LEASES

12 Months Ended

Jun. 28, 2023

As of June 28, 2023, 1,135 of our 1,185 Company-owned restaurant facilities were leased. We typically lease our restaurant facilities through ground leases (where we lease land only, but construct the building and leasehold improvements) or retail leases (where we lease the land/retail space and building, but construct the leasehold improvements). As of June 28, 2023, the restaurant leases have cumulative renewal clauses of 1 to 30 years at our option. Our leased restaurants typically have an initial lease term of 10 to 20 years, with one or more renewal terms ranging from 1 to 10 years. The leases typically provide for a fixed rental or a fixed rental plus percentage rentals based on sales volume. In addition to our restaurant facilities, we also lease our corporate headquarters location and certain equipment. Our lease agreements do not contain any material residual value guarantees or material covenant restrictions.

Consolidated Balance Sheet Disclosure of Lease Amounts

The following table includes a detail of lease assets and liabilities included in the Consolidated Balance Sheets:


	June 28, 2023
	Finance Leases(1)		Operating Leases(2)		Total Leases
Lease assets	$	51.3	$	1,134.9	$	1,186.2

Current lease liabilities	10.2		112.4		122.6
Long-term lease liabilities	57.6		1,125.8		1,183.4
Total lease liabilities	$	67.8	$	1,238.2	$	1,306.0


	June 29, 2022
	Finance Leases(1)		Operating Leases(2)		Total Leases
Lease assets	$	71.1	$	1,160.5	$	1,231.6

Current lease liabilities	20.3		112.7		133.0
Long-term lease liabilities	69.9		1,151.1		1,221.0
Total lease liabilities	$	90.2	$	1,263.8	$	1,354.0

(1)Finance lease assets are recorded in Property and equipment, at cost, and the related current and long-term lease liabilities are recorded within Other accrued liabilities and Long-term debt and finance leases, less current installments, respectively.

(2)Operating lease assets are recorded in Operating lease assets and the related current and long-term lease liabilities are recorded within Operating lease liabilities and Long-term operating lease liabilities, less current portion, respectively.

Consolidated Statement of Comprehensive Income Disclosure of Lease Amounts

The components of lease expenses, including variable lease costs primarily consisting of rent based on a percentage of sales, common area maintenance and real estate tax charges, and short-term lease expenses for leases with lease terms less than twelve months are included in the Consolidated Statements of Comprehensive Income as follows:


	Fiscal Years Ended
	June 28, 2023		June 29, 2022		June 30, 2021
Operating lease cost	$	181.0	$	173.7	$	167.2
Finance lease amortization	19.7		21.9		17.3
Finance lease interest	4.1		5.5		5.9
Short-term lease cost	0.3		0.6		0.5
Variable lease cost	63.5		60.5		57.9
Sublease income	(2.8)		(4.2)		(4.4)
Total lease costs, net	$	265.8	$	258.0	$	244.4

Consolidated Statement of Cash Flows Disclosure of Lease Amounts

Supplemental cash flow information related to leases recorded in the Consolidated Statements of Cash Flows is as follows:


	Fiscal Years Ended
	June 28, 2023		June 29, 2022		June 30, 2021
Cash flows from operating activities
Cash paid related to lease liabilities
Operating leases(1)	$	184.3	$	171.1	$	195.5
Finance leases	4.1		5.5		5.9
Cash flows from financing activities
Cash paid related to lease liabilities
Finance leases	22.1		23.7		20.0
Non-cash lease assets obtained in exchange for lease liabilities
Operating leases(2)	101.7		255.4		60.6
Finance leases	0.3		13.4		29.8

(1)Cash paid related to lease liabilities for Operating leases were higher in fiscal 2021 primarily due to the lease payments made during fiscal 2021 for rents that were deferred in fiscal 2020 due to the impacts of the COVID-19 pandemic.

(2)Non-cash operating lease assets obtained in exchange for operating lease liabilities were higher in fiscal 2022 primarily due to the new and assumed operating lease additions associated with the 68 restaurants purchased from three former franchisees, including sale leaseback transactions on six of the acquired restaurants. The combined transactions resulted in increased operating lease assets of $86.8 million as of the end of fiscal 2022, and cash proceeds of $20.5 million were received from the sale leaseback transactions. Additionally, the modifications of 25 leases in fiscal 2022 from finance leases to operating leases, resulted in increased operating lease assets of $47.9 million.

Weighted Average Lease Term and Discount Rate

Other information related to leases is as follows:

Fiscal Years Ended

June 28, 2023

June 29, 2022

Finance Leases

Operating Leases

Finance Leases

Operating Leases

Weighted average remaining lease term

9.9 years

11.8 years

9.1 years

12.0 years

Weighted average discount rate

5.5

5.8

5.1

5.5

Lease Maturity Analysis

Finance leases and Operating leases total future lease payments represent the contractual obligations due under the lease agreements, including cancellable option periods where we are reasonably assured to exercise the options. As of June 28, 2023, the future minimum lease payments on finance and operating leases, as well as sublease income were as follows:


	June 28, 2023
Fiscal Year	Finance Leases		Operating Leases		Sublease Income
2024	$	13.7	$	179.4	$	0.8
2025	12.3		177.6		0.7
2026	8.1		164.8		0.6
2027	7.6		147.7		0.5
2028	7.5		129.3		0.3
Thereafter	40.1		944.5		0.1
Total future lease payments	89.3		1,743.3		$	3.0
Less: Imputed interest	21.5		505.1
Present value of lease liability	$	67.8	$	1,238.2

Pre-Commencement Leases

In fiscal 2023, we executed five leases for new Chili’s locations with undiscounted fixed payments over the initial term of $17.7 million. These leases are expected to commence in the next 12 months and are expected to have an economic lease term of 20 years. These leases will commence when the landlords make the property available to us for new restaurant construction. We will assess the reasonably certain lease term at the lease commencement date.