Impairment, closed restaurant and other costs |
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| Impairment and closure 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:
During the year ended December 27, 2020, the Company recorded a $20.9 million impairment charge as a result of restaurant closures, the discontinuation of the complimentary "Nacho Car" as well as the abandoned development costs mainly driven by the COVID-19 pandemic. The Company also recorded a $0.8 million COVID-19 related charge due to idle development costs as a result of delaying restaurant openings to 2021. During the years ended December 29, 2019 and December 30, 2018, the Company recorded asset impairment charges relating to closures of underperforming restaurants.
The Company also recorded $5.1 million and $1.5 million of closed restaurant costs, which include rent expense, utility and insurance costs during fiscal 2020 and 2019, respectively.
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