ASSET IMPAIRMENT AND ESTIMATED LEASE TERMINATION AND OTHER CLOSING COSTS

3 Months Ended

Apr. 02, 2017

Asset Impairment And Estimated Lease Terminations And Other Closing Costs [Abstract]

Asset Impairment And Estimated Lease Terminations And Other Closing Costs Disclosure [Text Block]

(11) Asset Impairment and Estimated Lease Termination and Other Closing Costs

In accordance with FASB Accounting Standards Codification 360 for Property, Plant, and Equipment, the Company evaluates restaurant sites and long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of restaurant sites to be held and used is measured by a comparison of the carrying amount of the restaurant site to the undiscounted future net cash flows expected to be generated on arestaurant-by-restaurantbasis. If a restaurant is determined to be impaired, the loss is measured by the amount by which the carrying amount of the restaurant’s assets exceeds its fair value. Fair value is estimated based on the best information available including estimated future cash flows, expected growth rates in comparable restaurant sales, remaining lease terms, discount rate, anticipated sale prices and other factors. If these assumptions change in the future, the Company may be required to take additional impairment charges for the related assets. Considerable management judgment is necessary to estimate future cash flows. Accordingly, actual results could vary significantly from such estimates. As of April 2, 2017, the Company evaluated events and circumstances surrounding its Company-owned restaurants and determined that no restaurant impairment charges were necessary for the first quarter of fiscal 2017.

The Company maintains lease reserves on locations for which the Company is the primary obligor of a lease agreement but expects to incur losses after the Company ceases to use the location. During the first quarter of fiscal 2017, the Company recorded lease reserves and corresponding lease termination charges on Company-owned closed restaurants located in Stillwater, Minnesota and Falls Church, Virginia. Additionally, the Company recorded lease termination charges on two Franshisee-operated locations, for which the Company was the primary obligor of the lease agreement, located in Evergreen Park, Illinois and Algonquin, Illinois.

Restaurant Optimization- During fiscal 2016, the Company recorded asset impairment charges associated with 11 restaurants which were slow to respond to several initiatives to turnaround operating performance. As a result, the Company determined that the estimated fair value of the assets was less than the net book value and recognized impairment charges to reduce the related assets to their estimated fair value. As the Company continues to evaluate the restaurant portfolio, the Company anticipates addressing the ongoing operation of the 11 locations impaired over the next three years by way of lease restructuring, lease assignment or subsequent closure at the end of their natural lease term.

During the first quarter of fiscal 2017, the Company closed two restaurants as part of the Restaurant Optimization plan and, subsequent to the end of the first quarter of fiscal 2017, the Company closed two additional restaurants as part of this plan. See Note 17 “Subsequent Events.”

The following is a summary of impairment costs forthe first quarter of fiscal 2017 and fiscal 2016. These costs are included in asset impairment and estimated lease termination and other closing costs in the consolidated statements of operations.

		Three Months Ended
(dollars in thousands)		April 2, 2017		April 3, 2016
Asset Impairments
	Restaurant optimization(1)	$	(56)	$	---
	Lease termination charges(2)		1,182		---
Restaurant closure expenses			7		8
Asset impairment and estimated lease termination and other closing costs		$	1,133	$	8
(1) Gains resulting primarily from recapture of deferred rent credits, net of other costs incurred.
(2) Primarily related to Chicago-area refranchised restaurants and former Chicago field office. See Note 14 - Variable Interest Entities.