Leases

6 Months Ended

Mar. 28, 2023

Leases [Abstract]

Leases

Note 12.  Leases

The Company determines if a contract contains a lease at inception. The Company's material long-term operating lease agreements are for the land and buildings for our restaurants as well as our corporate office. The initial lease terms range from 10 years to 20 years, most of which include renewal options of 10 to 15 years. The lease term is generally the minimum of the non-cancelable period or the lease term including the renewal options which are reasonably certain of being exercised up to a term of approximately 20 years. The Company reassesses the number of remaining renewal options to include in a lease term for a specific lease when it exercises an option to extend such lease.

Operating lease assets and liabilities are recognized at the lease commencement date for material leases with a term of greater than 12 months. Operating lease liabilities represent the present value of future minimum lease payments. Since our leases do not provide an implicit rate, our operating lease liabilities are calculated using our estimated incremental borrowing rate based on a collateralized borrowing over the term of each individual lease. Minimum lease payments include only fixed lease components of the agreement, as well as variable rate payments that depend on an index, initially measured using the index at the lease commencement date.

Operating lease assets represent our right to use an underlying asset and are based upon the operating lease liabilities adjusted for prepaid or accrued lease payments, initial direct costs and lease incentives. Lease incentives are recognized when earned and reduce our operating lease asset related to the lease. They are amortized through the operating lease assets as reductions of rent expense over the lease term.

Operating lease expense is recognized on a straight-line basis over the lease term. Certain of the Company’s operating leases contain clauses that provide for contingent rent based on a percentage of sales greater than certain specified target amounts. Variable lease payments that do not depend on a rate or index, escalation in the index subsequent to the initial measurement, payments associated with non-lease components such as common area maintenance, real estate taxes and insurance, and short-term lease payments (leases with a term with 12 months or less) are expensed as incurred or when the achievement of the specified target that triggers the contingent rent is considered probable.

Some of the leases provide for base rent, plus additional rent based on gross sales, as defined in each lease agreement. The Company is also generally obligated to pay certain real estate taxes, insurance and common area maintenance charges, and various other expenses related to properties, which are expensed as incurred.

Components of operating lease costs are as follows for the fiscal quarters ended March 28, 2023 and March 29, 2022:

Lease cost	Classification	March 28, 2023			March 29, 2022
Operating lease cost	Occupancy, Other restaurant operating costs and General and administrative expenses, net	$	1,853		$	1,830
Variable lease cost	Occupancy		-			59
Sublease income	Occupancy		(143	)		(136	)
		$	1,710		$	1,753

Weighted average lease term and discount rate are as follows:

	March 28, 2023			March 29, 2022
Weighted average remaining lease term (in years)		8.24			9.06
Weighted average discount rate		5.0	%		5.0	%

Supplemental cash flow disclosures for the two fiscal quarters ended March 28, 2023:

	March 28, 2023		March 29, 2022
Cash paid for operating lease liabilities	$	3,734	$	3,621
Non-cash operating lease assets obtained in exchange for operating lease liabilities	$	184	$	872

Supplemental balance sheet disclosures:

		March 28, 2023		September 27, 2022
Right-of-use assets	Operating lease assets	$	40,383	$	42,463
Current lease liabilities	Operating lease liability	$	5,506	$	5,430
Non-current lease liabilities	Operating lease liability, less current portion		43,063		45,544
Total lease liabilities		$	48,569	$	50,974

Future minimum rent payments for our operating leases for each of the next five years as of March 28, 2023 are as follows:

Fiscal year ending:	Total
Remainder of 2023	$	3,901
2024		7,762
2025		7,829
2026		7,378
2027		7,079
Thereafter		25,718
Total minimum lease payments		59,667
Less: imputed interest		(11,098	)
Present value of lease liabilities	$	48,569

The above future minimum rental amounts exclude the amortization of deferred lease incentives, renewal options that are not reasonably assured of renewal, and contingent rent. The Company generally has escalating rents over the term of the leases and records rent expense on a straight-line basis.