Leases

3 Months Ended

Mar. 26, 2023

Leases [Abstract]

Leases

3. Leases

Lessor Operating Leases

The Company subleases certain retail space to our franchisees in the United Kingdom (“UK”), which are primarily operating leases. At March 26, 2023, we leased and subleased 446 Papa Johns restaurants to franchisees in the UK. The initial lease terms on the franchised sites in the UK 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. The initial lease terms of the franchisee subleases are generally five to ten years. Rental income, primarily derived from properties leased and subleased to franchisees in the UK, is recognized on a straight-line basis over the respective operating lease terms. The Company recognized total sublease income of $2.9 million and $3.0 million for the three months ended March 26, 2023 and March 27, 2022, respectively, within Other revenues in the Condensed Consolidated Statements of Operations.

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 52 domestic leases. These leases have varying terms, the latest of which expires in 2036. As of March 26, 2023, the estimated maximum amount of undiscounted payments the Company could be required to make in the event of nonpayment by the primary lessees was $8.7 million. This contingent liability is not included in the Condensed Consolidated Balance Sheets 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:

	Three Months Ended
(In thousands)	March 26, 2023		March 27, 2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from finance leases	$	309	$	262
Financing cash flows from finance leases	$	1,743	$	1,241
Operating cash flows from operating leases (a)	$	9,178	$	9,612
Right-of-use assets obtained in exchange for new finance lease liabilities	$	4,764	$	569
Right-of-use assets obtained in exchange for new operating lease liabilities	$	4,721	$	20,801
Cash received from sublease income	$	2,532	$	3,092

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(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.

Leases

3. Leases

Lessor Operating Leases

The Company subleases certain retail space to our franchisees in the United Kingdom (“UK”), which are primarily operating leases. At March 26, 2023, we leased and subleased 446 Papa Johns restaurants to franchisees in the UK. The initial lease terms on the franchised sites in the UK 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. The initial lease terms of the franchisee subleases are generally five to ten years. Rental income, primarily derived from properties leased and subleased to franchisees in the UK, is recognized on a straight-line basis over the respective operating lease terms. The Company recognized total sublease income of $2.9 million and $3.0 million for the three months ended March 26, 2023 and March 27, 2022, respectively, within Other revenues in the Condensed Consolidated Statements of Operations.

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 52 domestic leases. These leases have varying terms, the latest of which expires in 2036. As of March 26, 2023, the estimated maximum amount of undiscounted payments the Company could be required to make in the event of nonpayment by the primary lessees was $8.7 million. This contingent liability is not included in the Condensed Consolidated Balance Sheets 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:

	Three Months Ended
(In thousands)	March 26, 2023		March 27, 2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from finance leases	$	309	$	262
Financing cash flows from finance leases	$	1,743	$	1,241
Operating cash flows from operating leases (a)	$	9,178	$	9,612
Right-of-use assets obtained in exchange for new finance lease liabilities	$	4,764	$	569
Right-of-use assets obtained in exchange for new operating lease liabilities	$	4,721	$	20,801
Cash received from sublease income	$	2,532	$	3,092

___________________________________

(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.

Leases

3. Leases

Lessor Operating Leases

The Company subleases certain retail space to our franchisees in the United Kingdom (“UK”), which are primarily operating leases. At March 26, 2023, we leased and subleased 446 Papa Johns restaurants to franchisees in the UK. The initial lease terms on the franchised sites in the UK 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. The initial lease terms of the franchisee subleases are generally five to ten years. Rental income, primarily derived from properties leased and subleased to franchisees in the UK, is recognized on a straight-line basis over the respective operating lease terms. The Company recognized total sublease income of $2.9 million and $3.0 million for the three months ended March 26, 2023 and March 27, 2022, respectively, within Other revenues in the Condensed Consolidated Statements of Operations.

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 52 domestic leases. These leases have varying terms, the latest of which expires in 2036. As of March 26, 2023, the estimated maximum amount of undiscounted payments the Company could be required to make in the event of nonpayment by the primary lessees was $8.7 million. This contingent liability is not included in the Condensed Consolidated Balance Sheets 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:

	Three Months Ended
(In thousands)	March 26, 2023		March 27, 2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from finance leases	$	309	$	262
Financing cash flows from finance leases	$	1,743	$	1,241
Operating cash flows from operating leases (a)	$	9,178	$	9,612
Right-of-use assets obtained in exchange for new finance lease liabilities	$	4,764	$	569
Right-of-use assets obtained in exchange for new operating lease liabilities	$	4,721	$	20,801
Cash received from sublease income	$	2,532	$	3,092

___________________________________

(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.