NOTE

- 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 31, 2019,

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

	Lease		Sublease		Net lease
	commitments		income		commitments

2020	$	1,404	$	267	$	1,137
2021		1,319		245		1,074
2022		1,572		247		1,325
2023		1,596		175		1,421
2024		1,545		169		1,376
Thereafter		6,120		521		5,599

	$	13,556	$	1,624	$	11,932

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

$1,579,

$1,591

and

$1,566

of which,

$1,287,

$1,304

and

$1,278

were a component of restaurant operating expenses, for the fiscal years ended

March 31, 2019,

March 25, 2018

and

March 26, 2017,

respectively. The remaining rents of

$298,

$287

and

$288

were included in general and administrative expenses for the fiscal years ended

March 31, 2019,

March 25, 2018

and

March 26, 2017,

respectively. Sublease rental income was

$267,

$274

and

$272

for the fiscal years ended

March 31, 2019,

March 25, 2018

and

March 26, 2017,

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

$480,

$478

and

$457

for the fiscal years ended

March 31, 2019,

March 25, 2018

and

March 26, 2017,

respectively.

March 31, 2019,

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 Proceeding

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.

Guaran

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 Company is obligated to make payments under the Brooklyn Guaranty in the event of a default by the tenant/franchisee. The Brooklyn Guaranty has an initial term of

years and

one

-year option and is limited to

months of rent for the

first

three

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

$217

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, the Brooklyn Guaranty is limited to

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