FRANCHISE GROUP, INC. Management report and analysis of the financial situation and operating results. (Form 10-K)

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General

Our fiscal year ends on the Saturday in December closest to December 31st. The 2021, 2020 and 2019 financial years consisted of 52 weeks.

The discussion of our financial condition and results of operations for the
years ended December 26, 2020 and April 30, 2019, included in Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations ("MD&A") can be found in Exhibit 99.1 of Form 8-K filed on June 25,
2021, to reflect certain retrospective revisions for discontinued operations and
changes in reportable segments in the consolidated financial statements of the
Company in its Annual Report on Form 10-K for the year ended December 26, 2020
that was previously filed with the Securities and Exchange Commission ("SEC") on
March 10, 2021 (the "Form 10-K").

Overview

We are an owner and operator of franchised and franchisable businesses that
continually looks to grow our portfolio of brands while utilizing our operating
and capital allocation philosophy to generate strong cash flows. We currently
operate six reportable segments: Vitamin Shoppe, Pet Supplies Plus, Badcock,
American Freight, Buddy's, and Sylvan.

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Our Vitamin Shoppe segment is an omnichannel specialty retailer of vitamins,
minerals, herbs, specialty supplements, sports nutrition and other health and
wellness products. Our Pet Supplies Plus segment is a leading franchisor and
retailer of pet supplies and services. Our Badcock segment carries a complete
line of furniture, appliances, bedding, electronics, home office equipment,
accessories and seasonal items in a showroom format. Our American Freight
segment is a retail chain offering in-store and online access to furniture,
mattresses, new and out-of-box appliances and home accessories at discount
prices. On October 23, 2019, we completed the acquisition of the Sears Outlet
business ("Sears Outlet") from Sears Hometown and Outlet Stores, Inc. (the
"Sears Outlet Acquisition"). Sears Outlet has been rebranded as American Freight
Outlet and is included in our American Freight segment. Our Buddy's segment is a
specialty retailer of high quality, name brand consumer electronic, residential
furniture, appliances and household accessories through rent-to-own agreements.
Our Sylvan segment is an established and growing franchisor of supplemental
education for Pre-K-12 students and families in the United States and Canada.

Our revenue is derived primarily from merchandise sales, rental revenue, and service revenue comprised of royalties and other fees required from our franchisees, licensees, and financing programs.

When evaluating our performance, management focuses on several metrics that we believe are critical to our success:

•Net change in retail and franchise outlets. The change in retail and franchise locations from year to year is a function of new locations opening, offset by locations that we or our franchisees close. Please see section 2. Properties of this annual report for the number of locations at
December 25, 2021.

•Same-store or comparable store sales. The difference in revenue generated by
the segment's existing store locations over a certain period (often a fiscal
week, month, or quarter), compared to an identical period in the past, usually
in the previous year. A segment's store becomes a comparable store at the
beginning of the fiscal period following the one year anniversary of the store
open date (or the beginning of the 13th fiscal period after the store opens). If
a store relocates outside of the current trade area or defined territory, it is
removed from the comparable store base and is treated as a new store. On-line
revenue is included in the overall segment comparable store sales calculation.

•Adjusted EBITDA. Management focuses on adjusted EBITDA as a measure of the cash
flow from recurring operations from the businesses. Adjusted EBITDA represents
net income (loss), before income taxes, interest expense, depreciation and
amortization, and certain other items.

Acquisitions

On December 27, 2020, we completed our acquisition of Furniture Factory Outlet
("FFO Home"). For a complete description of the FFO Home Acquisition, refer to
"Note 2 - Acquisitions" in the Notes to the Consolidated Financial Statements.

On March 10, 2021, we completed our acquisition of PSP Midco, LLC ("Pet Supplies
Plus"). For a complete description of the Pet Supplies Plus Acquisition, refer
to "Note 2 - Acquisitions" in the Notes to the Consolidated Financial
Statements.

On September 27, 2021, we completed our acquisition of Sylvan. For a complete
description of the Sylvan Acquisition, refer to "Note 2 - Acquisitions" in the
Notes to the Consolidated Financial Statements.

On November 22, 2021, we completed our acquisition of Badcock. For a complete
description of the Badcock Acquisition, refer to "Note 2 - Acquisitions" in the
Notes to the Consolidated Financial Statements.

