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, most of which include renewal options of 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. 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 charges, and various other expenses related to properties, which 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. Components of operating lease costs are as follows for the thirteen weeks ended March 31, 2019: Lease cost Classification Unrelated Parties Related Party Total Operating lease cost (a) Occupancy, General and administrative expenses and Property and equipment, net $ 5,436 $ 576 $ 6,012 Variable lease cost Occupancy 101 151 252 $ 5,537 $ 727 $ 6,264 (a) Includes short-term operating lease costs which are immaterial. Weighted average lease term and discount rate are as follows: March 31, 2019 Weighted average remaining lease term (in years) 15.5 Weighted average discount rate 7.8 % Supplemental cash flow disclosures for the thirteen weeks ended March 31, 2019: March 31, 2019 Cash paid for operating lease liabilities $ 6,286 Operating lease assets obtained in exchange for operating lease liabilities (a) 168,984 (a) Includes the transition adjustment for the adoption of Leases (Topic 842) as discussed in Note 3, Recent Accounting Pronouncements in the notes to our unaudited condensed consolidated financial statements. As a result of the store closures, the Company also shortened the remaining life of the related leases and recorded a $1.3 million reduction to the operating lease assets and liabilities during the first quarter of 2019. Supplemental balance sheet disclosures: Operating leases Classification March 31, 2019 Right-of-use assets Operating lease assets $ 167,088 Current lease liabilities Operating lease liability $ 9,106 Non-current lease liabilities Operating lease liability, less current portion 213,245 Total lease liabilities $ 222,351 Future minimum rent payments for our operating leases for each of the next five years as of March 31, 2019 are as follows: Unrelated Parties Related Party Total Fiscal year ending: Remainder of 2019 $ 17,607 $ 1,709 $ 19,316 2020 23,977 2,286 26,263 2021 24,261 2,292 26,553 2022 24,104 1,439 25,543 2023 24,472 1,446 25,918 Thereafter 261,547 1,205 262,752 Total minimum lease payments 375,968 10,377 386,345 Less: imputed interest 162,202 1,792 163,994 Present value of lease liabilities $ 213,766 $ 8,585 $ 222,351 As of March 31, 2019, operating lease payments include $142.0 million related to options to extend lease terms that are reasonable certain of being exercised and exclude approximately $13.8 million of legally binding minimum lease payments for leases signed but not yet commenced. As previously disclosed in our 2018 Annual Report on Form 10-K and under the previous lease accounting, future minimum rent payments for our operating leases for each of the next five years and in total are as follows as of December 30, 2018: Unrelated Parties Related Party Total Fiscal year ending: 2019 $ 23,638 $ 2,279 $ 25,917 2020 25,184 2,286 27,470 2021 25,620 2,292 27,912 2022 25,463 1,439 26,902 2023 25,832 1,446 27,278 Thereafter 294,112 1,205 295,317 Total minimum lease payments $ 419,849 $ 10,947 $ 430,796 The above future minimum rental amounts exclude the amortization of deferred lease incentives, renewal options that are not reasonably assured of renewal, and contingent rent. The Company generally has escalating rents over the term of the leases and records rent expense on a straight-line basis. |