WENDY'S CO, 10-K filed on 3/3/2021
Annual Report
v3.20.4
Document and Entity Information - USD ($)
$ in Millions
12 Months Ended
Jan. 03, 2021
Feb. 23, 2021
Jun. 26, 2020
Document and Entity Information [Abstract]      
Document Type 10-K    
Document Annual Report true    
Document Period End Date Jan. 03, 2021    
Document Transition Report false    
Entity File Number 1-2207    
Entity Registrant Name THE WENDY’S COMPANY    
Entity Incorporation, State or Country Code DE    
Entity Tax Identification Number 38-0471180    
Entity Address, Address Line One One Dave Thomas Blvd.    
Entity Address, Postal Zip Code 43017    
Entity Address, City or Town Dublin,    
Entity Address, State or Province OH    
City Area Code 614    
Local Phone Number 764-3100    
Title of 12(b) Security Common Stock, $.10 par value    
Trading Symbol WEN    
Security Exchange Name NASDAQ    
Entity Well-known Seasoned Issuer Yes    
Entity Voluntary Filers No    
Entity Central Index Key 0000030697    
Current Fiscal Year End Date --01-03    
Entity Current Reporting Status Yes    
Entity Interactive Data Current Yes    
Entity Filer Category Large Accelerated Filer    
Entity Small Business false    
Entity Emerging Growth Company false    
Document Fiscal Year Focus 2020    
Document Fiscal Period Focus FY    
Amendment Flag false    
ICFR Auditor Attestation Flag true    
Entity Shell Company false    
Entity Common Stock, Shares Outstanding   223,841,105  
Entity Public Float     $ 3,782.5
v3.20.4
Consolidated Balance Sheets - USD ($)
shares in Thousands, $ in Thousands
Jan. 03, 2021
Dec. 29, 2019
Current assets:    
Cash and cash equivalents $ 306,989 $ 300,195
Restricted cash 33,973 34,539
Accounts and notes receivable, net 109,891 117,461
Inventories 4,732 3,891
Prepaid expenses and other current assets 89,732 15,585
Advertising funds restricted assets 142,306 82,376
Total current assets 687,623 554,047
Properties 915,889 977,000
Finance lease assets 206,153 200,144
Operating lease assets 821,480 857,199
Goodwill 751,049 755,911
Other intangible assets 1,224,960 1,247,212
Investments 44,574 45,949
Net investment in sales-type and direct financing leases 268,221 256,606
Other assets 120,057 100,461
Total assets 5,040,006 4,994,529
Current liabilities:    
Current portion of long-term debt 28,962 22,750
Current portion of finance lease liabilities 12,105 11,005
Current portion of operating lease liabilities 45,346 43,775
Accounts payable 31,063 22,701
Accrued expenses and other current liabilities 155,321 165,272
Advertising funds restricted liabilities 140,511 84,195
Total current liabilities 413,308 349,698
Long-term debt 2,218,163 2,257,561
Long-term finance lease liabilities 506,076 480,847
Long-term operating lease liabilities 865,325 897,737
Deferred income taxes 280,755 270,759
Deferred franchise fees 89,094 91,790
Other liabilities 117,689 129,778
Total liabilities 4,490,410 4,478,170
Commitments and contingencies
Stockholders’ equity:    
Common stock, $0.10 par value; 1,500,000 shares authorized; 470,424 shares issued; 224,268 and 224,889 shares outstanding, respectively 47,042 47,042
Additional paid-in capital 2,899,276 2,874,001
Retained earnings 238,674 185,725
Common stock held in treasury, at cost; 246,156 and 245,535 shares, respectively (2,585,755) (2,536,581)
Accumulated other comprehensive loss (49,641) (53,828)
Total stockholders’ equity 549,596 516,359
Total liabilities and stockholders’ equity $ 5,040,006 $ 4,994,529
Common Stock, Par Value $ 0.10 $ 0.10
Common Stock, Shares Authorized 1,500,000 1,500,000
Common Stock, Shares Issued 470,424 470,424
Common Stock, Shares, Outstanding 224,268 224,889
Treasury Stock, Shares 246,156 245,535
v3.20.4
Consolidated Statements of Operations - USD ($)
$ in Thousands
12 Months Ended
Jan. 03, 2021
Dec. 29, 2019
Dec. 30, 2018
Revenues      
Franchise rental income $ 232,648 $ 233,065  
Franchise rental income     $ 203,297
Revenues 1,733,825 1,709,002 1,589,936
Costs and Expenses      
Cost of sales 614,907 597,530 548,588
Franchise support and other costs 26,464 43,686 25,203
Franchise rental expense 125,613 123,929 91,104
Advertising funds expense 345,360 338,116 321,866
