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Leases

12 Months Ended

Dec. 31, 2019

The Company leases restaurant facilities, office space and certain equipment that expire on various dates through April 2035. Lease terms for restaurants in traditional shopping centers generally include a base term of 10 years, with options to extend these leases for additional periods of five to 15 years.

The Company’s leases typically contain rent escalations over the lease term. The Company recognizes expense for these leases on a straight-line basis over the lease term. Additionally, tenant incentives used to fund leasehold improvements are recognized when earned and reduce the right-of-use asset related to the lease. These are amortized through the right-of-use asset as reductions of expense over the lease term. Total rent expense for operating leases for 2019, 2018 and 2017 was approximately $40.8 million, $41.7 million and $43.9 million, respectively.

Some of the Company’s leases include rent escalations based on inflation indexes and fair market value adjustments. Certain leases contain contingent rental provisions that include a fixed base rent plus an additional percentage of the restaurant’s sales in excess of stipulated amounts. Lease expense associated with rent escalation and contingent rental provisions is not material and is included within operating lease cost. Operating lease liabilities are calculated using the prevailing index or rate at lease commencement. Subsequent escalations in the index or rate and contingent rental payments are recognized as variable lease expenses. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The Company elected the practical expedient to account for lease and non-lease components as a single component for substantially all lease types.

As most of the Company’s leases do not provide an implicit rate, the Company used its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.

Supplemental balance sheet information related to leases is as follows (in thousands):



Classification		December 31, 2019
Assets
Operating	Operating lease assets, net	$	209,717
Finance	Finance lease assets, net ⁽¹⁾	771
Total leased assets		$	210,488
Liabilities
Current lease liabilities
Operating	Current operating lease liabilities	$	22,775
Finance	Current finance lease liabilities ⁽²⁾	510
Long-term lease liabilities
Operating	Long-term operating lease liabilities	225,014
Finance	Long-term finance lease liabilities ⁽²⁾	281
Total lease liabilities		$	248,580

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(1)	The finance lease assets are included in property and equipment, net in the Consolidated Balance Sheets.


(2)	The current portion of the finance lease liabilities is included in accrued expenses and other current liabilities, and the long-term portion is included in other long-term liabilities in the Consolidated Balance Sheets.

The components of lease costs are as follows (in thousands):



		Year Ended
Classification		December 31, 2019
Operating lease cost	Occupancy, other restaurant operating costs, and general and administrative expenses	$	40,753
Finance lease cost
Amortization of lease assets	Depreciation and amortization	661
Interest on lease liabilities	Interest expense, net	73
		41,487
Sublease income	Franchising royalties and fees, and other	(651		)
Total lease cost, net		$	40,836

Future minimum lease payments required under existing leases as of December 31, 2019 are as follows (in thousands):



	Operating Leases		Finance Leases		Total
2020	$	43,236	$	546	$	43,782
2021	42,530		225		42,755
2022	42,340		51		42,391
2023	40,988		14		41,002
2024	38,986		8		38,994
Thereafter	152,721		1		152,722
Total lease payments	360,801		845		361,646
Less: Imputed interest	113,012		54		113,066
Present value of lease liabilities	$	247,789	$	791	$	248,580

As previously disclosed in our 2018 Annual Report on Form 10-K and under the previous lease accounting, maturities of lease liabilities were as follows as of January 1, 2019 (in thousands):



2019	$	42,652
2020	39,626
2021	35,609
2022	30,611
2023	24,440
Thereafter	54,414
	$	227,352

Operating lease payments include $158.8 million related to options to extend lease terms that are reasonably certain of being exercised and exclude $11.0 million of legally binding minimum lease payments for leases signed but not yet commenced.

Lease term and discount rate as of December 31, 2019 are as follows:



Weighted average remaining lease term (years):
Operating	10.0
Finance	2.9
Weighted average discount rate:
Operating	8.6	%
Finance	7.2	%

Supplemental disclosures of cash flow information related to leases for the year ended December 31, 2019 are as follows (in thousands):



Cash paid for lease liabilities:
Operating leases	$	43,203
Finance leases	763
	$	43,966
Right-of-use assets obtained in exchange for new lease liabilities:
Operating leases	$	11,211
Finance leases	253
	$	11,464

Leases