Discontinued operations

As disclosed above, on February 21, 2021, we entered into the Purchase Agreement
with NextPoint to sell our Liberty Tax business. In connection with the Purchase
Agreement, the parties entered into a transition services agreement pursuant to
which both parties agreed to provide certain transition services to each other
for a period not to exceed twelve months. On July 2, 2021, we completed the
transaction and received total consideration of $255.3 million, consisting of
$181.2 million in cash and $74.1 million in proportionate voting shares of
NextPoint recorded as an investment in equity securities in "Other non-current
assets" on the Consolidated Balance Sheet. The transaction resulted in a gain on
the sale of $188.1 million recorded in "Income (loss) from discontinued
operations, net of tax" on the Consolidated Statement of Operations. As part of
the divestiture, we incurred transaction costs of $7.1 million which were paid
using shares of NextPoint. As a result of the transaction, the financial
position and results of operations of the Liberty Tax business are presented as
discontinued operations and, as such, have been excluded from continuing
operations and segment results for all periods presented.

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Results of Operations

For the year ended December 25, 2021 compared to the year ended December 26, 2020

As described above, our Liberty Tax business is reported as a discontinued
operation and its results of operations are excluded from our results of
operations. For the fiscal year ended April 30, 2019, Liberty Tax was our only
business, therefore, no continuing operations existed for that fiscal year and
comparative information is not provided.
The following table sets forth the results of our operations for the years ended
December 25, 2021, and December 26, 2020:
                                                      Fiscal Years Ended                               Change
(In thousands)                                  12/25/2021           12/26/2020               $                     %
Total revenues                                $ 3,255,204          $ 2,029,727          $ 1,225,477                    60  %
Total operating expenses                        3,028,853            1,977,216            1,051,637                    53  %
Income (loss) from operations                     226,351               52,511              173,840                   331  %
Net income (loss) from continuing
operations                                        191,966               20,645              171,321                   830  %
Net income (loss) from discontinued
operations, net of tax                            171,822                4,419              167,403                 3,788  %
Net income (loss) attributable to
Franchise Group, Inc.                         $   363,788          $    25,064          $   338,724                  1351  %


Revenues. The table below presents the components and the evolution of our revenues for the financial years ended December 25, 2021 and December 26, 2020:

                              Fiscal Years Ended                  Change
(In thousands)          12/25/2021       12/26/2020            $             %
Product                $ 3,012,471      $ 1,899,662      $ 1,112,809        59  %
Service and other          209,103           65,798          143,305       218  %
Rental                      33,630           64,267          (30,637)      (48) %
Total revenue          $ 3,255,204      $ 2,029,727      $ 1,225,477        60  %


Our total revenue increased by $1.2 billion, or 60%, in the year ended
December 25, 2021 compared to the year ended December 26, 2020. This increase
was primarily due to the Pet Supplies Plus Acquisition on March 10, 2021, which
increased revenue by $917.4 million, the Badcock Acquisition on November 22,
2021, which increased revenue by $102.1 million, and the Sylvan Acquisition on
September 27, 2021, which increased revenue by $9.7 million. The $30.6 million
decrease in rental revenue was due to the refranchising of 47 Buddy's'
Company-owned stores on November 10, 2020 and an additional 8 stores on August
25, 2021.

Operating expenses. The following table details the amounts and changes in our
operating expenses for the years ended December 25, 2021 and December 26, 2020:
                                                       Fiscal Years Ended                              Change
(In thousands)                                   12/25/2021           12/26/2020               $                    %
Cost of revenue:
Product                                        $ 1,892,741          $ 1,136,054          $   756,687                   67  %
Service and other                                   16,506                2,149               14,357                  668  %
Rental                                              11,552               21,905              (10,353)                 (47) %
Total cost of revenue                            1,920,799            1,160,108              760,691                   66  %
Selling, general and administrative
expenses                                         1,108,054              817,108              290,946                   36  %
Total operating expenses                       $ 3,028,853          $ 1,977,216          $ 1,051,637                   53  %



Total operating expenses increased $1.1 billion, or 53%, in the year ended
December 25, 2021 compared to the year ended December 26, 2020. This increase
was primarily due to the Pet Supplies Plus Acquisition on March 10, 2021, which
increased operating expenses by $875.8 million, the Badcock Acquisition on
November 22, 2021, which increased operating expenses by $79.4 million and the
Sylvan Acquisition on September 27, 2021, which increased operating expenses by
$10.4
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million. the $10.4 million lower rental cost of sales is due to the refranchising of 47 stores owned by the Buddy’s Company November 10, 2020 and 8 additional stores on August 25, 2021.