General and administrative 206,876 200,206 217,489
Depreciation and amortization 132,775 131,693 128,879
System optimization gains, net (3,148) (1,283) (463)
Reorganization and realignment costs 16,030 16,965 9,068
Impairment of long-lived assets 8,037 6,999 4,697
Other operating income, net (8,397) (11,418) (6,387)
Costs and expenses 1,464,517 1,446,423 1,340,044
Operating profit 269,308 262,579 249,892
Interest expense, net (117,737) (115,971) (119,618)
Loss on early extinguishment of debt 0 (8,496) (11,475)
Investment (loss) income, net (225) 25,598 450,736
Other income, net 1,449 7,771 5,381
Income before income taxes 152,795 171,481 574,916
Provision for income taxes (34,963) (34,541) (114,801)
Net Income $ 117,832 $ 136,940 $ 460,115
Earnings Per Share      
Earnings Per Share, Basic $ 0.53 $ 0.60 $ 1.93
Earnings Per Share, Diluted $ 0.52 $ 0.58 $ 1.88
Sales      
Revenues      
Revenue from Contract with Customer, Excluding Assessed Tax $ 722,764 $ 707,485 $ 651,577
Franchise royalty revenue and fees      
Revenues      
Revenue from Contract with Customer, Excluding Assessed Tax 444,749 428,999 409,043
Advertising funds revenue      
Revenues      
Revenue from Contract with Customer, Excluding Assessed Tax $ 333,664 $ 339,453 $ 326,019
v3.20.4
Consolidated Statements of Comprehensive Income - USD ($)
$ in Thousands
12 Months Ended
Jan. 03, 2021
Dec. 29, 2019
Dec. 30, 2018
Net income $ 117,832 $ 136,940 $ 460,115
Other comprehensive income (loss), net:      
Foreign currency translation adjustment 4,187 7,845 (16,524)
Unrealized gains arising during the period 0 0 156
Income tax provision 0 0 (39)
Final settlement of pension liability 0 0 932
Change in unrecognized pension loss 0 0 (1,049)
Other comprehensive income (loss), net 4,187 7,845 (15,475)
Comprehensive income $ 122,019 $ 144,785 $ 444,640
v3.20.4
Consolidated Statements of Stockholders' Equity - USD ($)
$ in Thousands
Total
Cumulative effect of change in accounting principle
Common Stock
Additional Paid-In Capital
Retained Earnings (Accumulated Deficit)
Retained Earnings (Accumulated Deficit)
Cumulative effect of change in accounting principle
Common Stock Held in Treasury
Accumulated Other Comprehensive Loss
Stockholders' Equity, beginning of period at Dec. 31, 2017 $ 573,203 $ (70,210) $ 47,042 $ 2,885,955 $ (163,289) $ (70,210) $ (2,150,307) $ (46,198)
Increase (Decrease) in Stockholders' Equity                
Net income 460,115   0 0 460,115   0 0
Other Comprehensive Income (Loss), Net of Tax (15,475)   0 0 0   0 (15,475)
Cash dividends (80,532)   0 0 (80,532)   0 0
Repurchases of common stock, including accelerated share repurchase (270,377)   0 0 0   (270,377) 0
Share-based compensation 17,918   0 17,918 0   0 0
Common stock issued upon exercises of stock options 38,819   0 (9,582) 0   48,401 0
Common stock issued upon vesting of restricted shares (5,431)   0 (9,711) 0   4,280 0
Other 419   0 116 193   110 0
Stockholders' Equity, end of period at Dec. 30, 2018 648,449 $ (1,105) 47,042 2,884,696 146,277 $ (1,105) (2,367,893) (61,673)
Increase (Decrease) in Stockholders' Equity                
Net income 136,940   0 0 136,940   0 0
Other Comprehensive Income (Loss), Net of Tax 7,845   0 0 0   0 7,845
Cash dividends (96,364)   0 0 (96,364)   0 0
Repurchases of common stock, including accelerated share repurchase (217,771)   0 (15,000) 0   (202,771) 0
Share-based compensation 18,676   0 18,676 0   0 0
Common stock issued upon exercises of stock options 28,136   0 (808) 0   28,944 0
Common stock issued upon vesting of restricted shares (8,627)   0 (13,677) 0   5,050 0
Other 180   0 114 (23)   89 0
Stockholders' Equity, end of period at Dec. 29, 2019 516,359   47,042 2,874,001 185,725   (2,536,581) (53,828)
Increase (Decrease) in Stockholders' Equity                
Net income 117,832   0 0 117,832   0 0
Other Comprehensive Income (Loss), Net of Tax 4,187   0 0 0   0 4,187
Cash dividends (64,866)   0 0 (64,866)   0 0
Repurchases of common stock, including accelerated share repurchase (61,095)   0 15,000 0   (76,095) 0
Share-based compensation 18,930   0 18,930 0   0 0
Common stock issued upon exercises of stock options 23,351   0 (912) 0   24,263 0
