v3.24.3
Leases
 12 Months Ended
Sep. 29, 2024
Leases [Abstract]  
Leases LEASES
Nature of leases — We own restaurant sites and we also lease restaurant sites from third parties. Some of these owned or leased sites are leased and/or subleased to franchisees. Initial terms of our real estate leases are generally 20 years, exclusive of options to renew, which are generally exercisable at our sole discretion for 1 to 20 years. In some instances, our leases have provisions for contingent rentals based upon a percentage of defined revenues. Many of our restaurants also have rent escalation clauses and require the payment of property taxes, insurance, and maintenance costs. Variable lease costs include contingent rent, cost-of-living index adjustments, and payments for additional rent such as real estate taxes, insurance, and common area maintenance, which are excluded from the measurement of the lease liability. We also lease certain restaurant and office equipment with initial terms generally ranging from 3 to 8 years. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.
As lessor, our leases and subleases primarily consist of restaurants that have been leased to franchisees subsequent to refranchising transactions. The lease descriptions, terms, variable lease payments and renewal options are generally the same as the lessee leases described above. Revenues from leasing arrangements with our franchisees are presented in “Franchise rental revenues” in the accompanying consolidated statements of earnings, and the related expenses are presented in “Franchise occupancy expenses.”
Company as lessee — Leased assets and liabilities consisted of the following as of September 29, 2024 and October 1, 2023 (in thousands):
September 29,
2024		October 1,
2023
Assets:
Operating lease ROU assets$1,410,083 $1,397,555 
Finance lease ROU assets (1)416 971 
Total ROU assets$1,410,499 $1,398,526 
Liabilities:
Current operating lease liabilities $162,017 $142,518 
Current finance lease liabilities (2)602 689 
Long-term operating lease liabilities1,286,415 1,265,514 
Long-term finance lease liabilities (2)— 627 
Total lease liabilities$1,449,034 $1,409,348 
________________________
(1)Included in “Property and equipment, net” on our consolidated balance sheets.
(2)Included in “Current maturities of long-term debt” and “Long-term debt, net of current maturities” on our consolidated balance sheets.
The following table presents the components of our lease costs in fiscal 2024, 2023, and 2022 (in thousands):
202420232022
Lease costs:
Finance lease cost:
Amortization of ROU assets (1)$492 $691 $827 
Interest on lease liabilities (2)68 55 67 
Operating lease cost (3)243,488 240,153 218,837 
Short-term lease cost (3)195 730 824 
Variable lease cost (3)(4)51,374 50,448 48,872 
$295,617 $292,077 $269,427 
________________________
(1)Included in “Depreciation and amortization” in our consolidated statements of earnings.
(2)Included in “Interest expense, net” in our consolidated statements of earnings.
(3)Operating lease, short-term and variable lease costs associated with franchisees and company-operated restaurants are included in “Franchise occupancy expenses” and “Occupancy and other,” respectively, in our consolidated statements of earnings. For our closed restaurants, these costs are included in “Other operating expense, net” and all other costs are included in “Selling, general and administrative expenses.”
(4)Includes $41.0 million, $39.9 million, and $38.2 million in 2024, 2023, and 2022, respectively, of property taxes and common area maintenance costs which are reimbursed by sub-lessees.
The following table presents supplemental information related to leases:
September 29,
2024		October 1,
2023
Weighted-average remaining lease term (in years):
Finance leases0.81.7
Operating leases11.111.1
Weighted-average discount rate:
Finance leases7.0 %7.1 %
Operating leases5.9 %5.5 %
The following table presents as of September 29, 2024, the annual maturities of our lease liabilities (in thousands):
Finance LeasesOperating Leases
Fiscal year:
2025
$625 $239,575 
20267 227,422 
2027— 224,198 
2028— 181,919 
2029— 144,349 
Thereafter— 1,015,330 
Total future lease payments (1)$632 $2,032,793 
Less: imputed interest(30)(584,361)
Present value of lease liabilities$602 $1,448,432 
Less current portion(602)(162,017)
Long-term lease obligations$— $1,286,415 
________________________
(1)Total future lease payments include non-cancellable commitments of $0.6 million for finance leases and $1,375.1 million for operating leases.
