Leases

6 Months Ended

Jun. 27, 2021

Leases

Leases

3. Leases

Lessor Operating Leases

We sublease certain retail space to our franchisees in the United Kingdom which are primarily operating leases.  At June 27, 2021, we leased and subleased approximately 400 Papa John’s restaurants to franchisees in the United Kingdom. The initial lease terms on the franchised sites in the United Kingdom are generally 15 years.  The Company has the option to negotiate an extension toward the end of the lease term at the landlord’s discretion.  Rental income, primarily derived from properties leased and subleased to franchisees in the United Kingdom, is recognized on a straight-line basis over the respective operating lease terms.  We recognized total sublease income of $6.1 million and $5.0 million for the six months ended June 27, 2021 and June 28, 2020, respectively.

Lease Guarantees

As a result of assigning our interest in obligations under property leases as a condition of the refranchising of certain restaurants, we are contingently liable for payment of 75 domestic leases. These leases have varying terms, the latest of which expires in 2036. As of June 27, 2021, the estimated maximum amount of undiscounted payments the Company could be required to make in the event of nonpayment by the primary lessees was $12.8 million.  This contingent liability is not included in the Condensed Consolidated Balance Sheet as it is not probable to occur.  The fair value of the guarantee is not material.

Supplemental Cash Flow & Other Information

Supplemental cash flow information related to leases for the periods reported is as follows:

	Six Months Ended
(in thousands)		June 27, 2021		June 28, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from finance leases	$	574	$	295
Financing cash flows from finance leases		2,188		939
Operating cash flows from operating leases (a)		19,139		18,744
Right-of-use assets obtained in exchange for new finance lease liabilities		8,393		19
Right-of-use assets obtained in exchange for new operating lease liabilities (b)		35,115		13,370
Cash received from sublease income		5,890		5,014
(a) Included within the change in Other assets and liabilities within the Condensed Consolidated Statements of Cash Flows offset by non-cash operating lease right-of-use asset amortization and lease liability accretion.
(b) Includes right-of-use assets of approximately $14.3 million in the six-month period ended June 27, 2021 associated with the lease commencement of our Atlanta, Georgia Corporate office.