Leasing Arrangements

12 Months Ended

Dec. 31, 2023


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	2023		2022		2021







Restaurants	$	1,491.0	$	1,416.4	$	1,486.3
Other	51.3		59.7		74.0
Total rent expense	$	1,542.3	$	1,476.1	$	1,560.3

Rent expense included percent rents in excess of minimum rents (in millions) as follows–Company-operated restaurants: 2023–$56.1; 2022–$39.6; 2021–$69.2. Franchised restaurants: 2023–$261.4; 2022–$209.0; 2021–$160.0. 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 certain of being exercised, discounted using a collateralized incremental borrowing rate. Typically, renewal options are considered reasonably certain 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. In light of the introduction of Restaurant Development as a growth pillar in 2023 and as part of the Company’s ongoing evaluation of its estimates, the Company refined its assumption on renewal options that have not yet been exercised to reflect the expected increase in renewal option exercises under this new growth pillar. This was the primary driver of the increase in the Lease right-of-use asset and Lease liability.

The following table details amounts related to operating and finance leases recorded within the Company’s Consolidated Balance Sheet.


December 31, 2023
In millions	Operating	Finance	Total
Lease right-of use asset, net	11,724.2	1,790.2	13,514.4
Current lease liability	642.6	45.5	688.1
Long-term lease liability	11,527.7	1,530.0	13,057.7


December 31, 2022
In millions	Operating	Finance	Total
Lease right-of use asset, net	11,052.1	1,513.6	12,565.7
Current lease liability	639.6	21.5	661.1
Long-term lease liability	10,834.1	1,300.2	12,134.4

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 following table summarizes the weighted average remaining lease term and discount rate used for leases as of December 31, 2023 and 2022:


	2023		2022
Weighted-average remaining lease term - operating leases	17 years		18 years
Weighted-average remaining lease term - finance leases	28 years		29 years
Weighted-average discount rate - operating leases	4.0	%	3.6	%
Weighted-average discount rate - finance leases	3.6	%	3.0	%

The Company makes cash payments related to its operating and finance lease liabilities, of which the majority are recorded within operating activities on the Consolidated Statement of Cash Flows. For each of the three years reflected within its cash flow statement, the Company made total payments of approximately $1.5 billion. Of these total payments, approximately 3% related to the Company’s repayment of the principal portion of finance lease liabilities, and were recorded within financing activities on the Consolidated Statement of Cash Flows. Lease right-of-use assets obtained in exchange for operating and finance lease liabilities totaled approximately $1.0 billion and $0.3 billion, respectively, during the year ended December 31, 2023.

As of December 31, 2023, maturities of lease liabilities for the Company's lease portfolio were as follows:


In millions	Operating		Finance		Total*
2024	$	1,126.3	$	78.0	$	1,204.3
2025	1,093.7		79.3		1,173.0
2026	1,046.2		80.0		1,126.2
2027	1,018.1		80.6		1,098.7
2028	981.1		81.2		1,062.3
Thereafter	12,132.2		2,083.1		14,215.3
Total lease payments	$	17,397.6	$	2,482.2	$	19,879.8
Less: imputed interest	5,227.3		906.7		6,134.0
Present value of lease liability	$	12,170.3	$	1,575.5	$	13,745.8

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

The increase in the present value of the lease liability since December 31, 2022 is approximately $950 million. The lease liability will continue to be impacted by new leases, lease modifications, lease terminations, reevaluation of lease terms, and foreign currency.