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Refranchising Initiative
 3 Months Ended
Nov. 30, 2017
Restructuring and Related Activities [Abstract]  
Refranchising Initiative
Refranchising Initiative

The Company completed a refranchising initiative in fiscal year 2017. During the first quarter of fiscal year 2017, 56 Company Drive-Ins were refranchised, and the Company retained a non-controlling minority investment in the franchise operations. Income from minority investments is included in other revenue on the condensed consolidated statements of income. The gains and losses below are recorded in other operating income, net, on the condensed consolidated statement of income.

The following is a summary of the pretax activity recorded as a result of the refranchising initiative (in thousands, except number of refranchised Company Drive-Ins):

 
 
Three months ended
November 30, 2016
Number of refranchised Company Drive-Ins
 
56

 
 
 
Proceeds from sales of Company Drive-Ins
 
$
8,950

 
 
 
Assets sold, net of retained minority investment (1)
 
(5,461
)
Initial lease payments for real estate option (2)
 
(3,810
)
Goodwill related to sales of Company Drive-Ins
 
(377
)
Loss on assets held for sale
 
(259
)
Refranchising initiative losses, net
 
$
(957
)
_______________
(1)
Net assets sold consisted primarily of equipment.
(2)
During the first quarter of fiscal year 2017, as part of a 53 drive-in refranchising transaction, the Company entered into a direct financing lease which included an option for the franchisee to purchase the real estate within the next 24 months. In accordance with lease accounting requirements, because the exercise of this option could occur at any time within 24 months, the portion of the proceeds from the refranchising attributable to the fair value of the option was applied as the initial minimum lease payment for the real estate. The franchisee exercised the option in the last six months of fiscal year 2017. Until the option was fully exercised, the franchisee made monthly lease payments which were included in other operating income, net of sub-lease expense.