Assets recorded under finance leases are included in property and equipment, and consisted of the following at each fiscal year-end (in thousands):
20242023
Buildings$— $1,342 
Equipment6,003 6,140 
Less accumulated amortization(5,587)(6,511)
$416 $971 
The following table includes supplemental cash flow and non-cash information related to our lessee leases (in thousands):
20242023
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$218,916 $236,356 
Operating cash flows from financing leases$68 $55 
Financing cash flows from financing leases$617 $836 
Supplemental noncash information on lease liabilities arising from obtaining right-of-use assets:
Right-of-use assets obtained in exchange for new operating lease obligations$191,923 $250,862 
Right-of-use assets obtained in exchange for new financing lease obligations$— $5 
Sale and leaseback transactions — In fiscal 2024, we sold one restaurant property in a sale and leaseback transaction for net proceeds of $1.7 million, and recorded a total loss of less than $0.1 million. The lease has been accounted for as an operating lease and contains an initial term of 20 years.
In fiscal 2023, we sold one restaurant property in a sale and leaseback transaction for net proceeds of $3.7 million, and recorded a total loss of less than $0.1 million. The lease has been accounted for as an operating lease and contains an initial term of 20 years.
In fiscal 2022, we sold four restaurant properties in sale and leaseback transactions for net proceeds of $10.8 million, and recorded total losses of $0.2 million. The leases have been accounted for as operating leases and contain initial terms of 16 years and 20 years.
Company as lessor — The following table presents rental income (in thousands):
20242023
Owned PropertiesLeased PropertiesTotalOwned PropertiesLeased PropertiesTotal
Operating lease income - franchise$18,301 $242,111 $260,412 $17,805 $225,392 $243,197 
Variable lease income - franchise12,522 100,903 113,425 12,700 108,010 120,710 
Amortization of sublease assets and liabilities, net— 1,591 1,591 — 684 684 
Franchise rental revenues$30,823 $344,605 $375,428 $30,505 $334,086 $364,591 
Operating lease income - closed restaurants and other (1)$31 $7,662 $7,693 $76 $7,387 $7,463 
________________________
(1)Primarily relates to closed restaurant properties included in “Other operating expense, net” in our consolidated statements of earnings.
The following table presents as of September 29, 2024, future minimum rental receipts for non-cancellable leases and subleases (in thousands):
September 29,
2024
Fiscal year:
2025
$269,206 
2026254,975 
2027253,917 
2028208,641 
2029164,247 
Thereafter1,180,855 
Total minimum rental receipts$2,331,841 
Assets held for lease and included in property and equipment consisted of the following at each fiscal year-end (in thousands):
September 29,
2024		October 1,
2023
Land$71,130 $78,665 
Buildings763,697 792,177 
Equipment716 63 
835,543 870,905 
Less accumulated depreciation(669,459)(672,137)
$166,084 $198,768 
Leases LEASES
Nature of leases — We own restaurant sites and we also lease restaurant sites from third parties. Some of these owned or leased sites are leased and/or subleased to franchisees. Initial terms of our real estate leases are generally 20 years, exclusive of options to renew, which are generally exercisable at our sole discretion for 1 to 20 years. In some instances, our leases have provisions for contingent rentals based upon a percentage of defined revenues. Many of our restaurants also have rent escalation clauses and require the payment of property taxes, insurance, and maintenance costs. Variable lease costs include contingent rent, cost-of-living index adjustments, and payments for additional rent such as real estate taxes, insurance, and common area maintenance, which are excluded from the measurement of the lease liability. We also lease certain restaurant and office equipment with initial terms generally ranging from 3 to 8 years. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.
As lessor, our leases and subleases primarily consist of restaurants that have been leased to franchisees subsequent to refranchising transactions. The lease descriptions, terms, variable lease payments and renewal options are generally the same as the lessee leases described above. Revenues from leasing arrangements with our franchisees are presented in “Franchise rental revenues” in the accompanying consolidated statements of earnings, and the related expenses are presented in “Franchise occupancy expenses.”
