Annual report pursuant to Section 13 and 15(d)

Commitments and Contingencies

v3.6.0.2
Commitments and Contingencies
 12 Months Ended
Dec. 25, 2016
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies
Commitments and Contingencies
Commitments
Leasing Activities—The Company leases land, buildings, and equipment used in its operations under operating leases. The Company’s operating leases have remaining non-cancelable terms ranging from less than one year to more than 15 years. These leases generally contain renewal options which permit the Company to renew the leases at defined contractual rates or prevailing market rates. Certain equipment leases also include options to purchase equipment at the end of the lease term. Certain leases provide for contingent rents, which are determined as a percentage of adjusted restaurant sales in excess of specified levels. The Company records a contingent rent liability and the corresponding rent expense when specified levels have been achieved or when management determines that achieving the specified levels during the fiscal year is probable. Certain lease agreements also require the Company to pay maintenance, insurance, and property tax costs. Rental expense related to land, building, and equipment leases for the fiscal years ended December 25, 2016, December 27, 2015, and December 28, 2014 are as follows (in thousands):
 
 
2016
 
2015
 
2014
Minimum rent
 
$
73,605

 
$
67,078

 
$
58,083

Contingent rent
 
1,676

 
2,264

 
2,239

Equipment rent under operating leases
 
1,052

 
791

 
895

 
 
$
76,333

 
$
70,133

 
$
61,217


Prior to 2016, the Company leased certain of its owned land, buildings, and equipment to outside parties under non-cancelable operating leases. Rental income was immaterial for 2016, 2015, and 2014.
Future minimum lease commitments under all leases as of December 25, 2016 are as follows (in thousands):
 
 
Capital
Leases
 
Operating
Leases
2017
 
$
1,183

 
$
73,496

2018
 
1,183

 
70,903

2019
 
1,183

 
65,897

2020
 
1,196

 
61,110

2021
 
1,240

 
54,872

Thereafter
 
9,635

 
232,053

Total
 
15,620

 
$
558,331

Less amount representing interest
 
(4,157
)
 
 

Present value of future minimum lease payments
 
11,463

 
 

Less current portion
 
(658
)
 
 

Long-term capital lease obligations
 
$
10,805

 
 


Future minimum rental income is immaterial. At the end of 2016 and 2015, property and equipment included $29.3 million and $19.0 million of assets under capital lease, and $10.5 million and $9.1 million of related accumulated depreciation.
Contingencies
In the normal course of business, there are various claims in process, matters in litigation, and other contingencies. These include claims resulting from “slip and fall” accidents, employment related claims and claims alleging illness, injury, or other food quality, health, or operational issues. Evaluating contingencies related to litigation is a complex process involving subjective judgment on the potential outcome of future events, and the ultimate resolution of litigated claims may differ from our current analysis. We review the adequacy of accruals and disclosures pertaining to litigation matters each quarter and year end in consultation with legal counsel, and we assess the probability and range of possible losses associated with contingencies for potential accrual in the consolidated financial statements. While it is not possible to predict the outcome of these other suits, legal proceedings, and claims with certainty, management is of the opinion that adequate provision for potential losses associated with these other matters has been made in the consolidated financial statements. During 2016, the Company recorded $3.9 million of litigation contingencies for employment-related claims. The Company had $2.0 million and $0.1 million of liabilities recorded for various legal contingencies as of December 25, 2016 and December 27, 2015.