Common stock issued upon vesting of restricted shares (5,389)   0 (7,889) 0   2,500 0
Other 287   0 146 (17)   158 0
Stockholders' Equity, end of period at Jan. 03, 2021 $ 549,596   $ 47,042 $ 2,899,276 $ 238,674   $ (2,585,755) $ (49,641)
v3.20.4
Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
12 Months Ended
Jan. 03, 2021
Dec. 29, 2019
Dec. 30, 2018
Cash flows from operating activities:      
Net income $ 117,832 $ 136,940 $ 460,115
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation and amortization 132,775 131,693 128,879
Share-based compensation 18,930 18,676 17,918
Impairment of long-lived assets 8,037 6,999 4,697
Deferred income tax 10,266 837 (6,568)
Non-cash rental expense (income), net 28,937 28,202 (17,043)
Change in operating lease liabilities (40,905) (41,911) 0
Net receipt (recognition) of deferred vendor incentives 2,495 (501) 139
System optimization gains, net (3,148) (1,283) (463)
Gain on sale of investments, net 0 (24,496) (450,000)
Distributions received from TimWen joint venture 8,376 13,400 13,390
Equity in earnings in joint ventures, net (6,096) (8,673) (8,076)
Long-term debt-related activities, net (see below) 6,723 15,317 18,673
Other, net (6,438) (4,838) 5,178
Changes in operating assets and liabilities:      
Accounts and notes receivable, net (16,243) 16,935 13,226
Inventories (841) (163) (434)
Prepaid expenses and other current assets (8,780) (1,569) 6,824
Advertising funds restricted assets and liabilities 49,052 (2,720) 13,955
Accounts payable 1,620 1,054 (145)
Accrued expenses and other current liabilities (18,231) 5,034 23,963
Net cash provided by operating activities 284,361 288,933 224,228
Cash flows from investing activities:      
Capital expenditures (68,969) (74,453) (69,857)
Acquisitions (4,879) (5,052) (21,401)
Dispositions 6,091 3,448 3,223
Proceeds from sale of investments 169 24,496 450,000
Notes receivable, net (662) (3,370) 959
Payments for investments 0 0 13
Net cash (used in) provided by investing activities (68,250) (54,931) 362,911
Cash flows from financing activities:      
Proceeds from long-term debt 153,315 850,000 934,837
Repayments of long-term debt (191,462) (899,800) (894,501)
Repayments of finance lease liabilities (8,383) (6,835)  
Repayments of finance lease liabilities     (5,571)
Deferred financing costs (2,122) (14,008) (17,340)
Repurchases of common stock, including accelerated share repurchase (62,173) (217,797) (269,809)
Dividends (64,866) (96,364) (80,532)
Proceeds from stock option exercises 23,361 28,328 45,228
Payments related to tax withholding for share-based compensation (5,577) (8,820) (11,805)
Contingent consideration payment 0 0 (6,269)
Net cash used in financing activities (157,907) (365,296) (305,762)
Net cash provided by (used in) operations before effect of exchange rate changes on cash 58,204 (131,294) 281,377
Effect of exchange rate changes on cash 1,330 3,489 (7,689)
Net increase (decrease) in cash, cash equivalents and restricted cash 59,534 (127,805) 273,688
Cash, cash equivalents and restricted cash at beginning of period 358,707 486,512 212,824
Cash, cash equivalents and restricted cash at end of period 418,241 358,707 486,512
Long-term debt-related activities, net:      
Loss on early extinguishment of debt 0 8,496 11,475
Accretion of long-term debt 1,161 1,272 1,255
Amortization of deferred financing costs 5,562 5,549 5,943
Long-term debt-related activities, net: 6,723 15,317 18,673
Cash paid for:      
Interest 136,228 138,270 137,607
Income taxes, net of refunds 16,202 34,798 102,827
Supplemental non-cash investing and financing activities:      
Capital expenditures included in accounts payable 3,673 6,026 6,460
Finance leases 34,918 50,061  
Finance leases     6,569
Reconciliation of cash, cash equivalents and restricted cash at end of period:      
Total cash, cash equivalents and restricted cash $ 418,241 $ 486,512 $ 486,512
v3.20.4
Summary of Significant Accounting Policies
12 Months Ended
Jan. 03, 2021
Accounting Policies [Abstract]  
Organization, Consolidation and Presentation of Financial Statements Disclosure and Significant Accounting Policies Summary of Significant Accounting Policies
Corporate Structure