Company as lessee — Leased assets and liabilities consisted of the following as of September 29, 2024 and October 1, 2023 (in thousands):
September 29,
2024		October 1,
2023
Assets:
Operating lease ROU assets$1,410,083 $1,397,555 
Finance lease ROU assets (1)416 971 
Total ROU assets$1,410,499 $1,398,526 
Liabilities:
Current operating lease liabilities $162,017 $142,518 
Current finance lease liabilities (2)602 689 
Long-term operating lease liabilities1,286,415 1,265,514 
Long-term finance lease liabilities (2)— 627 
Total lease liabilities$1,449,034 $1,409,348 
________________________
(1)Included in “Property and equipment, net” on our consolidated balance sheets.
(2)Included in “Current maturities of long-term debt” and “Long-term debt, net of current maturities” on our consolidated balance sheets.
The following table presents the components of our lease costs in fiscal 2024, 2023, and 2022 (in thousands):
202420232022
Lease costs:
Finance lease cost:
Amortization of ROU assets (1)$492 $691 $827 
Interest on lease liabilities (2)68 55 67 
Operating lease cost (3)243,488 240,153 218,837 
Short-term lease cost (3)195 730 824 
Variable lease cost (3)(4)51,374 50,448 48,872 
$295,617 $292,077 $269,427 
________________________
(1)Included in “Depreciation and amortization” in our consolidated statements of earnings.
(2)Included in “Interest expense, net” in our consolidated statements of earnings.
(3)Operating lease, short-term and variable lease costs associated with franchisees and company-operated restaurants are included in “Franchise occupancy expenses” and “Occupancy and other,” respectively, in our consolidated statements of earnings. For our closed restaurants, these costs are included in “Other operating expense, net” and all other costs are included in “Selling, general and administrative expenses.”
(4)Includes $41.0 million, $39.9 million, and $38.2 million in 2024, 2023, and 2022, respectively, of property taxes and common area maintenance costs which are reimbursed by sub-lessees.
The following table presents supplemental information related to leases:
September 29,
2024		October 1,
2023
Weighted-average remaining lease term (in years):
Finance leases0.81.7
Operating leases11.111.1
Weighted-average discount rate:
Finance leases7.0 %7.1 %
Operating leases5.9 %5.5 %
The following table presents as of September 29, 2024, the annual maturities of our lease liabilities (in thousands):
Finance LeasesOperating Leases
Fiscal year:
2025
$625 $239,575 
20267 227,422 
2027— 224,198 
2028— 181,919 
2029— 144,349 
Thereafter— 1,015,330 
Total future lease payments (1)$632 $2,032,793 
Less: imputed interest(30)(584,361)
Present value of lease liabilities$602 $1,448,432 
Less current portion(602)(162,017)
Long-term lease obligations$— $1,286,415 
________________________
(1)Total future lease payments include non-cancellable commitments of $0.6 million for finance leases and $1,375.1 million for operating leases.
Assets recorded under finance leases are included in property and equipment, and consisted of the following at each fiscal year-end (in thousands):
20242023
Buildings$— $1,342 
Equipment6,003 6,140 
Less accumulated amortization(5,587)(6,511)
$416 $971 
The following table includes supplemental cash flow and non-cash information related to our lessee leases (in thousands):
20242023
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$218,916 $236,356 
Operating cash flows from financing leases$68 $55 
Financing cash flows from financing leases$617 $836 
Supplemental noncash information on lease liabilities arising from obtaining right-of-use assets:
Right-of-use assets obtained in exchange for new operating lease obligations$191,923 $250,862 
Right-of-use assets obtained in exchange for new financing lease obligations$— $5 
Sale and leaseback transactions — In fiscal 2024, we sold one restaurant property in a sale and leaseback transaction for net proceeds of $1.7 million, and recorded a total loss of less than $0.1 million. The lease has been accounted for as an operating lease and contains an initial term of 20 years.
In fiscal 2023, we sold one restaurant property in a sale and leaseback transaction for net proceeds of $3.7 million, and recorded a total loss of less than $0.1 million. The lease has been accounted for as an operating lease and contains an initial term of 20 years.
In fiscal 2022, we sold four restaurant properties in sale and leaseback transactions for net proceeds of $10.8 million, and recorded total losses of $0.2 million. The leases have been accounted for as operating leases and contain initial terms of 16 years and 20 years.
