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Impairment and Restaurant Closures
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12 Months Ended |
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Dec. 28, 2014
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| Restructuring and Related Activities [Abstract] | |
| Impairment and Restaurant Closures |
Impairment and Restaurant Closures
Impairment of Software in Development
During the fourth quarter of fiscal year 2014, the Company determined that certain software in development related to the supply chain and human resource management modules of an Enterprise Resource Planning (“ERP”) system would not meet the Company’s requirements if they were implemented. As the result, the Company recorded a $7.6 million impairment charge to write down the capitalized costs associated with the supply chain and human resource management system modules.
Restaurant Impairment
During fiscal year 2014, the Company determined that three Company-owned restaurants were impaired. The Company recognized a non-cash pre-tax impairment charge of $1.2 million resulting from the continuing and projected future results of these restaurants, primarily through projected cash flows. Each restaurant’s past and present operating performance were reviewed combined with projected future results, primarily through projected undiscounted cash flows, which indicated possible impairment. The Company compared the carrying amount of each restaurant’s assets to its fair value as estimated by management. The fair value of the long-lived assets is typically determined using a discounted cash flow projection model to estimate expected future cash flows. In certain cases, management uses market information, when available, to estimate the fair value of a restaurant. The impairment charges represent the excess of each restaurant’s carrying amount over its estimated fair value.
During fiscal year 2013, the Company impaired long-lived assets of four Company-owned restaurants, and recognized a non-cash pre-tax impairment charge of $1.5 million resulting from the continuing and projected losses of these restaurants. There were no restaurant impairments during fiscal year 2012.
Restaurant Closures
In fiscal year 2014, the Company closed three restaurants that operated below acceptable profitability levels and temporarily closed one restaurant due to public construction. The Company did not close any restaurants in fiscal year 2013. In fiscal year 2012, one restaurant operating below acceptable profitability levels was closed and two restaurants were closed at the end of their respective lease terms. The Company recorded immaterial restaurant closure expenses in fiscal years 2014 and 2012.
The Company evaluates restaurants that are sold or closed and allocates goodwill based on the relative fair value of the disposal restaurants to the Company’s reporting unit. Since restaurant operations are typically valued based on cash flow from operations, the Company compares the historical cash flow from the closed restaurants to the cash flow from the reporting unit to determine the relative value. The Company allocates goodwill to disposed restaurants, if necessary. No goodwill was allocated to the three restaurants that were permanently closed in fiscal year 2014, because those restaurants had projected negative cash flow and consequently did not have positive fair value.
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