Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.Guarantees
As of December 31, 2019 and December 25, 2018, we were contingently liable for $13.9 million and $14.8 million,
respectively, for seven leases, listed in the table below. These amounts represent the maximum potential liability of
future payments under the guarantees. In the event of default, the indemnity and default clauses in our assignment
agreements govern our ability to pursue and recover damages incurred. No material liabilities have been recorded as of
December 31, 2019, as the likelihood of default was deemed to be less than probable and the fair value of the guarantees
is not considered significant.
Lease Current Lease
Assignment Date Term Expiration
Everett, Massachusetts (1)(2) ............................................. September 2002 February 2023
Longmont, Colorado (1) ................................................. October 2003 May 2029
Montgomeryville, Pennsylvania (1) ........................................ October 2004 March 2021
Fargo, North Dakota (1)(2) ............................................... February 2006 July 2021
Logan, Utah (1) ........................................................ January 2009 August 2024
Irving, Texas (3) ....................................................... December 2013 December 2024
Louisville, Kentucky (3)(4) .............................................. December 2013 November 2023
(1) Real estate lease agreements for restaurant locations which we entered into before granting franchise rights to those
restaurants. We have subsequently assigned the leases to the franchisees, but remain contingently liable, under the
terms of the lease, if the franchisee defaults.
(2) As discussed in note 17, these restaurants are owned, in whole or part, by certain officers, directors and 5%
shareholders of the Company.
(3) Leases associated with a restaurant concept which was sold. The leases were assigned to the acquirer, but we
remain contingently liable under the terms of the lease if the acquirer defaults.
(4) We may be released from liability after the initial lease term expiration contingent upon certain conditions being
met by the acquirer.
Critical Accounting Policies and Estimates
The above discussion and analysis of our financial condition and results of operations are based upon our
consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these
financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities,
revenue and expenses, and disclosures of contingent assets and liabilities. Our significant accounting policies are
described in note 2 to the accompanying consolidated financial statements. Critical accounting policies are those that we
believe are most important to portraying our financial condition and results of operations and also require the greatest
amount of subjective or complex judgments by management. Judgments or uncertainties regarding the application of
these policies may result in materially different amounts being reported under different conditions or using different
assumptions. We consider the following policies to be the most critical in understanding the judgments that are involved
in preparing the consolidated financial statements.
Impairment of Long-lived Assets. We evaluate long-lived assets related to each restaurant to be held and used in the
business, such as property and equipment, right-of-use assets and intangible assets subject to amortization, for
impairment whenever events and circumstances indicate that the carrying amount of a restaurant may not be recoverable.
When we evaluate restaurants, cash flows are the primary indicator of impairment. Recoverability of assets to be held
and used is measured by comparison of the carrying amount of the restaurant to estimated undiscounted future cash
flows expected to be generated by the restaurant. Under our policies, trailing 12-month cash flow results under a
predetermined amount at the individual restaurant level signals a potential impairment. In our evaluation of restaurants
that do not meet the cash flow threshold, we estimate future undiscounted cash flows from operating the restaurant over
its estimated useful life, which can be a period of over 20 years. In the estimation of future cash flows, we consider the
period of time the restaurant has been open, the trend of operations over such period and future periods and expectations
for future sales growth. We limit assumptions about important factors such as trend of future operations and sales growth
to those that are supportable based upon our plans for the restaurant and actual results at comparable restaurants. Both
qualitative and quantitative information are considered when evaluating for potential impairments. As we assess the