Leases

3 Months Ended

Mar. 31, 2024

Leases

Nature of Leases

The Company operates restaurants that are located on sites owned by us and sites leased by us from third parties. In addition, the Company owns sites and leases sites from third parties, which it leases and/or subleases to franchisees. The Company also leases restaurant, office and transportation equipment. As of March 31, 2024, the nature of restaurants operated by the Company and its franchisees was as follows:


			March 31, 2024
Company-operated restaurants:
Owned land and building			155
Owned building and held long-term land leases			144
Leased land and building			112
Total Company-operated restaurants			411

Franchisee-operated restaurants:
Company-owned properties leased to franchisees			493
Company-leased properties subleased to franchisees			1,176
Other franchisee-operated restaurants			5,168
Total franchisee-operated restaurants			6,837
Total Company-operated and franchisee-operated restaurants			7,248

Company as Lessee

The components of lease cost are as follows:


	Three Months Ended
	March 31, 2024		April 2, 2023
Finance lease cost:
Amortization of finance lease assets	$	4,297	$	4,063
Interest on finance lease liabilities	10,658		10,750
	14,955		14,813
Operating lease cost	21,701		21,449
Variable lease cost (a)	16,488		16,081
Short-term lease cost	1,394		1,506
Total operating lease cost (b)	39,583		39,036
Total lease cost	$	54,538	$	53,849

_______________

(a)Includes expenses for executory costs of $10,221 and $9,848 for the three months ended March 31, 2024 and April 2, 2023, respectively, for which the Company is reimbursed by sublessees.

(b)Includes $31,718 and $30,598 for the three months ended March 31, 2024 and April 2, 2023, respectively, recorded to “Franchise rental expense” for leased properties that are subsequently leased to franchisees. Also includes $7,388 and $7,865 for the three months ended March 31, 2024 and April 2, 2023, respectively, recorded to “Cost of sales” for leases for Company-operated restaurants.

Leases, Company as Lessor

Company as Lessor

The components of lease income are as follows:


	Three Months Ended
	March 31, 2024		April 2, 2023
Sales-type and direct-financing leases:
Selling (loss) profit	$	(16)	$	129
Interest income (a)	7,719		7,862

Operating lease income	41,497		42,156
Variable lease income	16,489		15,651
Franchise rental income (b)	$	57,986	$	57,807

_______________

(a)Included in “Interest expense, net.”

(b)Includes sublease income of $42,783 and $42,951 recognized during the three months ended March 31, 2024 and April 2, 2023, respectively. Sublease income includes lessees’ variable payments to the Company for executory costs of $10,089 and $9,778 for the three months ended March 31, 2024 and April 2, 2023, respectively.