The Wendy’s Company (“The Wendy’s Company” and, together with its subsidiaries, the “Company,” “we,” “us,” or “our”) is the parent company of its 100% owned subsidiary holding company, Wendy’s Restaurants, LLC (“Wendy’s Restaurants”). Wendy’s Restaurants is the parent company of Wendy’s International, LLC and its subsidiaries (“Wendy’s”). Wendy’s franchises and operates Wendy’s quick-service restaurants specializing in hamburger sandwiches throughout the United States of America (“U.S.”) and also franchises Wendy’s quick-service restaurants in 30 foreign countries and U.S. territories. At January 3, 2021, Wendy’s operated and franchised 361 and 6,467 restaurants, respectively.

The Company manages and internally reports its business in the following segments: (1) Wendy’s U.S., (2) Wendy’s International and (3) Global Real Estate & Development. See Note 26 for further information.

Principles of Consolidation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and include all of the Company’s subsidiaries. We also consider for consolidation entities in which we have certain interests, where the controlling financial interest may be achieved through arrangements that do not involve voting interests. Such an entity, known as a variable interest entity (“VIE”), is required to be consolidated by its primary beneficiary. The primary beneficiary is the entity that possesses the power to direct the activities of the VIE that most significantly impact its economic performance and has the obligation to absorb losses or the right to receive benefits from the VIE that are significant to it. The principal entities in which we possess a variable interest include the Company’s national advertising funds for the U.S. and Canada (the “Advertising Funds”). All intercompany balances and transactions have been eliminated in consolidation.

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ materially from those estimates.

On March 11, 2020, the World Health Organization declared the novel strain of coronavirus (“COVID-19”) a global pandemic and recommended containment and mitigation measures worldwide. We continue to monitor the dynamic nature of the COVID-19 pandemic on our business, results and financial condition; however, we cannot predict the ultimate duration, scope or severity of the COVID-19 pandemic or its ultimate impact on our results of operations, financial condition and prospects.

Reclassifications

Certain reclassifications have been made to the prior year presentation to conform to the current year presentation.

