NOTE N - COMMITMENTS AND CONTINGENCIES

Commitments

The Company’s operations are principally conducted in leased premises. The leases generally have initial terms ranging from

years and usually provide for renewal options ranging from

years. Most of the leases contain escalation clauses and common area maintenance charges (including taxes and insurance).

Revenue from sub-leasing properties is recognized in income as the revenue is earned and deemed collectible. Sub-lease rental income is presented net of associated lease costs in the accompanying consolidated statements of earnings.

As of

March 26, 2017,

the Company had non-cancelable operating lease commitments, net of certain sublease rental income, as follows:

	Lease		Sublease		Net lease
	commitments		income		commitments

2018	$	1,645	$	327	$	1,318
2019		1,654		330		1,324
2020		1,545		332		1,213
2021		1,063		309		754
2022		1,065		263		802
Thereafter		5,841		865		4,976

	$	12,813	$	2,426	$	10,387

Aggregate rental expense, net of sublease income, under all current leases amounted to

$1,566

$1,628

and

$1,617

for the fiscal years ended

March 26, 2017,

March 27, 2016

and

March 29, 2015,

respectively. Sublease rental income was

$272,

$270

and

$267

for the fiscal years ended

March 26, 2017,

March 27, 2016

and

March 29, 2015,

respectively.

Contingent rental payments on building leases are typically made based on the percentage of gross sales of the individual restaurants that exceed predetermined levels. The percentage of gross sales to be paid and related gross sales level vary by unit. Contingent rental expense, which is inclusive of common area maintenance charges, was approximately

$457,

$517

and

$489

for the fiscal years ended

March 26, 2017,

March 27, 2016

and

March 29, 2015,

respectively.

March 26, 2017,

the Company leases

one

site which it in turn subleases to a franchisee, which expires in

April 2027

exclusive of renewal options. The Company remains liable for all lease costs when property is subleased to a franchisee.

Legal Proceedings

The Company and its subsidiaries are from time to time involved in ordinary and routine litigation. Management presently believes that the ultimate outcome of these proceedings, individually or in the aggregate, will

not

have a material adverse effect on the Company’s financial position, cash flows or results of operations. Nevertheless, litigation is subject to inherent uncertainties and unfavorable rulings could occur. An unfavorable ruling could include money damages and, in such event, could result in a material adverse impact on the Company’s results of operations for the period in which the ruling occurs.

Guaranty

December 1, 2009,

a wholly-owned subsidiary of the Company executed a Guaranty of Lease (the “Guaranty”) in connection with its re-franchising of a restaurant located in West Nyack, New York. The Guaranty extended through the

fifth

Lease Year, as defined in the lease, and shall

not

exceed an amount equal to the highest amount of the annual minimum rent, percentage rent and any additional rent payable pursuant to the lease and reasonable attorney’s fees and other costs. The Guaranty expired and the Company reversed all previously recorded liabilities in connection with this guaranty as of

March 29, 2015.

In connection with the Nathan’s Franchise Agreement, Nathan’s also received a personal guaranty from the franchisee for all obligations under the Guaranty. Nathan’s has

not

been required to make any payments pursuant to the Guaranty.

February 27, 2017,

a wholly-owned subsidiary of the Company executed a Guaranty of Lease (the “Brooklyn Guaranty”) in connection with its re-franchising of a restaurant located in Brooklyn, New York. The Brooklyn Guaranty could be called upon in the event of a default by the tenant/franchisee. The Brooklyn Guaranty is limited to

months of rent for the

first

three

years of the term. Nathan’s has recorded a liability of

$204

in connection with the Brooklyn Guaranty which does

not

include potential percentage rent, real estate tax increases, attorney’s fees and other costs as these amounts are

not

reasonably determinable at this time. Nathan’s has received a personal guaranty from the franchisee for all obligations under the Brooklyn Guaranty. For the remainder of the term, Brooklyn Guaranty is limited to

months of rent plus reasonable costs of collection and attorney’s fees.