Company as lessor — The following table presents rental income (in thousands):
20242023
Owned PropertiesLeased PropertiesTotalOwned PropertiesLeased PropertiesTotal
Operating lease income - franchise$18,301 $242,111 $260,412 $17,805 $225,392 $243,197 
Variable lease income - franchise12,522 100,903 113,425 12,700 108,010 120,710 
Amortization of sublease assets and liabilities, net— 1,591 1,591 — 684 684 
Franchise rental revenues$30,823 $344,605 $375,428 $30,505 $334,086 $364,591 
Operating lease income - closed restaurants and other (1)$31 $7,662 $7,693 $76 $7,387 $7,463 
________________________
(1)Primarily relates to closed restaurant properties included in “Other operating expense, net” in our consolidated statements of earnings.
The following table presents as of September 29, 2024, future minimum rental receipts for non-cancellable leases and subleases (in thousands):
September 29,
2024
Fiscal year:
2025
$269,206 
2026254,975 
2027253,917 
2028208,641 
2029164,247 
Thereafter1,180,855 
Total minimum rental receipts$2,331,841 
Assets held for lease and included in property and equipment consisted of the following at each fiscal year-end (in thousands):
September 29,
2024		October 1,
2023
Land$71,130 $78,665 
Buildings763,697 792,177 
Equipment716 63 
835,543 870,905 
Less accumulated depreciation(669,459)(672,137)
$166,084 $198,768 
Leases LEASES
Nature of leases — We own restaurant sites and we also lease restaurant sites from third parties. Some of these owned or leased sites are leased and/or subleased to franchisees. Initial terms of our real estate leases are generally 20 years, exclusive of options to renew, which are generally exercisable at our sole discretion for 1 to 20 years. In some instances, our leases have provisions for contingent rentals based upon a percentage of defined revenues. Many of our restaurants also have rent escalation clauses and require the payment of property taxes, insurance, and maintenance costs. Variable lease costs include contingent rent, cost-of-living index adjustments, and payments for additional rent such as real estate taxes, insurance, and common area maintenance, which are excluded from the measurement of the lease liability. We also lease certain restaurant and office equipment with initial terms generally ranging from 3 to 8 years. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.
As lessor, our leases and subleases primarily consist of restaurants that have been leased to franchisees subsequent to refranchising transactions. The lease descriptions, terms, variable lease payments and renewal options are generally the same as the lessee leases described above. Revenues from leasing arrangements with our franchisees are presented in “Franchise rental revenues” in the accompanying consolidated statements of earnings, and the related expenses are presented in “Franchise occupancy expenses.”
Company as lessee — Leased assets and liabilities consisted of the following as of September 29, 2024 and October 1, 2023 (in thousands):
September 29,
2024		October 1,
2023
Assets:
Operating lease ROU assets$1,410,083 $1,397,555 
Finance lease ROU assets (1)416 971 
Total ROU assets$1,410,499 $1,398,526 
Liabilities:
Current operating lease liabilities $162,017 $142,518 
Current finance lease liabilities (2)602 689 
Long-term operating lease liabilities1,286,415 1,265,514 
Long-term finance lease liabilities (2)— 627 
Total lease liabilities$1,449,034 $1,409,348 
________________________
(1)Included in “Property and equipment, net” on our consolidated balance sheets.
(2)Included in “Current maturities of long-term debt” and “Long-term debt, net of current maturities” on our consolidated balance sheets.
The following table presents the components of our lease costs in fiscal 2024, 2023, and 2022 (in thousands):
202420232022
Lease costs:
Finance lease cost:
Amortization of ROU assets (1)$492 $691 $827 
Interest on lease liabilities (2)68 55 67 
Operating lease cost (3)243,488 240,153 218,837 
Short-term lease cost (3)195 730 824 
Variable lease cost (3)(4)51,374 50,448 48,872 
$295,617 $292,077 $269,427 
________________________
(1)Included in “Depreciation and amortization” in our consolidated statements of earnings.
(2)Included in “Interest expense, net” in our consolidated statements of earnings.