Fiscal Year

The Company’s fiscal reporting periods consist of 52 or 53 weeks ending on the Sunday closest to December 31 and are referred to herein as (1) “the year ended January 3, 2021” or “2020,” which consisted of 53 weeks, (2) “the year ended December 29, 2019” or “2019,” which consisted of 52 weeks, and (3) “the year ended December 30, 2018” or “2018,” which consisted of 52 weeks. All references to years, quarters and months relate to fiscal periods rather than calendar periods.

Cash and Cash Equivalents

All highly liquid investments with a maturity of three months or less when acquired are considered cash equivalents. The Company’s cash and cash equivalents principally consist of cash in bank and money market mutual fund accounts and are primarily not in Federal Deposit Insurance Corporation insured accounts.
We believe that our vulnerability to risk concentrations in our cash equivalents is mitigated by (1) our policies restricting the eligibility, credit quality and concentration limits for our placements in cash equivalents and (2) insurance from the Securities Investor Protection Corporation of up to $500 per account, as well as supplemental private insurance coverage maintained by substantially all of our brokerage firms, to the extent our cash equivalents are held in brokerage accounts.

Restricted Cash

In accordance with the Company’s securitized financing facility, certain cash accounts have been established with the trustee for the benefit of the trustee and the noteholders and are restricted in their use. Such restricted cash primarily represents cash collections and cash reserves held by the trustee to be used for payments of principal, interest and commitment fees required for the Company’s senior secured notes. Restricted cash also includes cash collected by the Advertising Funds, usage of which is restricted for advertising activities and is included in “Advertising funds restricted assets.” Refer to Note 7 for further information.

Accounts and Notes Receivable, Net

Accounts and notes receivable, net, consist primarily of royalties, rents, property taxes and franchise fees due principally from franchisees, credit card receivables, insurance receivables and refundable income taxes. Reserve estimates include consideration of the likelihood of default expected over the estimated life of the receivable. The Company periodically assesses the need for an allowance for doubtful accounts on its receivables based upon several key credit quality indicators such as outstanding past due balances, the financial strength of the obligor, the estimated fair value of any underlying collateral and agreement characteristics.

We believe that our vulnerability to risk concentrations in our receivables is mitigated by (1) favorable historical collectability on past due balances, (2) recourse to the underlying collateral regarding sales-type and direct financing lease receivables, and (3) our expectations for fluctuations in general market conditions. Receivables are considered delinquent once they are contractually past due under the terms of the underlying agreements. As of January 3, 2021, there were no material receivables more than one year past due.

Inventories

The Company’s inventories are stated at the lower of cost or net realizable value, with cost determined in accordance with the first-in, first-out method and consist primarily of restaurant food items and paper supplies.

Properties and Depreciation and Amortization

Properties are stated at cost, including capitalized internal costs of employees to the extent such employees are dedicated to specific restaurant construction projects, less accumulated depreciation and amortization. Depreciation and amortization of properties is computed principally on the straight-line basis using the following estimated useful lives of the related major classes of properties: 3 to 20 years for office and restaurant equipment (including technology), 3 to 15 years for transportation equipment and 7 to 30 years for buildings and improvements. When the Company commits to a plan to cease using certain properties before the end of their estimated useful lives, depreciation expense is accelerated to reflect the use of the assets over their shortened useful lives. Leasehold improvements are amortized over the shorter of their estimated useful lives or the terms of the respective leases, including periods covered by renewal options that the Company is reasonably assured of exercising.

The Company reviews properties for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. If such review indicates an asset group may not be recoverable, an impairment loss is recognized for the excess of the carrying amount over the fair value of an asset group to be held and used or over the fair value less cost to sell of an asset to be disposed. See “Impairment of Long-Lived Assets” below for further information.

