Leasing Arrangements

12 Months Ended

Dec. 31, 2022


Leasing Arrangements

The Company is the lessee in a significant real estate portfolio, primarily through ground leases (the Company leases the land and generally owns the building) and through improved leases (the Company leases the land and buildings). The Company determines whether an arrangement is a lease at inception. Lease terms for most restaurants, where market conditions allow, are generally for 20 years and, in many cases, provide for rent escalations and renewal options. Renewal options are typically solely at the Company’s discretion. Escalation terms vary by market with examples including fixed-rent escalations, escalations based on an inflation index and fair-value market adjustments. The timing of these escalations generally range from annually to every five years.

The following table provides detail of rent expense:


In millions	2022		2021		2020







Restaurants	$	1,416.4	$	1,486.3	$	1,399.5
Other	59.7		74.0		79.8
Total rent expense	$	1,476.1	$	1,560.3	$	1,479.3

Rent expense included percent rents in excess of minimum rents (in millions) as follows–Company-operated restaurants: 2022–$39.6; 2021–$69.2; 2020–$53.7. Franchised restaurants: 2022–$209.0; 2021–$160.0; 2020–$136.5. These variable rent payments are based on a percent of sales.

The Lease right-of-use asset and Lease liability reflect the present value of the Company's estimated future minimum lease payments over the lease term, which includes options that are reasonably assured of being exercised, discounted using a collateralized incremental borrowing rate. Typically, renewal options are considered reasonably assured of being exercised if the associated asset lives of the building or leasehold improvements exceed that of the initial lease term, and the sales performance of the restaurant remains strong. Therefore, the Lease right-of-use asset and Lease liability include an assumption on renewal options that have not yet been exercised by the Company, and are not currently a future obligation.

The Company's lease portfolio includes both operating and finance leases, however as of December 31, 2022, the vast majority of the portfolio was classified as operating leases.

As the rate implicit in each lease is not readily determinable, the Company uses an incremental borrowing rate to calculate the lease liability that represents an estimate of the interest rate the Company would incur to borrow on a collateralized basis over the term of a lease within a particular currency environment. The weighted average discount rate used for leases was 3.5% as of December 31, 2022 and 3.7% as of December 31, 2021.

As of December 31, 2022, maturities of lease liabilities for the Company's lease portfolio were as follows:


In millions	Total *
2023	$	1,161.6
2024	1,134.4
2025	1,096.2
2026	1,041.8
2027	1,003.3
Thereafter	12,799.5
Total lease payments	18,236.8
Less: imputed interest	(5,441.3)
Present value of lease liability	$	12,795.5

* Total lease payments include option periods that are reasonably assured of being exercised.

The decrease in the present value of the lease liability since December 31, 2021 is approximately $(0.9) billion. The lease liability will continue to be impacted by new leases, lease modifications, lease terminations, reevaluation of lease terms, and foreign currency.

The Weighted Average Lease Term remaining that is included in the maturities of lease liabilities was 19 years as of December 31, 2022 and 20 years as of December 31, 2021.