Goodwill

12 Months Ended

Dec. 31, 2021

Goodwill and Intangible Assets Disclosure [Abstract]

The significant majority of the Company's goodwill arose from the November 29, 2007 acquisition of Applebee's. Changes in the carrying amount of goodwill for the years ended December 31, 2021, 2020 and 2019 are as follows:


	Applebee's Franchise Unit		Applebee's Company Unit		IHOP Franchise Unit		Total
	(In millions)
Balance at December 31, 2018	$	328.4	$	6.1	$	10.8	$	345.3
Purchase price adjustment related to business acquisition	—		(1.5)		—		(1.5)
Balance at December 31, 2019	328.4		4.6		10.8		343.9
Impairment loss	(92.2)		—		—		(92.2)
Balance at December 31, 2020	236.2		4.6		10.8		251.6


Balance at December 31, 2021	$	236.2	$	4.6	$	10.8	$	251.6

Gross and net carrying amounts of goodwill at December 31, 2021 and 2020 are as follows:


	December 31, 2021						December 31, 2020
	Gross		Accumulated Impairment Loss		Net		Gross		Accumulated Impairment Loss		Net
	(In millions)
Applebee's Franchise Unit	$	686.7	$	(450.5)	$	236.2	$	686.7	$	(450.5)	$	236.2
Applebee's Company Unit	4.6		—		4.6		4.6		—		4.6
IHOP Franchise Unit	10.8		—		10.8		10.8		—		10.8
Total	$	702.1	$	(450.5)	$	251.6	$	702.1	$	(450.5)	$	251.6

The Company assesses goodwill for impairment in accordance with its policy described in Note 2 - Basis of Presentation and Summary of Significant Accounting Policies.

The Company evaluates its goodwill and the indefinite-lived Applebee's tradename for impairment annually in the fourth quarter of each year or on an interim basis if events or changes in circumstances between annual tests indicate a potential impairment. Definite-lived intangible assets and long-lived tangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable based on estimated undiscounted future cash flows.

2021 Assessment

In the fourth quarter of 2021, the Company performed qualitative assessments of its goodwill in accordance with its accounting policies. As result of the qualitative assessment, the Company concluded it was more likely than not that the fair values of each unit exceeded the respective carrying amounts and therefore, a quantitative test of impairment was not necessary.

2020 Assessment

Because of the risks and uncertainties associated with the COVID-19 pandemic, the Company performed an interim assessment to determine whether the impact of COVID-19 indicated a potential impairment to its goodwill and intangible assets. In the second quarter of 2020, the Company noted that its common stock had recovered less of its early March 2020 (pre-pandemic) market value than the overall U.S. stock market had recovered. The Company also was able to assess several months of data as to the impact of the COVID-19 pandemic on its operations and, in turn, assess the impact that might have on the risk premium incorporated into its discount rate. Based on these developments, the Company determined that an interim quantitative test for impairment of the goodwill of the Applebee's Franchise and Company units should be performed as of May 24, 2020. In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The fair value technique used in this instance is classified as Level 3, where unobservable inputs are used when little or no market data is available.

In performing the quantitative test for impairment of goodwill, the Company used the income approach method of valuation that includes the discounted cash flow method and the market approach that includes the guideline public company method to determine the fair value of goodwill and intangible assets. Significant assumptions made by management in estimating fair value under the discounted cash flow model include future trends in sales, operating expenses, overhead expenses, depreciation, capital expenditures and changes in working capital, along with an appropriate discount rate based on the Company's estimated cost of equity capital and after-tax cost of debt. Significant assumptions used to determine fair value under the guideline public company method include the selection of guideline companies and the valuation multiples applied.

As a result of performing the quantitative test of impairment, the Company recognized an impairment loss of $92.2 million in 2020 to the goodwill of the Applebee's Franchise unit. The majority of the impairment was due to an increase in the assessed risk premium incorporated into the discount rate assumption. There was no impairment of the Applebee's Company unit.

2019 Assessment

In the fourth quarter of 2019, the Company performed qualitative assessments of its goodwill in accordance with its accounting policies. As result of the qualitative test, the Company concluded it was more likely than not that the fair values of each unit exceeded the respective carrying amounts and therefore, a quantitative test of impairment was not necessary.