Leases
We are party to operating lease arrangements primarily for leased real estate for restaurants and office space. Right-of-use assets and lease liabilities related to operating leases under ASC 842 are recorded at commencement when we are party to a contract that conveys the right for the Company to control an asset for a specified period of time. We are not a party to any material contracts considered finance leases. Right-of-use assets and lease liabilities related to operating leases are recorded as Lease assets and Lease liabilities, respectively, on the Consolidated Balance Sheets as of December 31, 2025 and 2024.
Our material operating leases range in term from one year to fifteen years. As of December 31, 2025 and 2024, the weighted-average remaining lease term of our operating leases was approximately ten years. Leases with an initial term of twelve months or less are not recorded on the balance sheet and we recognize lease expense for these leases on a straight-line basis over the lease term.
Our operating lease agreements do not contain any material buyout options, residual value guarantees or restrictive covenants.
Most of our leases include one or more options to renew, with renewal terms that can extend the lease term by varying amounts. The exercise of lease renewal options is at our sole discretion. We include options to renew, not to exceed a total lease term of twenty years, in our measurement of right-of-use assets and lease liabilities when they are considered reasonably certain of exercise. We consider a lease reasonably certain for renewal when the duration of the lease extensions are in the foreseeable future and related to assets for which continued use is reasonably assured.
Excluding certain immaterial classes of leases in our Restaurant Group, we do not separate lease components from non-lease components for any of our right of use assets.
Our operating lease liabilities are determined by discounting future lease payments using a discount rate that represents our best estimate of the incremental borrowing rate our subsidiaries would have to pay to borrow money to finance the asset over the underlying lease term and for an amount equal to the lease payments. Our discount rate is based on interest rates associated with comparable public company secured debt for companies similar to our operating subsidiaries and of similar duration to the underlying lease. As of December 31, 2025 and 2024, the weighted-average discount rate used to determine our operating lease liabilities was 7.40%.
Our lease costs are directly attributable to restaurant operations, primarily for real estate and to a lesser extent certain restaurant equipment. Operating lease costs of $26.0 million, $25.9 million and $30.5 million are included in Cost of restaurant revenue on the Consolidated Statement of Operations for the years ended December 31, 2025, 2024 and 2023, respectively.
Lease assets are reviewed for impairment when events or circumstances indicate that the carrying amounts may not be recoverable.
In the year ended December 31, 2025, 2024 and 2023, we recorded $8.8 million, $0.3 million and $24.6 million, respectively, of impairment to Lease assets. The impairments for 2023 relate primarily to our Restaurant Group for O'Charley's stores that have closed in the year ended December 31, 2023. All such impairments are included in Other operating expenses in our Consolidated Statements of Operations.
Future payments under operating lease arrangements accounted for under ASC 842 as of December 31, 2025 are as follows (in millions):
| | | | | |
| 2026 | $ | 24.9 | |
| 2027 | 23.4 | |
| 2028 | 21.1 | |
| 2029 | 17.9 | |
| 2030 | 15.8 | |
| Thereafter | 93.2 | |
| Total lease payments, undiscounted | $ | 196.3 | |
| Less: discount | 58.1 | |
Total operating lease liability as of December 31, 2025, at present value | $ | 138.2 | |
Less: operating lease liability as of December 31, 2025, current | 15.4 | |
Operating lease liability as of December 31, 2025, long-term | $ | 122.8 | |