Non-operating income (expenses). The following table presents certain information regarding our non-operating income (expenses) for the years ended
December 25, 2021 and December 26, 2020:

                                                            Fiscal Years Ended                         Change (Fiscal 2021 vs. Fiscal 2020)
(In thousands)                             12/25/2021          12/26/2020           4/30/2019                 $                    %
Bargain purchase gain                     $  132,559          $        -                    -          $    132,559                  100  %
Other                                        (67,368)             (5,294)                   -               (62,074)               1,173  %
Interest expense, net                       (133,114)            (96,774)                   -               (36,340)                  38  %
Non-operating income (expense)            $  (67,923)         $ (102,068)         $         -          $     34,145                  (33) %



Non-operating income (expenses) increased $34.1 million due to the following:

• Increased bargain purchase gain $132.6 million in the year ended December 25, 2021 driven by the $132.0 million the buy-side gain from the acquisition of Badcock;

•Other expenses increased $62.1 million for the year ended December 25, 2021 due
to a prepayment penalty of $36.7 million from the repayment of the Franchise
Group New Holdco Term Loan and ABL Term Loan and a $31.8 million loss related to
our investment in NextPoint; and

•Interest expense, net increased by $36.3 million due to the write-off of $29.3
million, $6.1 million and $4.7 million of deferred financing costs from the
termination of the Franchise Group New Holdco Term Loan and ABL Term Loan, the
$182.1 million principal payment on the First Lien Term Loan and the $219.0
million principal payment on the First Lien Badcock Term Loan. These increases
were partially offset by the reduction in amortization of deferred financing
costs.

Income taxes. The following table sets forth certain information regarding our income taxes for the years ended December 25, 2021 and December 26, 2020:

                                            Fiscal Years Ended              

Change

(In thousands)                          12/25/2021      12/26/2020          $             %
Gain (loss) before income taxes        $ 158,428       $ (49,557)      $ 207,985        (420) %
Income tax benefit                       (33,538)        (60,501)         26,963         (45) %
Effective tax rate                         (21.2) %        122.1  %



The decrease in the effective tax rate from 122.1% to (21.2)% for the year ended
December 25, 2021 compared to the year ended December 26, 2020 is primarily due
to a $45.2 million release of a valuation allowance in the current year, on the
basis of management's reassessment of the amount of its deferred tax assets that
are more likely than not to be realized. In addition, the bargain purchase gain
recorded in the Badcock Acquisition in the current year is disregarded for tax
purposes, resulting in a permanent benefit. In the prior year, the Company
recorded an income tax benefit of $52.3 million on a pre-tax loss of $50.0
million related to the Coronavirus Aid, Relief, and Economic Security (the
"CARES Act"), which was enacted on March 27, 2020. The CARES Act retroactively
changed the eligibility of certain assets for expense treatment in the year
placed in service, back to 2018, and permitted any net operating loss for the
tax years 2018, 2019, and 2020 to be carried back for five years.

Net revenue. In the year ended December 25, 2021we had net income from continuing operations of $192.0 million compared to the net result of $10.9 million
in the year ended December 26, 2020 due to the fluctuations indicated above.

Segment information

Our operations are conducted in six reporting business segments: Vitamin Shoppe,
Pet Supplies Plus, Badcock, American Freight, Buddy's, and Sylvan. We define our
segments as those operations whose results our chief operating decision maker
("CODM") regularly reviews to analyze performance and allocate resources.
Because the Pet Supplies Plus Acquisition, Sylvan Acquisition, and Badcock
Acquisition occurred in the year ended December 25, 2021, comparable information
is not available; therefore, Pet Supplies Plus, Sylvan, and Badcock segment
information is not provided.
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Vitamin Shoppe

