Leases

6 Months Ended

Jun. 28, 2020

Leases

Leases

3. Leases

Lessor Operating Leases

We sublease certain retail space to our franchisees in the United Kingdom which are primarily operating leases.  At June 28, 2020, we leased and subleased approximately 370 Papa John’s restaurants to franchisees in the United Kingdom. The initial lease terms on the franchised sites in the United Kingdom are generally 15 years.  The Company has the option to negotiate an extension toward the end of the lease term at the landlord’s discretion.  Rental income, primarily derived from properties leased and subleased to franchisees in the United Kingdom, is recognized on a straight-line basis over the respective operating lease terms.  We recognized total sublease income of $5.0 million and $4.8 million for the six months ended June 28, 2020 and June 30, 2019, respectively.

Lease Guarantees

As a result of assigning our interest in obligations under property leases as a condition of the refranchising of certain restaurants, we are contingently liable for payment of approximately 89 domestic leases. These leases have varying terms, the latest of which expires in 2036. As of June 28, 2020, the estimated maximum amount of undiscounted payments the Company could be required to make in the event of nonpayment by the primary lessees was $15.9 million.  This contingent liability is not included in the Condensed Consolidated Balance Sheet as it is not probable to occur.  The fair value of the guarantee is not material.

Supplemental Cash Flow & Other Information

Supplemental cash flow information related to leases for the periods reported is as follows:

	Six Months Ended
(in thousands)		June 28, 2020		June 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from finance leases	$	295	$	—
Financing cash flows from finance leases		939		—
Operating cash flows from operating leases (a)		18,744		20,307
Right-of-use assets obtained in exchange for new finance lease liabilities		19		—
Right-of-use assets obtained in exchange for new operating lease liabilities		13,370		6,180
Cash received from sublease income		5,014		4,662
(a) Included within the change in Other assets and liabilities within the Condensed Consolidated Statements of Cash Flows offset by non-cash operating lease asset amortization and liability accretion.