Restaurant Impairments, Closure Costs and Asset Disposals

12 Months Ended

Jan. 02, 2024

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 2023, 2022 and 2021 (in thousands):


	2023		2022		2021
Restaurant impairments(1)	$	2,987	$	1,362	$	3,424
Closure costs(1)	1,198		1,285		1,239
Loss on disposal of assets and other	4,215		3,517		1,064
Total restaurant impairments, closure costs and asset disposals	$	8,400	$	6,164	$	5,727

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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

Impairment is based on management’s current assessment of the expected future cash flows of its company-owned restaurants 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.

During 2023, the Company recorded fixed asset impairment on two restaurants and wrote down lease related assets on four restaurants. Additionally, the Company wrote-off its lease related assets on two previously closed restaurants after determining abandonment of its lease on the retail space. In 2022, the Company recognized an impairment charge related to the fixed assets on four restaurants and a write-down of its lease related assets on two restaurants. In 2021, the Company impaired the fixed assets on six restaurants and the lease related asset on one restaurant, and wrote-off its lease related asset on one restaurant that closed in previous years. The Company also wrote down $0.5 million of assets held in connection with a restaurant divestiture in January 2022. All periods include ongoing equipment costs for restaurants previously impaired.

Restaurant Closures

Closure costs during 2023, 2022 and 2021 pertain to ongoing costs of restaurants that closed in previous years, as well as costs related to the closure of six, five, and twelve restaurants, respectively. These closure costs were offset by gains of $0.2 million in 2023, $0.1 million in 2022 and $0.2 million in 2021 resulting from the adjustments to liabilities as lease terminations occur. Closure costs can also 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.

Losses on Disposal of Assets and Other

All periods include asset disposals in the normal course of business and lease related costs and expenses that the Company is still obligated for. In 2022, the Company also recorded $0.3 million loss from the sale of its fifteen company-owned restaurants to a franchisee. Losses on disposal of assets and other in 2023 and 2021 were partially offset by $0.2 million and $0.4 million gains on insurance proceeds from property damage.

Sublease Expense

The Company records sublease expense related to leases for which the Company remains obligated. In previous years, the Company has entered into transactions to sell company-owned restaurants to franchisees. The lease agreements for those restaurants were assigned to the franchisee, but in some instances, the Company was not relieved of its primary obligations under the lease, therefore these leases are treated as subleases. The lease income for these restaurants has been recorded in “Franchising royalties and fees, and other” and the offsetting lease expense has been recorded in “Restaurant impairments, closure costs and asset disposals” in the Consolidated Statement of Operations.