The Company classifies assets as held for sale and ceases depreciation of the assets when there is a plan for disposal of the assets and those assets meet the held for sale criteria. Assets held for sale are included in “Prepaid expenses and other current assets” in the consolidated balance sheets.
Goodwill

Goodwill, representing the excess of the cost of an acquired entity over the fair value of the acquired net assets, is not amortized. Goodwill associated with our Company-operated restaurants is reduced as a result of restaurant dispositions based on the relative fair values and is included in the carrying value of the restaurant in determining the gain or loss on disposal. If a Company-operated restaurant is sold within two years of being acquired from a franchisee, the goodwill associated with the acquisition is written off in its entirety. Goodwill has been assigned to reporting units for purposes of impairment testing.  The Company tests goodwill for impairment annually during the fourth quarter, or more frequently if events or changes in circumstances indicate that the asset may be impaired. Our annual impairment test of goodwill may be completed through a qualitative assessment to determine if the fair value of the reporting unit is more likely than not greater than the carrying amount.  If we elect to bypass the qualitative assessment for any reporting units, or if a qualitative assessment indicates it is more likely than not that the estimated carrying value of a reporting unit exceeds its fair value, we perform a quantitative goodwill impairment test. Under the quantitative test, the fair value of the reporting unit is compared with its carrying value (including goodwill).  If the carrying value of the reporting unit exceeds its fair value, an impairment loss is recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit. Our critical estimates in this impairment test include future sales growth, operating profit, income tax rates, terminal value growth rates, capital expenditures and the weighted average cost of capital (discount rate).

Our fair value estimates are subject to change as a result of many factors including, among others, any changes in our business plans, changing economic conditions and the competitive environment. Should actual cash flows and our future estimates vary adversely from those estimates we use, we may be required to recognize goodwill impairment charges in future years.

Impairment of Long-Lived Assets

Our long-lived assets include (1) properties and related definite-lived intangible assets (e.g., favorable leases) that are leased and/or subleased to franchisees, (2) Company-operated restaurant assets and related definite-lived intangible assets, which include reacquired rights under franchise agreements, and (3) finance and operating lease assets.

We review our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. We assess the recoverability of our long-lived assets by comparing the carrying amount of the asset group to future undiscounted net cash flows expected to be generated through leases and/or subleases or by our individual Company-operated restaurants. If the carrying amount of the long-lived asset group is not recoverable on an undiscounted cash flow basis, then impairment is recognized to the extent that the carrying amount exceeds its fair value and is included in “Impairment of long-lived assets.” Our critical estimates in this review process include the anticipated future cash flows from leases and/or subleases or individual Company-operated restaurants, which is used in assessing the recoverability of the respective long-lived assets.

Our fair value estimates are subject to change as a result of many factors including, among others, any changes in our business plans, changing economic conditions and the competitive environment. Should actual cash flows and our future estimates vary adversely from those estimates we used, we may be required to recognize additional impairment charges in future years.

Other Intangible Assets

Definite-lived intangible assets are amortized on a straight-line basis using the following estimated useful lives of the related classes of intangibles: for favorable leases, the terms of the respective leases, including periods covered by renewal options that the Company as lessor is reasonably certain the tenant will exercise; 1 to 5 years for computer software; 4 to 20 years for reacquired rights under franchise agreements; and 20 years for franchise agreements. Trademarks have an indefinite life and are not amortized.
The Company reviews definite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the intangible asset may not be recoverable. Indefinite-lived intangible assets are tested for impairment at least annually, or more frequently if events or changes in circumstances indicate that the assets may be impaired. Our annual impairment test for indefinite-lived intangible assets may be completed through a qualitative assessment to determine if the fair value of the indefinite-lived intangible assets is more likely than not greater than the carrying amount. If we elect to bypass the qualitative assessment, or if a qualitative assessment indicates it is more likely than not that the estimated carrying value exceeds the fair value, we test for impairment using a quantitative process. If the Company determines that impairment of its intangible assets may exist, the amount of impairment loss is measured as the excess of carrying value over fair value. Our estimates in the determination of the fair value of indefinite-lived intangible assets include the anticipated future revenues of Company-operated and franchised restaurants and the resulting cash flows.

Investments

The Company has a 50% share in a partnership in a Canadian restaurant real estate joint venture (“TimWen”) with a subsidiary of Restaurant Brands International Inc., a quick-service restaurant company that owns the Tim Hortons® brand (Tim Hortons is a registered trademark of Tim Hortons USA Inc.). In addition, the Company has a 20% share in a joint venture in Brazil (the “Brazil JV”). The Company has significant influence over these investees. Such investments are accounted for using the equity method, under which our results of operations include our share of the income (loss) of the investees in “Other operating income, net.” Other investments in equity securities, including investments in limited partnerships, in which the Company does not have significant influence, and for which there is not a readily determinable fair value, are recorded at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer. Realized gains and losses are reported as income or loss in the period in which the securities are sold or otherwise disposed. Cash distributions and dividends received that are determined to be returns of capital are recorded as a reduction of the carrying value of our investments and returns on our investments are recorded to “Investment (loss) income, net.”

