Annual report pursuant to Section 13 and 15(d)

Leases

v3.20.1
Leases
12 Months Ended
Dec. 29, 2019
Leases [Abstract]  
Lessee, Operating Leases
Leases
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 offices. The initial lease terms range from 10 years to 15 years and currently expire between 2021 and 2040. The leases typically include renewal options for 10 to 15 years, which are exercisable at the Company's option. 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 (“CAM”) charges, and various other expenses related to properties. These charges are expensed as incurred.
Rent expense is paid to various landlords including several companies owned and controlled by the Company's founders and one of its former executive officers, who were considered related parties in prior years. For the year ended December 29, 2019, these entities are no longer related parties as defined by SEC regulations since the founders and former executive officer are either retired or otherwise left the Company in fiscal year 2018 or earlier.
As of December 29, 2019, all of the Company's leases were operating.
Components of operating lease costs are included in the occupancy, general and administrative expense and property and equipment, net:
 
 
Year Ended
Lease cost
 
December 29, 2019
Operating lease cost (a)
 
$
24,544

Variable lease cost
 
1,103

 
 
$
25,647

(a) Includes short-term operating lease costs which are immaterial.
As previously disclosed in our 2018 Annual Report on Form 10-K and under the previous lease accounting, rent expense, excluding real estate taxes, CAM charges, insurance, deferred lease incentives and other expenses related to operating leases for the years ended December 30, 2018 and December 31, 2017 consists of the following:
 
2018
 
2017
Minimum rent—unrelated parties
$
21,530

 
$
18,304

Contingent rent—unrelated parties
317

 
397

Total rent—unrelated parties
21,847

 
18,701

Minimum rent—related parties
2,276

 
2,215

Contingent rent—related parties
557

 
621

Total rent—related parties
2,833

 
2,836

Total minimum and contingent rent
$
24,680

 
$
21,537


Supplemental cash flow disclosures and other lease information for the year ended December 29, 2019:
Cash paid for operating lease liabilities
25,781

Operating lease assets obtained in exchange for operating lease liabilities (a)
177,701

Weighted average remaining lease term (in years)
15.0

Weighted average discount rate
7.8
%
(a) Includes the transition adjustment for the adoption of Leases (Topic 842) as discussed in Note 2, Recent Accounting Pronouncements in the Notes to our Consolidated Financial Statements. As a result of the store closures, the Company also shortened the remaining life of the related leases and recorded a $4.3 million reduction to the operating lease assets and liabilities during 2019.
Supplemental balance sheet disclosures:
Operating leases
 
Classification
 
December 29, 2019
Right-of-use assets
 
Operating lease assets
 
$
169,299

 
 
 
 
 
Current lease liabilities
 
Operating lease liability
 
$
10,307

Non-current lease liabilities
 
Operating lease liability, less current portion
 
214,541

Total lease liabilities
 
 
 
$
224,848


Future minimum rent payments for our operating leases for each of the next five years as of December 29, 2019 are as follows:
Fiscal year ending:
 
2020
$
27,162

2021
27,592

2022
26,582

2023
26,957

2024
25,790

Thereafter
248,744

Total minimum lease payments
382,827

Less: imputed interest
157,979

Present value of lease liabilities
$
224,848


As of December 29, 2019, operating lease payments exclude approximately $12.0 million of legally binding minimum lease payments for leases signed but which we have not yet taken possession.