Annual report pursuant to Section 13 and 15(d)

Acquisitions of Red Robin Franchised Restaurants

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Acquisitions of Red Robin Franchised Restaurants
 12 Months Ended
Dec. 25, 2016
Business Combinations [Abstract]  
Acquisitions of Red Robin Franchised Restaurants
Acquisitions of Red Robin Franchised Restaurants

The Company acquires franchised restaurants from time to time. On March 21, 2016, the Company acquired 13 restaurants, including real estate at five of the locations, from one of its U.S. franchisees for a purchase price of $40.0 million in cash. During the fourth quarter of 2016, the Company finalized the allocation of the purchase price to the fair value of the assets acquired and liabilities assumed as follows (in thousands):
 
 
Fair Value at Acquisition Date
Property and equipment
 
18,762

Intangible assets
 
6,540

Deferred tax assets
 
3,473

Deferred tax liabilities
 
(2,783
)
Goodwill
 
13,679

Other assets and liabilities, net
 
331

Total purchase price
 
40,002


Of the $18.8 million in property and equipment, $6.3 million is related to land. Of the $6.5 million of intangible assets, $5.6 million is related to reacquired franchise rights, which will be amortized on a straight-line basis over a weighted average of 15 years, and $0.9 million is related to acquired favorable leases.
On August 31, 2015, the Company acquired one restaurant from a franchisee for $2.5 million in cash. The fair value of the net assets acquired on the acquisition date primarily comprised building and land.
The pro forma impact of above acquisitions and the operating results of the acquired restaurants are not presented as the impact was not material to reported results.
The above acquisitions were accounted for using the purchase method as defined in ASC 805, Business Combinations. The goodwill arising from these acquisitions consists largely of the synergies and economies of scale expected from combining the acquired operations with the Company. The goodwill generated by the acquisitions is not amortizable for book purposes but is amortizable and deductible for tax purposes.
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 fair value measurement.