Annual report pursuant to Section 13 and 15(d)

Note 3 - Leases

Note 3 - Leases
12 Months Ended
Dec. 25, 2022
Notes to Financial Statements  
Lessee, Operating Leases [Text Block]

(3) Leases


At December 25, 2022, all of the Company-owned Ruth’s Chris Steak House restaurants operated in leased premises, with the exception of the restaurant in Ft. Lauderdale, FL, which is an owned property, and the restaurants in Anaheim, CA, Lake Mary, FL Princeton, NJ and South Barrington, IL, which operate on leased land. The leases generally provide for minimum annual rental payments with scheduled minimum rent payments increases during the terms of the leases. Certain leases also provide for rent deferral during the initial term, lease incentives in the form of tenant allowances to fund leasehold improvements, and/or contingent rent provisions based on the sales at the underlying restaurants. Most of the Company’s restaurant leases have remaining lease terms of 1 year to 20 years, most of which include options to extend the leases for 5 years or more. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. The weighted average term and discount rate for operating leases as of December 25, 2022 is 13.5 years and 5.7%, respectively. The weighted average term and discount rate for operating leases as of December 26, 2021 is 12.9 years and 5.3%, respectively.


The components of lease expense are as follows (in thousands):



Fiscal Year Ended




December 25, 2022


December 26, 2021


Operating lease cost

Restaurant operating expenses and General and administrative costs

  $ 25,789     $ 19,553  

Variable lease cost

Restaurant operating expenses and General and administrative costs

    12,833       13,824  

Total lease cost

  $ 38,622     $ 33,377  


As of December 25, 2022, maturities of lease liabilities are summarized as follows (in thousands):



Company Total



  $ 28,812  











Imputed interest

    (110,379 )
    $ 235,361  


Supplemental cash flow information related to leases was as follows (in thousands):



Fiscal Year Ended


December 25, 2022


December 26, 2021


Cash paid for amounts included in the measurement of lease liabilities

  $ 25,716     $ 21,898  

Right-of-use assets obtained in exchange for lease obligations

  $ 40,741     $ 13,042  

Reduction of right-of-use assets and lease obligations from lease modifications and terminations

  $ 570     $ 12,594  


Additionally, as of December 25, 2022, the Company has executed four leases for new Ruth’s Chris Steak House Restaurant locations with undiscounted fixed payments over the initial term of $21.7 million. These leases are expected to commence during the next 12 months and are expected to have an economic lease term of approximately 20 years. The leases will commence when the landlords make the properties available to the Company. The Company will assess the reasonably certain lease term at the lease commencement date.


The Company previously operated eighteen Mitchell’s Fish Markets and three Mitchell’s/Cameron’s Steakhouse restaurants (collectively, the Mitchell’s Restaurants).  The sale of the Mitchell’s Restaurants to Landry’s, Inc. and Mitchell’s Entertainment, Inc., an affiliate of Landry’s Inc. (together with Landry’s Inc., Landry’s) closed on January 21, 2015. The assets sold consisted primarily of leasehold interests, leasehold improvements, restaurant equipment and furnishings, inventory, and related intangible assets, including brand names and trademarks associated with the 21 Mitchell’s Restaurants.  Pursuant to the terms of the Agreement, upon closing of the sale of the Mitchell’s Restaurants, Landry’s assumed the lease obligations of the Mitchell’s Restaurants. The Company guaranteed Landry’s lease obligations aggregating $8.3 million under four of the Mitchell’s Restaurants’ leases which extend until the leases terminate which may continue into 2040, including remaining lease options. The Company did not record a financial accounting liability for the lease guarantees, because the likelihood of Landry’s defaulting on the lease agreements was deemed to be remote. Separate from the purchase agreement, Landry’s has agreed to indemnify the Company in the event of a default under any of the leases. The above tables do not include potential lease obligations for the Mitchell’s Restaurants.