Restaurant Impairments, Closure Costs and Asset Disposals

12 Months Ended

Jan. 03, 2023

Restructuring and Related Activities [Abstract]

Restaurant Impairments, Closure Costs and Asset Disposals

The following table presents restaurant impairments, closure costs and asset disposals for fiscal years 2022, 2021 and 2020 (in thousands):


	2022		2021		2020
Restaurant impairments(1)	$	1,362	$	3,424	$	4,113
Closure costs(1)	1,285		1,239		535
Loss on disposal of assets and other	3,517		1,064		1,892
Total restaurant impairments, closure costs and asset disposals	$	6,164	$	5,727	$	6,540

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

Restaurant Impairments

During 2022, 2021 and 2020, four restaurants, six restaurants and eight restaurants were identified as impaired, respectively. In 2022, the Company recognized a $0.3 million loss from the Warner Sale (discussed in Note 2, Supplemental Financial Information). In 2021, the assets held in connection to the Warner Sale were written down by $0.5 million. All periods include ongoing equipment costs for restaurants previously impaired. Impairment is based on management’s current assessment of the expected future cash flows of various restaurants based on recent results and other specific market factors. Impairment expense is a Level 3 fair value measure and was determined by comparing the carrying value of restaurant assets to the estimated fair market value of the restaurant assets at resale value. The onset of the COVID-19 Pandemic during 2020 resulted in significant disruption to the restaurant industry and adversely affected the Company’s business. The Company will continue to monitor the impact from the COVID-19 Pandemic as it relates to recoverability of long-lived assets.

In performing its impairment testing, the Company forecasts the future undiscounted cash flows by looking at recent restaurant level performance, restaurant level operating plans, sales trends and cost trends for cost of sales, labor and operating expenses. The Company compares this cash flow forecast to the asset’s carrying value at the restaurant. Based on this analysis, if the carrying amount of the assets is greater than the estimated future undiscounted cash flows, an impairment charge is recognized, measured as the amount by which the carrying amount exceeds the fair value of the asset.

Restaurant Closures

Closure costs during 2022, 2021 and 2020 pertain to ongoing costs of restaurants that closed in previous years, as well as costs related to the closure of five, twelve, and six restaurants, respectively. These closure costs were offset by gains of $0.1 million in 2022, $0.2 million in 2021 and $0.6 million in 2020 resulting from the adjustments to liabilities as lease terminations occur. Closure costs can include fees from real estate advisors and brokers related to terminations of the leases and charges resulting from final adjustments to liabilities as lease terminations occur.

Loss on disposal of assets and other includes expenses related to the divestiture of company-owned restaurants in 2022 and 2020 as well as lease related costs. Both years include disposals of assets in the normal course of business. Loss on disposal of assets and other for 2021 includes a gain on insurance proceeds from property damage.