Quarterly report pursuant to Section 13 or 15(d)

Acquisition of Red Robin Franchised Restaurants

v2.4.0.8
Acquisition of Red Robin Franchised Restaurants
 6 Months Ended
Jul. 13, 2014
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. The purchase price was $7.9 million in cash and the Company incurred acquisition costs of $0.2 million for the twenty-eight weeks ended July 13, 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 as follows (in thousands):
 
 
Fair Value at
 
 
March 24, 2014
Property, plant and equipment
 
$
3,785

Intangible assets
 
3,092

Goodwill
 
2,122

Other current and non-current assets
 
261

Gift card liabilities
 
(59
)
Unfavorable leases
 
(1,256
)
Total purchase price
 
$
7,945


Of the $3.1 million of intangible assets, $2.6 million are 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 are related to a favorable lease and will be amortized on a straight-line basis over a life of 9 years. The unfavorable leases, which were included in Deferred rent in the accompanying condensed consolidated balance sheets, will be amortized on a straight-line basis over an average period of 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.