The difference between the carrying value of our TimWen equity investment and the underlying equity in the historical net assets of the investee is accounted for as if the investee were a consolidated subsidiary. Accordingly, the carrying value difference is amortized over the estimated lives of the assets of the investee to which such difference would have been allocated if the equity investment were a consolidated subsidiary. To the extent the carrying value difference represents goodwill, it is not amortized.

Share-Based Compensation

The Company has granted share-based compensation awards to certain employees under several equity plans (the “Equity Plans”). The Company measures the cost of employee services received in exchange for an equity award, which include grants of employee stock options and restricted shares, based on the fair value of the award at the date of grant. Share-based compensation expense is recognized net of estimated forfeitures, determined based on historical experience. The Company recognizes share-based compensation expense over the requisite service period unless the awards are subject to performance conditions, in which case we recognize compensation expense over the requisite service period to the extent performance conditions are considered probable. The Company determines the grant date fair value of stock options using a Black-Scholes-Merton option pricing model (the “Black-Scholes Model”). The grant date fair value of restricted share awards (“RSAs”), restricted share units (“RSUs”) and performance-based awards are determined using the fair market value of the Company’s common stock on the date of grant, as set forth in the applicable plan document, unless the awards are subject to market conditions, in which case we use a Monte Carlo simulation model. The Monte Carlo simulation model utilizes multiple input variables to estimate the probability that market conditions will be achieved.

Foreign Currency Translation

The Company’s primary foreign operations are in Canada where the functional currency is the Canadian dollar. Financial statements of foreign subsidiaries are prepared in their functional currency and then translated into U.S. dollars. Assets and liabilities are translated at the exchange rate as of the balance sheet date and revenues, costs and expenses are translated at a monthly average exchange rate. Net gains or losses resulting from the translation are recorded to the “Foreign currency translation adjustment” component of “Accumulated other comprehensive loss.” Gains and losses arising from the impact of foreign currency exchange rate fluctuations on transactions in foreign currency are included in “General and administrative.”
Income Taxes

The Company accounts for income taxes under the asset and liability method. A deferred tax asset or liability is recognized whenever there are (1) future tax effects from temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and (2) operating loss, capital loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to the years in which those differences are expected to be recovered or settled.

Deferred tax assets are recognized to the extent the Company believes these assets will more likely than not be realized. In evaluating the realizability of deferred tax assets, the Company considers all available positive and negative evidence, including the interaction and the timing of future reversals of existing temporary differences, projected future taxable income, recent operating results and tax-planning strategies. When considered necessary, a valuation allowance is recorded to reduce the carrying amount of the deferred tax assets to their anticipated realizable value.

The Company records uncertain tax positions on the basis of a two-step process whereby we first determine if it is more likely than not that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. A tax position that meets the more-likely-than-not recognition threshold is then measured for purposes of financial statement recognition as the largest amount of benefit that is greater than 50% likely of being realized upon being effectively settled.

Interest accrued for uncertain tax positions is charged to “Interest expense, net.” Penalties accrued for uncertain tax positions are charged to “General and administrative.”

Restaurant Acquisitions and Dispositions

The Company accounts for the acquisition of restaurants from franchisees using the acquisition method of accounting for business combinations. The acquisition method of accounting involves the allocation of the purchase price to the estimated fair values of the assets acquired and liabilities assumed. This allocation process requires the use of estimates and assumptions to derive fair values and to complete the allocation. The excess of the purchase price over the fair values of the assets acquired and liabilities assumed represents goodwill derived from the acquisition. See “Goodwill” above for further information.