The following table summarizes the results of operations of our Vitamin Shoppe segment for the years ended December 25, 2021 and December 26, 2020. As the acquisition of Vitamin Shoppe took place during the transition period, comparable information for the year ended April 30, 2019 is not available:

                                    Fiscal Years Ended                   Change
(In thousands)                 12/25/2021       12/26/2020           $             %
Total revenues                $ 1,172,725      $ 1,035,964      $ 136,761          13  %
Operating expenses              1,068,721        1,030,593         38,128           4  %
Operating income (loss)       $   104,004      $     5,371      $  98,633       1,836  %



Total revenue for our Vitamin Shoppe segment increased $136.8 million, or 13%,
for the year ended December 25, 2021 as compared to the year ended December 26,
2020. The increase in revenue was the result of a 14.4% increase in comparable
store sales, which was the driven by strong customer traffic, several new
product introductions throughout the year and the continuation in demand for
health and wellness products.

Operating expenses for the Vitamin Shoppe segment increased $38.1 million, or
4%, for the year ended December 25, 2021 as compared to the year ended December
26, 2020. The increase in operating expenses was primarily driven by:

•a $55.2 million increase in cost of revenue correlated to the revenue growth
noted above, as a percentage of revenue. Gross margin, excluding the inventory
step-up amortization in 2020 due to purchase price accounting, decreased
approximately ten basis points to 45.2% compared to 45.3% in the prior year due
to higher sales for supplement products which have a lower margin.

Increases in operating expenses were partially offset by:

• $20.6 million amortization of inventory increase during the prior year period;

•a $9.8 million decrease in occupancy costs due to 32 fewer stores compared to
the prior year; a $2.9 million right-of-use asset impairment in the prior year
period; and

•a $7.3 million decrease in depreciation expense.

American freight

The following table summarizes the operating results of our American Freight
segment for the years ended December 25, 2021 and December 26, 2020. Because the
American Freight Acquisition occurred in the year ended December 26, 2020,
comparable information for the year ended April 30, 2019 is not available:
                                   Fiscal Years Ended                Change
(In thousands)                 12/25/2021      12/26/2020         $            %
Total revenues                $  988,892      $  896,431      $ 92,461        10  %
Operating expenses               922,351         856,083        66,268         8  %
Operating income (loss)       $   66,541      $   40,348      $ 26,193        65  %



Total revenue for our American Freight segment increased $92.5 million, or 10%,
for the year ended December 25, 2021 as compared to the year ended December 26,
2020. The increase in revenue was primarily driven by the following:

•the inclusion of full first quarter results in the current year (American Freight was acquired on February 14th2020);

•increase in turnover linked to the opening of new stores; and

•the FFO Home acquisition.

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Operating expenses for the American Freight segment increased $66.3 million, or
8%, for the year ended December 25, 2021 as compared to the year ended December
26, 2020. The increase in operating expenses was primarily driven by the
following:

•the inclusion of the first full quarter in the current year (American Freight was acquired on February 14th2020);

•higher occupancy costs due to new store openings and store acquisitions; and

•an increase in advertising expenses due to a reduction in advertising in the prior year due to the COVID-19 pandemic.

boyfriend

The following table summarizes the operating results of our Buddy's segment for
the years ended December 25, 2021 and December 26, 2020. Because the Buddy's
Acquisition occurred in the Transition Period, comparable information for the
year ended April 30, 2019 is not available:
                                   Fiscal Years Ended                  Change
(In thousands)                 12/25/2021      12/26/2020           $            %
Total revenues                $   64,409      $    97,332      $ (32,923)      (34) %
Operating expenses                47,724           76,968        (29,244)      (38) %
Operating income (loss)       $   16,685      $    20,364      $  (3,679)      (18) %



Total revenue for our Buddy's segment decreased $32.9 million, or (34)%, for the
year ended December 25, 2021 as compared to the year ended December 26, 2020.
The decrease in revenue was primarily driven by the following:

•a $30.6 million decrease in rental revenue due to the refranchising of 47
Company-owned stores on November 10, 2020 and an additional 8 stores on August
25, 2021. Rental revenue for comparable stores for the year increased to $30.4
million from $29.7 million in the prior year.

•The decline in rental income was partially offset by an increase in $3.8 million royalties for the year ended December 25, 2021 due to the refranchising of Company-owned stores.

