Quarterly report pursuant to Section 13 or 15(d)

Impairment, Closed Restaurant and Other Costs

v3.20.2
Impairment, Closed Restaurant and Other Costs
 9 Months Ended
Sep. 27, 2020
Impairment & closed restaurant costs [Abstract]  
Impairment, Closed Restaurant and Other Costs Impairment, Closed Restaurant and Other Costs
The Company reviews long-lived assets, such as property and equipment and intangibles, subject to amortization, for impairment when events or circumstances indicate the carrying value of the assets may not be recoverable. In determining the recoverability of the asset value, an analysis is performed at the individual restaurant level and primarily includes an assessment of historical undiscounted cash flows and other relevant factors and circumstances. The Company evaluates future cash flow projections in conjunction with qualitative factors and future operating plans and regularly reviews any restaurants with a deficient level of cash flows for the previous 24 months to determine if impairment testing is necessary. Recoverability of assets to be held and used is measured by a comparison of the carrying value of the restaurant to its estimated future undiscounted cash flows. If the estimated undiscounted future cash flows are less than the carrying value, we determine if there is an impairment loss by comparing the carrying value of the restaurant to its estimated fair value. Based on this analysis, if the carrying value of the restaurant exceeds its estimated fair value, an impairment charge is recognized by the amount by which the carrying value exceeds the fair value.
We make assumptions to estimate future cash flows and asset fair values. The estimated fair value is generally determined using the depreciated replacement cost method, the income approach, or discounted cash flow projections. Estimated future cash flows are highly subjective assumptions based on the Company’s projections and understanding of our business, historical operating results, and trends in sales and restaurant level operating costs.
The Company’s impairment assessment process requires the use of estimates and assumptions regarding future cash flows and operating outcomes, which are based upon a significant degree of management judgment. The estimates used in the impairment analysis represent a Level 3 fair value measurement. The Company continues to assess the performance of restaurants and
monitors the need for future impairment. Changes in the economic environment, real estate markets, capital spending, overall operating performance and underlying assumptions could impact these estimates and result in future impairment charges.
The Company recorded impairment, closed restaurant and other costs as follows:
  Thirteen Weeks Ended Thirty-Nine Weeks Ended
  September 27, 2020 September 29, 2019 September 27, 2020 September 29, 2019
Operating lease assets impairment $ —  $ —  $ 3,133  — 
Property and equipment impairment 1,008  7,114  16,152  $ 7,114 
Total impairment charge 1,008  7,114  19,285  7,114 
Closed restaurant costs
 1,591  186  3,869  774 
COVID-19 related charges 845  —  845  — 
Impairment, closed restaurant and other costs $ 3,444  $ 7,300  $ 23,999  $ 7,888 
During the thirteen weeks ended September 27, 2020, the Company recorded a $1.0 million impairment charge as a result of the discontinuation of the Company's complimentary “Nacho Car” and a COVID-19 related charge of $0.8 million due to idle development costs as a result of delaying restaurant openings to 2021.
During the thirteen weeks ended September 27, 2020, the Company also incurred $1.6 million in closed restaurant costs, which represent on-going expenses to maintain the closed restaurants such as rent expense, utility and insurance costs.