Intangible Assets (Notes)

6 Months Ended

Jul. 03, 2022

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 second quarter of 2022, a sustained decline in the Company's stock price due to the impact of continued increases in input costs on the Company's operating margins resulted in an implied equity premium that was outside of an observable range and was determined to be an indicator of an impairment. As a result, the Company performed a quantitative interim goodwill impairment test for its reporting units during the second quarter of 2022. As part of this interim goodwill impairment test, the Company considered certain qualitative and quantitative factors, such as the Company's performance, business forecasts, capital expenditure plans, a discount rate approximating the Company's weighted average cost of capital, and an evaluation of peer company multiples, among other factors. Using both the income approach and the market approach, the Company compared the fair value of each of its reporting units to their respective carrying values. Based on the results of this analysis, the Company determined that the fair value of its Popeyes reporting unit was less than its carrying value, and as a result, recorded a non-cash goodwill impairment charge during the three months ended July 3, 2022 of $16.7 million. The non-cash goodwill impairment charge represented a full write-down of the goodwill for the Popeyes reporting unit and is included in impairment and other lease charges on the condensed consolidated statements of comprehensive loss. The change in goodwill for the six months ended July 3, 2022 is summarized below:

Balance at January 2, 2022	$	124,451
Impairment of goodwill	(16,700)
Balance at July 3, 2022	$	107,751

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 renewal period of twenty years.

The Company assesses the potential impairment of franchise rights whenever events or changes in circumstances indicate that the carrying value may not be recoverable, including closures of restaurants that were part of an acquisition, a shortfall in undiscounted operating cash flows over the projected remaining life of the franchise rights over the carrying value of such franchise rights for each acquisition group, or a goodwill impairment trigger. 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 six months ended July 3, 2022 and July 4, 2021. The change in franchise rights for the six months ended July 3, 2022 is summarized below:

Balance at January 2, 2022	$	326,769
Amortization expense	(6,987)
Balance at July 3, 2022	$	319,782

Amortization expense related to franchise rights was $3.5 million and $3.4 million for the three months ended July 3, 2022 and July 4, 2021, respectively, and $7.0 million and $6.9 million for the six months ended July 3, 2022 and July 4, 2021, respectively. The Company expects annual amortization expense to be $14.0 million in fiscal 2022, 2023 and 2024 and $13.9 million in 2025, 2026 and 2027.