Equity Method Investment

12 Months Ended

Jul. 31, 2020

Equity Method Investment [Abstract]

Equity Method Investment

3. Equity Method Investment

Effective July 18, 2019, the Company purchased approximately 58.6% of the economic ownership interest, and approximately 49.7% of the voting ownership interest, in PBS HC for $89,100, which was included on the Company’s consolidated balance sheet as an investment in unconsolidated subsidiary at August 2, 2019.  The Company does not have the power to unilaterally direct any activities of PBS HC, a variable interest entity, that most significantly impact PBS HC’s economic performance.  As a result, the Company’s investment in PBS HC, for which it has the ability to exercise significant influence, but not control and is not the primary beneficiary, is accounted for using the equity method. See section entitled “Investment in unconsolidated subsidiary” in Note 2 for further information regarding the accounting for equity method investments.

Additionally, as part of the transaction, the Company purchased promissory notes of $6,900 along with the related interest on the notes and provided additional funding of $8,000 to PBS HC in exchange for a promissory note. These promissory notes and related interest are included in other assets on the consolidated balance sheet.  As part of the purchase agreement with PBS HC, the Company agreed to fund PBS HC up to $51,000 through calendar 2020, of which the Company funded $48,000 and $12,500, respectively, as of July 31, 2020 and August 2, 2019.  The Company’s exposure to risk of loss in PBS HC is generally limited to its investment in the ownership interest and its receivable related to the promissory notes.

The Company assesses the impairment of its equity investment whenever events or changes in circumstances indicate that a decrease in value of the investment has occurred that is other than temporary.  During the onset of the COVID-19 pandemic, PBS HC’s wholly-owned subsidiary, PBS BrandCo, LLC (“Brandco”) suffered unsustainable disruption to its business across the chain and suspended all operations at each of its 19 locations and laid off substantially all restaurant and corporate employees.  On March 20, 2020, the primary lender under Brandco’s secured credit facility provided notice of the lender’s intention to foreclose on its collateral interest in Brandco unless the Company repaid or unconditionally guaranteed the indebtedness.   In keeping with the Company’s strategy of concentrating its resources on its core business during the COVID-19 pandemic, and in light of the substantial uncertainties surrounding PBS business coming out of the COVID-19 pandemic, the Company decided not to invest further resources to prevent foreclosure or otherwise provide additional capital to PBS HC.  The Company recorded a loss of $132,878, which represented the Company’s equity investment in PBS HC and the principal and accumulated interest under the outstanding unsecured indebtedness of PBS HC held by the Company.  This loss is recorded in the net loss in unconsolidated subsidiary line on the Company’s Consolidated Statement of Income (Loss) in 2020.