Operating expenses for the Buddy's segment decreased $29.2 million, or (38)%,
for the year ended December 25, 2021 as compared to the year ended December 26,
2020. The decrease in operating expenses was primarily driven by the following:

•a $10.4 million decrease in rental cost of sales, an $8.2 million decrease in
employee compensation, and a $7.3 million decrease in other expenses due to the
refranchising of 47 Company-owned stores on November 10, 2020 and an additional
8 stores on August 25, 2021.

Adjusted EBITDA.

To provide additional information regarding our financial results, we have
disclosed Adjusted EBITDA in the table below and within this Annual Report.
Adjusted EBITDA represents net income (loss), before income taxes, interest
expense, depreciation and amortization, and certain other items specified below.
We have provided a reconciliation below of Adjusted EBITDA to net income (loss),
the most directly comparable GAAP financial measure.

We have included Adjusted EBITDA in this Annual Report because we believe the
presentation of these measures is useful to investors as supplemental measures
in evaluating the aggregate performance of our operating businesses and in
comparing our results from period to period because they exclude items that we
do not believe are reflective of our core or ongoing operating results. These
measures are used by our management to evaluate performance and make resource
allocation decisions each period. Adjusted EBITDA is also the primary operating
metric used in the determination of executive management's compensation.  In
addition, a measure similar to Adjusted EBITDA is used in our credit
facilities. Adjusted EBITDA is not a recognized financial measure under GAAP and
may not be comparable to similarly-titled measures used by other companies in
our industry. Adjusted EBITDA should not be considered in isolation from or as
an alternative to net income (loss), operating income (loss), or any other
performance measures derived in accordance with GAAP.

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The following table presents a reconciliation of Adjusted EBITDA for the fiscal
years ended December 25, 2021 and December 26, 2020. Amounts for the year ended
April 30, 2019 are not provided as they are all attributable to discontinued
operations.
                                                        Fiscal Years Ended
(In thousands)                                      12/25/2021      12/26/2020
Net income (loss) from continuing operations       $  191,966      $   10,944
Add back:
Interest expense                                      133,114          96,774
Income tax benefit                                    (33,538)        (60,501)
Depreciation and amortization charges                  69,086          52,152
Total Adjustments                                     168,662          88,425
EBITDA                                                360,628          99,369
Adjustments to EBITDA
Executive severance and related costs                     302           

5,643

Stock based compensation                               14,956           

8,923

Litigation costs and settlements                       (1,130)         (1,070)
Corporate compliance costs                              2,172             543
Store closures                                          2,429             592
Securitized receivables, net                          (19,919)              -
Prepayment penalty on early debt repayment             36,726          44,996
Right-of-use asset impairment                           2,948           2,895
Integration costs                                      16,655           2,703
Divestiture costs                                         515               -
Acquisition costs                                      22,878          26,309
Loss on investment in equity securities                31,773               -
Acquisition bargain purchase gain                    (132,559)              -
Total Adjustments to EBITDA                           (22,254)         91,534
Adjusted EBITDA                                    $  338,374      $  190,903



Funding Requirements

We believe that we have sufficient liquidity to support our ongoing operations
and maintain a sufficient liquidity position to meet our obligations and
commitments. Our liquidity plans are established as part of our financial and
strategic planning processes and consider the liquidity necessary to fund our
operating, capital expenditure and debt service needs.

We primarily fund our operations and acquisitions through operating cash flows
and, as needed, a combination of borrowings under various credit agreements,
availability under our revolving credit facilities and the issuance of equity
securities. Cash generation can be subject to variability based on many factors,
including seasonality, receipt of prepaid payments from area developers, timing
of repayment of loans to franchisees and the effects of changes in end markets.

After December 25, 2021several transactions and events have occurred that will or may affect our liquidity and capital resources in future periods, as discussed in Part I, Item 1. Activity.

