LEASES

9 Months Ended

Jul. 10, 2022

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.

As lessor, our leases and subleases primarily consist of restaurants that have been leased to franchisees in connection with refranchising transactions. Revenues from leasing arrangements with our franchisees are presented in “Franchise rental revenues” in the accompanying condensed consolidated statements of earnings, and the related expenses are presented in “Franchise occupancy expenses.”

The following table presents rental income (in thousands):


	Quarter				Year-to-date
	July 10, 2022		July 4, 2021		July 10, 2022		July 4, 2021
Operating lease income - franchise	$	53,703	$	53,762	$	178,048	$	180,146
Variable lease income - franchise	26,274		26,836		81,556		82,102
Amortization of favorable and unfavorable lease contracts, net	91		—		119		—
Franchise rental revenues	$	80,068	$	80,598	$	259,723	$	262,248
Operating lease income - closed restaurants and other (1)	$	1,663	$	1,377	$	4,728	$	4,602

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(1)Primarily relates to closed restaurant properties included in “Other operating expenses, net” in our condensed consolidated statements of earnings.

The following table presents as of July 10, 2022, the annual maturities of our lease liabilities (in thousands):


	Finance Leases		Operating Leases
Fiscal year:
Remainder of 2022	$	244	$	55,942
2023	972		227,605
2024	399		191,112
2025	39		185,347
2026	27		168,451
Thereafter	26		874,345
Total future lease payments (1)	$	1,707	$	1,702,802
Less imputed interest	(84)		(362,768)
Present value of lease liabilities	$	1,623	$	1,340,034
Less current portion	(929)		(173,057)
Long-term lease obligations	$	694	$	1,166,977

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(1)Total future lease payments include non-cancellable commitments of $1.7 million for finance leases and $1,468.4 million for operating leases.