Commitments and Contingencies
Purchase Commitments
In some instances, the Company enters into commitments to purchase advertising and other items. Most of these agreements are fixed price purchase commitments. As of December 28, 2025, the outstanding purchase commitments were $104.4 million, of which $82.6 million related to advertising over the next twelve months.
Lease Guarantees
In connection with refranchising restaurants to franchisees, in certain cases the Company has guaranteed lease payments. As of December 28, 2025 and December 29, 2024 the notional amount of lease guarantees by the Company were $323.1 million and $345.0 million, respectively. Excluding unexercised option periods, the Company's potential liability for future payments under these leases were $83.1 million and $90.5 million as of December 28, 2025 and December 29, 2024, respectively. These amounts represent the maximum potential liability of future payments under these leases. These leases expire at the end of the respective lease terms, which range from 2026 through 2058. In the event of default, the indemnity and default clauses in our sale or assignment agreements govern our ability to pursue and recover damages incurred. No material liabilities for these guarantees have been recorded as of December 28, 2025.
Litigation, Claims and Disputes
The Company is subject to various lawsuits, governmental inspections, administrative proceedings, audits, and claims arising in the ordinary course of business. Some of these lawsuits purport to be class actions and/or seek substantial damages. The Company is required to record an accrual for litigation loss contingencies that are both probable and reasonably estimable. Legal fees and expenses associated with the defense of the Company's litigation are expensed as incurred. In the opinion of management, these matters are adequately covered by insurance or, if not so covered, are without merit or are of such a nature or involve amounts that would not have a material adverse impact on the Company's business or consolidated financial statements. Management regularly assesses the Company's insurance deductibles, analyzes litigation information with the Company's attorneys and evaluates its loss experience in connection with pending legal proceedings. While the Company does not presently believe that any of the legal proceedings to which the Company is currently a party will ultimately have a material adverse impact on the Company, there can be no assurance that the Company will prevail in all the proceedings the Company is party to, or that the Company will not incur material losses from them.
Letters of Credit
The Company provides letters of credit, primarily to various insurance carriers to collateralize obligations for outstanding claims. As of December 28, 2025, the Company had approximately $0.6 million of unused letters of credit outstanding that reduce the Company's available borrowing under its Credit Facility. These letters of credit expire on various dates in 2026 and are automatically renewed for an additional year if no cancellation notice is submitted.