Sources and uses of cash

Operational activities

Net cash provided by operating activities decreased $135.5 million in 2021
compared to 2020 due to a $219.1 million increase in cash used for inventory and
a $36.1 million decrease in accounts payable and accrued expenses due to the
timing of payments. These were partially offset by a $127.5 million increase in
cash net income and an $18.5 million increase in other assets due to our
investment in NextPoint. Cash net income represents net income adjusted for
non-cash or non-operating
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activities such as bargain purchase gains, gain on disposal of our Liberty tax business, debt prepayment penalties, change in fair value of investments and amortization of deferred financing costs . Investing activities

Net cash used in investing activities increased $572.9 million in 2021 compared
to 2020. This increase was primarily driven by an increase of $710.4 million in
cash used for acquisitions and a $23.5 million decrease of proceeds from the
sale of company-owned stores partially offset by $179.5 million in cash received
from divestitures.

Financing activities

Net cash provided by financing activities increased $743.6 million in 2021
compared to 2020. The increase was driven by a $1,689.0 million increase in
proceeds from the issuance of debt, a $150.7 million decrease in repayments of
revolving credit facilities and a $50.1 million increase in proceeds from the
issuance of preferred stock. The increases in cash provided by financing
activities were partially offset by a $671.1 million increase in repayments of
long-term obligations, a $198.0 million reduction in proceeds from the issuance
of common stock, a $157.9 million reduction in borrowing under our revolving
credit facilities, a $49.1 million increase in payments for debt issuance costs,
a $37.9 million increase in dividends paid and a $36.7 million increase in cash
paid for penalties for early debt repayment.

Contractual obligations

The following tables summarize our contractual obligations as of December 25,
2021:

                                                                                              Contractual Obligations
(in thousands)                         Total                2022                2023                2024                2025                    2026                 Thereafter

Finance leases Liabilities related to finance leases $6,465 $1,952 $1,757 $1,325 $1,056 $

             375          $         -
Operating lease liabilities            730,172              66,834             199,063             155,360             112,046                     80,557              116,312
Long-Term Obligations
Secured Borrowing                      407,502             302,246             105,256                   -                   -                          -                    -
Term Loans                           1,482,016               4,319             362,252                   -                   -                  1,115,445                    -
ABL Revolver                            20,000                   -                   -                   -                   -                     20,000                    -
Total Obligations                  $ 1,909,518          $  306,565          $  467,508          $        -          $        -          $       1,135,445          $         -
                                                                                                    Commitments
                                                         Expiring in         Expiring in         Expiring in         Expiring in
(in thousands)                         Total                2022                2023                2024                2025              Expiring in 2026           Thereafter
Guarantees                         $    23,925          $    4,228          $    3,860          $    4,506          $    3,039          $           2,597          $     5,695
Purchase obligations                   145,890              84,249              58,462               2,969                 210                          -                    -
Total commitments                  $   169,815          $   88,477          $   62,322          $    7,475          $    3,249          $           2,597          $     5,695

For more information on long-term obligations, refer to “Note 9 – Long-term obligations”, to the consolidated financial statements in section 8.

Leasing

Operating lease obligations. Refer to "Note 8 - Leases", to the Consolidated
Financial Statements in Item 8 for information on our operating leases. The
obligation above includes amounts for leases that were signed prior to December
25, 2021 for stores that were not yet open on December 25, 2021.

Other factors affecting our liquidity

Tax Receivable Agreement. We may be required to make payments under the Tax
Receivable Agreement ("TRA Payments") to the owners of Buddy's (the "Buddy's
Members"). As of December 25, 2021, we had TRA Payments due to the Buddy's
Members of $17.3 million. Refer to "Note 12 - Income Taxes", to the Consolidated
Financial Statements in Item 8 for more information on the Tax Receivable
Agreement.
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Off-balance sheet arrangements

The Company remains secondarily liable under various real estate leases that
were assigned to franchisees who acquired
stores from the Company. In the event of the failure of an acquirer to pay lease
payments, the Company could be obligated to pay the remaining lease payments
which extend through 2033 and aggregated $22.9 million as of December 25, 2021.
If the Company is required to make payments under these guarantees, the Company
could seek to recover those amounts
from the franchisees or in some cases their affiliates. The Company believes
that payment under these guarantees is remote as
of December 25, 2021.

Interest rate risk

We are exposed to various types of market risk in the normal course of our
business, including the impact of interest rate
changes. We may enter into interest rate swaps to manage exposure to interest
rate changes. We do not enter into derivative
instruments for any purpose other than cash flow hedging and we do not hold
derivative instruments for trading purposes.

