Acquisition (Notes)

6 Months Ended

Jul. 03, 2022

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)(2)	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 were sold in sale-leaseback transactions during the third quarter of 2021 for net proceeds of approximately $20.2 million.

(2)One of the fee-owned restaurants was closed at the end of 2021 and subsequently sold in the second quarter of 2022 for proceeds of $0.2 million.

The Company allocated the aggregate purchase price for the 2021 acquisitions at their estimated fair values. The following table summarizes the final allocation of the aggregate purchase price for the 2021 acquisitions:


Inventory	$	229


Land and buildings	20,376
Restaurant equipment	850
Restaurant equipment - subject to finance leases	29
Right-of-use assets	2,997
Leasehold improvements	550
Franchise fees	411
Franchise rights	6,025

Deferred income taxes	484
Goodwill	1,832
Operating lease liabilities	(2,900)
Finance lease liabilities for restaurant equipment	(35)

Accounts payable	(29)

Net assets acquired	$	30,819

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 $1.8 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 $5.8 million and $10.9 million in the three and six months ended July 3, 2022. 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 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			July 4, 2021
Total revenue		$	430,017		$	826,024
Net loss		$	(8,871)		$	(15,574)
Basic and diluted net loss per share		$	(0.18)		$	(0.31)

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.