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Commitments and Contingencies | 12 Months Ended
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Dec. 31, 2024
Commitments and Contingencies. |
Commitments and Contingencies | 13. Commitments and Contingencies Purchase obligations, which include inventory purchases, equipment purchases, information technology and other miscellaneous commitments, were $147.8 million and $101.4 million at December 31, 2024 and January 2, 2024, respectively. These purchase obligations are primarily due within three years and recorded as liabilities when goods are received or services rendered. Real estate obligations, which include construction commitments, net of up-front landlord construction contributions, and legally binding minimum lease payments for leases signed but not yet commenced, were $315.4 million and $414.8 million at December 31, 2024 and January 2, 2024, respectively. The FRC acquisition agreement included a contingent consideration provision of which the remainder is payable annually from 2024 through 2027 and is based on achievement of revenue and profitability targets for the FRC brands other than North Italia and Flower Child. The liability for this contingent consideration provision was $20.2 million at December 31, 2024. See Note 2 for discussion of the fair value measurement of this liability. As credit guarantees to insurers, we had $33.5 million at both December 31, 2024 and January 2, 2024, in standby letters of credit related to our self-insurance liabilities. All standby letters of credit are renewable annually. We retain the financial responsibility for a significant portion of our risks and associated liabilities with respect to workers’ compensation, general liability, staff member health benefits, employment practices and other insurable risks. The accrued liabilities associated with these programs are based on our estimate of the ultimate costs to settle known claims, as well as claims incurred but not yet reported to us (“IBNR”) as of the balance sheet date. The total accrued liability for our self-insured plans was $73.6 million and $71.5 million at December 31, 2024 and January 2, 2024, respectively. On June 7, 2024, the Internal Revenue Service (“IRS”) issued its examination report for tax years 2015 through 2020 in which it proposed to disallow a portion of our depreciation deductions and Domestic Production Activity Deductions and to assess penalties. On August 12, 2024, we submitted Protest Memoranda indicating our disagreement with a majority of the findings in the examination report, and our case is now under the jurisdiction of the Appeals Division. We expect to hold an opening conference with Appeals in the second quarter of fiscal 2025. Based on the current status of this matter, we have reserved an immaterial amount. Within the ordinary course of our business, we are subject to private lawsuits, government audits and investigations, administrative proceedings and other claims. These matters typically involve claims from customers, staff members and others related to operational and employment issues common to the foodservice industry. A number of these claims may exist at any given time, and some of the claims may be pled as class actions. From time to time, we are also involved in lawsuits with respect to infringements of, or challenges to, our registered trademarks and other intellectual property, both domestically and abroad. We could be affected by adverse publicity and litigation costs resulting from such allegations, regardless of whether they are valid or whether we are legally determined to be liable. At this time, we believe that the amount of reasonably possible losses resulting from final disposition of any pending lawsuits, audits, investigations, proceedings and claims will not have a material adverse effect individually or in the aggregate on our financial position, results of operations or liquidity. It is possible, however, that our future results of operations for a particular quarter or fiscal year could be impacted by changes in circumstances relating to lawsuits, audits, proceedings or claims. Legal costs related to such claims are expensed as incurred. We have employment agreements with certain of our executive officers that provide for payments to those officers in the event of an actual or constructive termination of their employment, including in the event of a termination without cause, an acquirer failure to assume or continue equity awards following a change in control of the Company or, otherwise, in the event of death or disability as defined in those agreements. Aggregate payments totaling approximately $3.5 million, excluding accrued potential bonuses of $3.3 million, which are subject to approval by the Compensation Committee, would have been required by those agreements had all such officers terminated their employment for reasons requiring such payments as of December 31, 2024. In addition, the employment agreement with our Chief Executive Officer specifies an annual founder’s retirement benefit of $650,000 for ten years, commencing six months after termination of his full-time employment.

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