Summary of Refranchisings and Franchise Acquisitions

12 Months Ended

Oct. 03, 2021

Summary Of Refranchisings, Franchisee Development And Acquisitions [Abstract]

Summary of Refranchisings and Franchisee Acquisitions

SUMMARY OF REFRANCHISINGS AND FRANCHISE ACQUISITIONS

Refranchisings — In 2021, 2020, and 2019, no company-operated restaurants were sold to franchisees. Amounts included in “Gains on the sale of company-operated restaurants” in all periods related to resolutions of certain contingencies from the sale of restaurants in prior years.

Franchise acquisitions — In 2021 and 2020, we acquired 20 and 8 franchise restaurants, respectively. In 2019 we did not acquire any franchise restaurants. Of the 20 restaurants acquired in 2021, we took over 16 restaurants as a result of an agreement with an underperforming franchisee who was in violation of franchise and lease agreements with the Company. Under this agreement, the franchisee voluntarily agreed to turn over the restaurants. The acquisition of the additional 4 restaurants in 2021 was the result of exercising our right of first refusal.

We account for the acquisition of franchised restaurants using the acquisition method of accounting for business combinations. The purchase price allocations were based on fair value estimates determined using significant unobservable inputs (Level 3). The goodwill recorded primarily relates to the sales growth potential of the market acquired and is expected to be deductible for income tax purposes.

The following table provides detail of the combined acquisitions in 2021 and 2020 (dollars in thousands):

	2021		2020
Restaurants acquired from franchisees	20		8
Inventory	$	258	$	73
Property and equipment	1,136		903
Intangible assets	245		263
Other assets	10		6
Goodwill	613		414
Gains on the acquisition of franchise-operated restaurants	(340)		—
Liabilities assumed	(277)		(800)
Total consideration	$	1,645	$	859

Of the 2021 total consideration, $1.3 million is non-cash consideration and is comprised of $0.3 million receivables that were eliminated in acquisition accounting and $1.0 million of accounts payable that was recorded in acquisition accounting. The accounts payable recorded is primarily related to estimated settlements with third parties to waive their liens and security interests on certain assets acquired and are subject to change based on final settlement amounts.