Restaurant Impairments, Closure Costs and Asset Disposals

9 Months Ended

Oct. 01, 2024

Discontinued Operations and Disposal Groups [Abstract]

Restaurant Impairments, Closure Costs and Asset Disposals

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


	Fiscal Quarter Ended				Three Fiscal Quarters Ended
	October 1, 2024		October 3, 2023		October 1, 2024		October 3, 2023
Restaurant impairments (1)	$	160	$	731	$	11,264	$	1,240
Closure costs (1)	995		189		1,257		996
Loss on disposal of assets and other	1,047		1,215		2,967		3,077
	$	2,202	$	2,135	$	15,488	$	5,313

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(1)Restaurant impairments and closure costs in all periods presented above include amounts related to restaurants previously impaired or closed. Closure costs in the first three quarters of 2024 include the impact of lease remeasurements related to the six Oregon restaurants sold to a franchisee in April of 2024.

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 value of the restaurant assets at resale value, if any, and the right-of-use asset based on a discounted cash flow analysis utilizing market lease rates.

No restaurants were identified as impaired during the third quarter of 2024. In the first three quarters of 2024, 12 restaurants were impaired. Additionally, the Company wrote down lease related assets on one restaurant during the third quarter of 2024 and five restaurants during the first three quarters of 2024. The impairment of these fixed assets and lease related assets were based on the review of underperforming restaurants that the Company would seek to close on or before their next lease renewal dates and are unlikely to recover the net book value of their assets.

The Company did not identify any restaurant impairments in the third quarter of 2023 and had one restaurant impaired during the first three quarters of 2023. The Company also wrote down the lease related assets on two previously closed restaurants in the third quarter of 2023 and had a total of four restaurant lease related assets written down during the first three quarters of 2023. All periods include ongoing equipment costs for restaurants previously impaired.

The Company closed five restaurants in the third quarter of 2024 and had seven restaurant closures during the first three quarters of 2024. Closure costs in the third quarter and the first three quarters of 2024 included $0.4 million and $0.8 million of estimated early lease termination settlements, partially offset by gains from the related lease asset remeasurements, on two and four restaurants, respectively. Both periods include ongoing expenses from restaurant closures in prior years.

The Company did not close any restaurants during the third quarter of 2023 and had four restaurant closures in first three quarters of 2023. Closure costs in the third quarter of 2023 primarily included ongoing expenses from restaurant closures in prior periods. Closure costs during the first three quarters of 2023 included $0.5 million early lease termination settlements, net of gains from the related lease remeasurements, plus ongoing expenses from restaurant closures in prior years.

Loss on disposal of assets in the third quarter and first three quarters of each of 2024 and 2023 include assets disposed in the normal course of business and sublease expense related to leases for which the Company remains obligated in connection with the divestiture of company-owned restaurants in previous years. In addition, during the first three quarters of 2024, the Company recognized a gain of $0.5 million from the sale of six company-owned restaurants to a new franchisee (“DND Sale”). Based on the sales price, there was no write down of assets related to this transaction.