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Acquisition of Red Robin Franchised Restaurants
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4 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Apr. 20, 2014
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| Business Combinations [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Acquisition of Red Robin Franchised Restaurants |
Acquisition of Red Robin® Franchised Restaurants
On March 24, 2014, the Company acquired four restaurants from one of its franchisees as a part of its overall expansion strategy. The purchase price was $8.0 million in cash and the Company incurred acquisition costs of $0.1 million for sixteen weeks ended April 20, 2014. See Note 12, Subsequent Events for more information regarding acquisition costs incurred in the first quarter of 2014. The condensed consolidated statements of income include the results of operations for the restaurants from the date of acquisition. The pro forma impact of the acquisition is not presented, as the impact was not material to reported results.
The acquisition of the four restaurants was accounted for using the purchase method as defined in ASC 805, Business Combination. The goodwill generated by the acquisition is not amortizable for book purposes but is amortizable and deductible for tax purposes. The Company preliminary allocated the purchase price to the fair value of the assets acquired and liabilities assumed on the closing date as follows (in thousands):
Of the $3.1 million of intangible assets, $2.6 million related to reacquired franchise rights, which will be amortized on a straight-line basis over a period of approximately 14 years, and $0.5 million related to a leasehold interest and will be amortized on a straight-line basis over a life of 9 years. The unfavorable market leases, which were included in Deferred rent in the accompany condensed consolidated balance sheets, will be amortized on a straight-line basis over a period of approximately 14 years. The fair value measurement of tangible and intangible assets and liabilities as of the acquisition date is based on significant inputs not observed in the market and thus represents a level 3 measurement that is subject to change.
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