As of June 30, 2023, we leased over 11,000 properties in China for our Company-owned restaurants. We generally enter into lease agreements for our restaurants with initial terms of 10 to 20 years. Most of our lease agreements contain termination options that permit us to terminate the lease agreement early if the restaurant’s unit contribution is negative for a specified period of time. We generally do not have renewal options for our leases. Such options are accounted for only when it is reasonably certain that we will exercise the options. The rent under the majority of our current restaurant lease agreements is generally payable in one of three ways: (i) fixed rent; (ii) the higher of a fixed base rent or a percentage of the restaurant’s sales; or (iii) a percentage of the restaurant’s sales. Most leases require us to pay common area maintenance fees for the leased property. In addition to restaurants leases, we also lease office spaces, logistics centers and equipment. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

In limited cases, we sub-lease certain restaurants to franchisees in connection with refranchising transactions or lease our properties to other third parties. The lease payments under these leases are generally based on the higher of a fixed base rent or a percentage of the restaurant’s annual sales. Income from sub-lease agreements with franchisees or lease agreements with other third parties are included in Franchise fees and income and Other revenues, respectively, within our Condensed Consolidated Statements of Income.


Supplemental Balance Sheet
	6/30/2023		12/31/2022		Account Classification
Assets
Operating lease right-of-use assets	$	2,066	$	2,219	Operating lease right-of-use assets
Finance lease right-of-use assets		38		38	PP&E, net
Total leased assets(a)	$	2,104	$	2,257

Liabilities
Current
Operating lease liabilities	$	404	$	448	Accounts payable and other current liabilities
Finance lease liabilities		5		5	Accounts payable and other current liabilities
Non-current
Operating lease liabilities		1,773		1,906	Non-current operating lease liabilities
Finance lease liabilities		41		42	Non-current finance lease liabilities
Total lease liabilities(a)	$	2,223	$	2,401


Summary of Lease Cost	Quarter Ended						Year to Date Ended
	6/30/2023			6/30/2022			6/30/2023			6/30/2022			Account Classification

Operating lease cost	$	128		$	143		$	261		$	300		Occupancy and other operating expenses, G&A or Franchise expenses
Finance lease cost
Amortization of leased assets		1			1			2			2		Occupancy and other operating expenses
Interest on lease liabilities		1			1			1			1		Interest income, net
Variable lease cost(b)		95			63			201			159		Occupancy and other operating expenses or Franchise expenses
Short-term lease cost		4			4			8			7		Occupancy and other operating expenses or G&A
Sub-lease income		(5	)		(7	)		(11	)		(13	)	Franchise fees and income or Other revenues
Total lease cost	$	224		$	205		$	462		$	456


Supplemental Cash Flow Information	Year to Date Ended
	6/30/2023		6/30/2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	275	$	278
Operating cash flows from finance leases		1		1
Financing cash flows from finance leases		2		2
Right-of-use assets obtained in exchange for lease liabilities(c):
Operating leases	$	153	$	23
Finance leases		3		3

(c)

This supplemental non-cash disclosure for ROU assets obtained in exchange for lease liabilities includes an increase in lease liabilities associated with obtaining new ROU assets of $171 million and $123 million for the years to date ended June 30, 2023 and 2022, respectively, as well as adjustments to lease liabilities or ROU assets due to modification or other reassessment events, which resulted in a $15 million and $97 million decrease in lease liabilities for the years to date ended June 30, 2023 and 2022, respectively.



Lease Term and Discount Rate	6/30/2023			6/30/2022
Weighted-average remaining lease term (years)
Operating leases		7.1			7.1
Finance leases		11.2			11.4

Weighted-average discount rate
Operating leases		5.0	%		5.3	%
Finance leases		5.1	%		5.3	%

Maturities of lease liabilities as of June 30, 2023 were as follows:


	Amount of Operating Leases		Amount of Finance Leases		Total
Remainder of 2023	$	270	$	3	$	273
2024		447		6		453
2025		390		6		396
2026		343		6		349
2027		289		5		294
Thereafter		857		34		891
Total undiscounted lease payment		2,596		60		2,656
Less: imputed interest(d)		419		14		433
Present value of lease liabilities	$	2,177	$	46	$	2,223

(d)

As the rate implicit in the lease cannot be readily determined, we use our incremental borrowing rate based on the information available at the lease commencement date in determining the imputed interest and present value of lease payments. We used the incremental borrowing rate on January 1, 2019 for operating leases that commenced prior to that date.

As of June 30, 2023, we have additional lease agreements that have been signed but not yet commenced, with total undiscounted minimum lease payments of $132 million. These leases will commence between the third quarter of 2023 and 2026 with lease terms of 1 year to 20 years.