Long-term debt. We use short-term and long-term financing to manage our overall interest expense related to our existing floating rate debt, as well as to cover variability in cash flows due to changes in benchmark interest rates related to issuances expected debt. See “Note 9 – Long-term obligations” to the consolidated financial statements in section 8 for more details on the components of our long-term debt as at December 25, 2021.

Changes in fair value

                                                             10 Basis Point
                                                         Increase in Underlying        10 Basis Point Decrease
                                  Fair Value                      Rate                   in Underlying Rate
Long-term debt               $        1,909,518          $           190,952          $             (190,952)



Critical accounting policies

The preparation of financial statements requires the use of estimates. Certain
of our estimates require a high level of judgment and have the potential to have
a material effect on the financial statements if actual results vary
significantly from those estimates. Following is a discussion of the estimates
that we consider critical.

Long-Lived and Right-of-Use Assets. We review our long-lived assets, such as
property, plant and equipment, purchased intangibles subject to amortization,
and operating lease right-of-use assets, for impairment whenever events or
changes in circumstances indicate that the carrying value of an asset group may
not be recoverable. We measure recoverability by comparison of the carrying
value of an asset to its estimated undiscounted future cash flows expected to be
generated by the asset. We recognize and measure potential impairment at the
lowest level where cash flows are individually identifiable. If the carrying
amount of an asset exceeds its estimated future cash flows, we recognize an
impairment charge equal to the amount by which the carrying value of the asset
exceeds the fair value of the asset. We determine fair value through various
valuation techniques, including discounted cash flow models, quoted market
values, and third-party independent appraisals.

Business Combinations-Purchase Price Allocation. For acquisitions which meet the
definition of a business combination in accordance with ASC 805, we allocate the
purchase price to the various tangible and intangible assets acquired and
liabilities assumed, based on their estimated fair values, some of which are
preliminary as of December 25, 2021. The excess of the purchase price over the
fair values of the assets acquired and liabilities assumed represents goodwill
derived from the acquisition. The amount by which the net fair value of assets
acquired and liabilities assumed exceeds the fair value of consideration
transferred as the purchase price is recorded as a bargain purchase gain.
Determining the fair value of certain assets and liabilities is subjective in
nature and often involves the use of significant estimates and assumptions,
which are inherently uncertain. Many of the estimates and assumptions used to
determine fair values, such as those used for intangible assets are made based
on forecasted information and discount rates. In addition, the judgments made in
determining the estimated fair value assigned to each class of assets acquired
and liabilities assumed, as well as asset lives, can materially impact our
results of operations. Refer to "Note 2 - Acquisitions" to the Consolidated
Financial Statements in Item 8 for additional information.

Goodwill and Non-amortizing Intangible Assets. Goodwill and non-amortizing
intangible assets are initially recorded at their fair values. These assets are
not amortized but are evaluated as of the end of July of each fiscal year, and a
more frequent evaluation is performed if an event occurs or circumstances change
that would more likely than not reduce the assets fair values below their
carrying values. Such events or circumstances could include, but are not limited
to, significant negative industry or
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economic trends, unanticipated changes in the competitive environment and a significant and sustained decline in our share price.

For goodwill, the Company performs a qualitative and/or quantitative assessment
to determine whether it is more likely than not that each reporting unit's fair
value is less than its carrying value, including goodwill. If the Company
determines that it is more likely than not that the fair value of the reporting
unit is less than its carrying value, the Company then estimates the fair value.
The Company uses either a market multiple method or a discounted cash flow
method to estimate the fair value of its reporting units and recognizes goodwill
impairment for any excess of the carrying amount of a reporting unit's goodwill
over its estimated fair value.

For non-amortizing intangible assets, the Company evaluates its tradenames for
impairment by comparing the fair value, based on an income approach using the
relief-from-royalty method, to its carrying value. If the carrying value of the
asset exceeds its estimated fair value, an impairment loss is recognized in an
amount equal to that excess. The Company's reporting units are determined in
accordance with the provisions of Accounting Standards Codification ("ASC") 350,
"Intangibles - Goodwill and Other (Topic 350)."

Refer to “Note 6 – Good will and intangible assets” to the consolidated financial statements in section 8 for more information.

Recently issued accounting standards

See “Note 1 – Organization and significant accounting policies” in our consolidated financial statements.

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