Restaurant Impairments, Closure Costs and Asset Disposals

6 Months Ended

Jun. 30, 2020

Property, Plant and Equipment Impairment or Disposal [Abstract]

Restaurant Impairments, Closure Costs and Asset Disposals

The following table presents restaurant impairments, closure costs and asset disposals (in thousands):



	Fiscal Quarter Ended				Two Fiscal Quarters Ended
	June 30, 2020		July 2, 2019		June 30, 2020		July 2, 2019
Restaurant impairments ⁽¹⁾	$	2,135	$	2,276	$	2,262	$	2,465
Closure costs ⁽¹⁾	299		173		512		134
Loss on disposal of assets and other	124		435		840		705
	$	2,558	$	2,884	$	3,614	$	3,304

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(1)	Restaurant impairments and closure costs in all periods presented above include amounts related to restaurants previously impaired or closed.

During the second quarter of 2020, five restaurants were identified as impaired for which the Company recorded an impairment charge of $2.1 million. In the second quarter of 2019, two restaurants were impaired for a total impairment charge of $2.2 million. Impairment is based on management’s current assessment of the expected future cash flows of a restaurant based on recent results and other specific market factors. Impairment expense is a Level 3 fair value measure and is determined by comparing the carrying value of restaurant assets to the estimated fair market value of the restaurant assets at resale value and the right-of-use asset based on a discounted cash flow analysis utilizing market lease rates. The Company will continue to monitor the impact from the COVID-19 pandemic as it relates to recoverability of long-lived assets. Although we have seen an improvement in sales, we are unable to predict how long these conditions will persist, what additional measures may be introduced by governments or what effect any such additional measures may have on restaurants and our business. Any measure that encourages consumers to stay in their homes, engage in social distancing or avoid larger gatherings of people for an extended period of time is highly likely to be harmful to the restaurant industry in general.

Closure costs in each of the second quarter and first two quarters of 2020 and 2019 include ongoing costs related to restaurants closed in previous years as well as one company-owned restaurant closed during the second quarter of 2020 that was near the end of its lease term. In addition, closure costs in the second quarter and first two quarters of 2019 were partially offset by a gain of $0.1 million and $0.4 million, respectively, from adjustments to liabilities as lease terminations occur.

Loss on disposal of assets and other includes expenses recognized during the first two quarters of 2020 related to the divestiture of company-owned restaurants to a franchisee.

These expenses are included in the “Restaurant impairments, closure costs and asset disposals” line in the Condensed Consolidated Statements of Operations.