 2022	$	326,769

Amortization expense related to franchise rights for the year ended December 29, 2019 was $11.3 million. The Company expects annual amortization to be $14.0 million in 2022, 2023 and 2024 and $13.9 million in 2025 and 2026.