Leases

12 Months Ended

Sep. 24, 2024

Leases [Abstract]

Leases

6. Leases

The Company’s office space and the land and buildings related to the Drive Thru and Bad Daddy’s restaurant facilities are classified as operating leases and expire at various dates over the next 15 years. Some leases contain escalation clauses over the lives of the leases. Most of the leases contain one to three five-year renewal options at the end of the initial term. Certain leases include provisions for additional contingent rent payments if sales volumes exceed specified levels. For the fiscal year ended September 24, 2024, the Company incurred $54,000 of contingent rent expense. The Company had income of $23,000 related to contingent rent adjustments for the fiscal year ended September 26, 2023.

The Company determines if a contract contains a lease at inception. The Company's material long-term operating lease agreements are for the land and buildings for our restaurants as well as our corporate office. The initial lease terms for our restaurants range from 10 years to 20 years, most of which at lease inception included renewal options of 10 to 15 years. The lease term is generally the minimum of the noncancelable period or the lease term including renewal options which are reasonably certain of being exercised up to a term of approximately 20 years.

Some of the leases provide for base rent, plus additional rent based on gross sales, as defined in each lease agreement. The Company is also generally obligated to pay certain real estate taxes, insurance and common area maintenance charges, and various other expenses related to properties, which are expensed as incurred.

Components of operating lease costs in the consolidated statements of operations for the fiscal years ended September 24, 2024 and September 26, 2023 are as follows (in thousands):

	Classification	Fiscal 2024			Fiscal 2023
Operating lease cost	Occupancy, Other restaurant operating costs, preopening costs and General and administrative expenses, net	$	7,450		$	7,302
Variable lease cost	Occupancy		54			(23	)
Sublease income	Occupancy		(517	)		(546	)
Total lease expense		$	6,987		$	6,733

Supplemental cash flow disclosures for the fiscal years ended September 24, 2024 and September 26, 2023 (in thousands):

	Fiscal 2024		Fiscal 2023
Cash paid for operating lease liabilities	$	8,072	$	7,431
Non-cash operating lease assets obtained in exchange for operating lease liabilities	$	242	$	443

Weighted average lease term and discount rate are as follows:

	September 24, 2024			September 26, 2023
Weighted average remaining lease term (in years)		7.36			7.94
Weighted average discount rate		5.2	%		5.0	%

Future minimum rent payments for our operating leases for each of the next five years as of September 24, 2024 are as follows (in thousands):

Fiscal year ending September:	Total
2025		8,280
2026		7,856
2027		7,560
2028		6,800
2029		5,563
Thereafter		16,618
Total minimum lease payments		52,677
Less: imputed interest		(9,120	)
Present value of lease liabilities	$	43,557

The above future minimum rental amounts exclude the amortization of deferred lease incentives, renewal options that are not reasonably assured of renewal, and contingent rent. The Company generally has escalating rents over the term of the leases and records rent expense on a straight-line basis.