Quarterly report pursuant to Section 13 or 15(d)

Leases

v3.23.1
Leases
 3 Months Ended
Mar. 26, 2023
Leases [Abstract]  
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 lease term begins on the date that the Company takes possession under the lease, including the pre-opening period during construction, when in many cases the Company is not making rent payments. The initial lease terms range from 10 years to 15 years, most of which include renewal options totaling 10 to 15 years. 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.
Operating lease assets and liabilities are recognized at the lease commencement date for material leases with a term of greater than 12 months. Operating lease liabilities represent the present value of future minimum lease payments. Since our leases do not provide an implicit rate, our operating lease liabilities are calculated using the Company's secured incremental borrowing rate at lease commencement. We estimate this rate based on prevailing financial market conditions, comparable companies, credit analysis and management judgment. Minimum lease payments include only fixed lease components of the agreement, as well as variable rate payments that depend on an index, initially measured using the index at the lease commencement date.
Operating lease assets represent our right to use an underlying asset and are based upon the operating lease liabilities adjusted for prepaid or accrued lease payments, initial direct costs and lease incentives. Lease incentives are recognized when construction milestones are met and reduce our operating lease asset. They are amortized through the operating lease assets as reductions of rent expense over the lease term.
Operating lease expense is recognized on a straight-line basis over the lease term. Variable lease payments that do not depend on a rate or index, escalation in the index subsequent to the initial measurement, payments associated with non-lease components such as common area maintenance, real estate taxes and insurance, and short-term lease payments (leases with a term with 12 months or less) are expensed as incurred. Certain of the Company’s operating leases contain clauses that provide for contingent rent based on a percentage of sales greater than certain specified target amounts. These variable payments are expensed when the achievement of the specified target that triggers the contingent rent is considered probable. As of March 26, 2023, all of the Company's leases were operating.
Components of operating lease costs are included in occupancy, closed restaurant costs, restaurant pre-opening, general and administrative expense and property and equipment, net:
Thirteen Weeks Ended
Lease cost March 26, 2023 March 27, 2022
Operating lease cost $ 6,041  $ 6,209 
Variable lease cost 450  379 
$ 6,491  $ 6,588 
Supplemental cash flow disclosures and other lease information:
Thirteen Weeks Ended
March 26, 2023 March 27, 2022
Cash paid for operating lease liabilities $ 6,821  $ 8,634 
Operating lease assets obtained in exchange for operating lease liabilities(a)
—  3,955 
(a) The thirteen weeks ended March 27, 2022 includes a $2.4 million increase to operating lease assets and liabilities related to new lease commencements and a $1.5 million increase primarily due to extending remaining lives of certain leases.
The Company recorded no deferred lease incentives during the thirteen weeks ended March 26, 2023 and $1.0 million deferred lease incentives during the thirteen weeks ended March 27, 2022.
Supplemental balance sheet disclosures:
Operating leases Classification March 26, 2023 December 25, 2022
Right-of-use assets Operating lease assets $ 144,435  $ 146,920 
Deferred rent payments Operating lease liability 6  84 
Current lease liabilities Operating lease liability 12,483  12,415 
12,489  12,499 
Deferred rent payments Operating lease liability, less current portion 66  68 
Non-current lease liabilities Operating lease liability, less current portion 180,577  183,602 
180,643  183,670 
Total lease liabilities $ 193,132  $ 196,169 
Weighted average remaining lease term (in years) 12.5 12.7
Weighted average discount rate 7.6  % 7.6%
Future minimum rent payments for our operating leases for the next five years as of March 26, 2023 are as follows:
Fiscal year ending:
Remainder of 2023 $ 20,027 
2024 26,163 
2025 26,279 
2026 25,298 
2027 22,894 
Thereafter 178,172 
Total minimum lease payments 298,833 
Less: imputed interest 105,701 
Present value of lease liabilities $ 193,132 
As of March 26, 2023, operating lease payments exclude approximately $5.3 million of legally binding minimum lease payments for leases signed but which we have not yet commenced payments