(3)Operating lease, short-term and variable lease costs associated with franchisees and company-operated restaurants are included in “Franchise occupancy expenses” and “Occupancy and other,” respectively, in our consolidated statements of earnings. For our closed restaurants, these costs are included in “Other operating expense, net” and all other costs are included in “Selling, general and administrative expenses.”
(4)Includes $41.0 million, $39.9 million, and $38.2 million in 2024, 2023, and 2022, respectively, of property taxes and common area maintenance costs which are reimbursed by sub-lessees.
The following table presents supplemental information related to leases:
September 29,
2024		October 1,
2023
Weighted-average remaining lease term (in years):
Finance leases0.81.7
Operating leases11.111.1
Weighted-average discount rate:
Finance leases7.0 %7.1 %
Operating leases5.9 %5.5 %
The following table presents as of September 29, 2024, the annual maturities of our lease liabilities (in thousands):
Finance LeasesOperating Leases
Fiscal year:
2025
$625 $239,575 
20267 227,422 
2027— 224,198 
2028— 181,919 
2029— 144,349 
Thereafter— 1,015,330 
Total future lease payments (1)$632 $2,032,793 
Less: imputed interest(30)(584,361)
Present value of lease liabilities$602 $1,448,432 
Less current portion(602)(162,017)
Long-term lease obligations$— $1,286,415 
________________________
(1)Total future lease payments include non-cancellable commitments of $0.6 million for finance leases and $1,375.1 million for operating leases.
Assets recorded under finance leases are included in property and equipment, and consisted of the following at each fiscal year-end (in thousands):
20242023
Buildings$— $1,342 
Equipment6,003 6,140 
Less accumulated amortization(5,587)(6,511)
$416 $971 
The following table includes supplemental cash flow and non-cash information related to our lessee leases (in thousands):
20242023
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$218,916 $236,356 
Operating cash flows from financing leases$68 $55 
Financing cash flows from financing leases$617 $836 
Supplemental noncash information on lease liabilities arising from obtaining right-of-use assets:
Right-of-use assets obtained in exchange for new operating lease obligations$191,923 $250,862 
Right-of-use assets obtained in exchange for new financing lease obligations$— $5 
Sale and leaseback transactions — In fiscal 2024, we sold one restaurant property in a sale and leaseback transaction for net proceeds of $1.7 million, and recorded a total loss of less than $0.1 million. The lease has been accounted for as an operating lease and contains an initial term of 20 years.
In fiscal 2023, we sold one restaurant property in a sale and leaseback transaction for net proceeds of $3.7 million, and recorded a total loss of less than $0.1 million. The lease has been accounted for as an operating lease and contains an initial term of 20 years.
In fiscal 2022, we sold four restaurant properties in sale and leaseback transactions for net proceeds of $10.8 million, and recorded total losses of $0.2 million. The leases have been accounted for as operating leases and contain initial terms of 16 years and 20 years.
Company as lessor — The following table presents rental income (in thousands):
20242023
Owned PropertiesLeased PropertiesTotalOwned PropertiesLeased PropertiesTotal
Operating lease income - franchise$18,301 $242,111 $260,412 $17,805 $225,392 $243,197 
Variable lease income - franchise12,522 100,903 113,425 12,700 108,010 120,710 
Amortization of sublease assets and liabilities, net— 1,591 1,591 — 684 684 
Franchise rental revenues$30,823 $344,605 $375,428 $30,505 $334,086 $364,591 
Operating lease income - closed restaurants and other (1)$31 $7,662 $7,693 $76 $7,387 $7,463 
________________________
(1)Primarily relates to closed restaurant properties included in “Other operating expense, net” in our consolidated statements of earnings.
The following table presents as of September 29, 2024, future minimum rental receipts for non-cancellable leases and subleases (in thousands):
September 29,
2024
Fiscal year:
2025
$269,206 
2026254,975 
2027253,917 
2028208,641 
2029164,247 
Thereafter1,180,855 
Total minimum rental receipts$2,331,841 
Assets held for lease and included in property and equipment consisted of the following at each fiscal year-end (in thousands):
September 29,
2024		October 1,
2023
Land$71,130 $78,665 
Buildings763,697 792,177 
Equipment716 63 
835,543 870,905 
Less accumulated depreciation(669,459)(672,137)
$166,084 $198,768