In connection with the sale of Company-operated restaurants to franchisees, the Company typically enters into several agreements, in addition to an asset purchase agreement, with franchisees including franchise, development, relationship and lease agreements. The Company typically sells restaurants’ cash, inventory and equipment and retains ownership or the leasehold interest to the real estate to lease and/or sublease to the franchisee. The Company has determined that its restaurant dispositions usually represent multiple-element arrangements, and as such, the cash consideration received is allocated to the separate elements based on their relative selling price. Cash consideration generally includes up-front consideration for the sale of the restaurants, technical assistance fees and development fees and future cash consideration for royalties and lease payments. The Company considers the future lease payments in allocating the initial cash consideration received. The Company obtains third-party evidence to estimate the relative selling price of the stated rent under the lease and/or sublease agreements which is primarily based upon comparable market rents. Based on the Company’s review of the third-party evidence, the Company records favorable or unfavorable lease assets/liabilities with a corresponding offset to the gain or loss on the sale of the restaurants. The cash consideration per restaurant for technical assistance fees and development fees is consistent with the amounts stated in the related franchise agreements which are charged for separate standalone arrangements. The Company recognizes the technical assistance and development fees over the contractual term of the franchise agreements. Future royalty income is also recognized in revenue as earned. See “Revenue Recognition” below for further information.

Revenue Recognition

“Sales” includes revenues recognized upon delivery of food to the customer at Company-operated restaurants. “Sales” excludes taxes collected from the Company’s customers. Revenue is recognized when the food is purchased by the customer, which is when our performance obligation is satisfied. “Sales” also includes income for gift cards. Gift card payments are recorded as deferred income when received and are recognized as revenue upon redemption.

“Franchise royalty revenue and fees” includes royalties, new build technical assistance fees, renewal fees, franchisee-to- franchisee restaurant transfer (“Franchise Flip”) technical assistance fees, Franchise Flip advisory fees and development fees.
Royalties from franchised restaurants are based on a percentage of sales of the franchised restaurant and are recognized as earned. New build technical assistance fees, renewal fees and Franchise Flip technical assistance fees are recorded as deferred revenue when received and recognized as revenue over the contractual term of the franchise agreements, once the restaurant has opened. Development fees are deferred when received, allocated to each agreed upon restaurant, and recognized as revenue over the contractual term of each respective franchise agreement, once the restaurant has opened. These franchise fees are considered highly dependent upon and interrelated with the franchise right granted in the franchise agreement. Franchise Flip advisory fees include valuation services and fees for selecting pre-approved buyers for Franchise Flips. Franchise Flip advisory fees are paid by the seller and are recognized as revenue at closing of the Franchise Flip transaction.

“Franchise rental income” includes rental income from properties owned and leased by the Company and leased or subleased to franchisees. Rental income is recognized on a straight-line basis over the respective operating lease terms. Favorable and unfavorable lease amounts related to the leased and/or subleased properties are amortized to rental income on a straight-line basis over the remaining term of the leases.

“Advertising funds revenue” includes contributions to the Advertising Funds by franchisees. Revenue related to these contributions is based on a percentage of sales of the franchised restaurants and is recognized as earned.

Cost of Sales

Cost of sales includes food and paper, restaurant labor and occupancy, advertising and other operating costs relating to Company-operated restaurants. Cost of sales excludes depreciation and amortization expense.

Vendor Incentives

The Company receives incentives from certain vendors. These incentives are recognized as earned and are classified as a reduction of “Cost of sales.”

Advertising Costs

Advertising costs are expensed as incurred and are included in “Cost of sales” and “Advertising funds expense.” Production costs of advertising are expensed when the advertisement is first released.

Franchise Support and Other Costs

The Company incurs costs to provide direct support services to our franchisees, as well as certain other direct and incremental costs to the Company’s franchise operations. These costs primarily relate to franchise development services, facilitating Franchise Flips and information technology services, which are charged to “Franchise support and other costs,” as incurred.

Self-Insurance

The Company is self-insured for most workers’ compensation losses and health care claims and purchases insurance for general liability and automotive liability losses, all subject to a $500 per occurrence retention or deductible limit. The Company provides for their estimated cost to settle both known claims and claims incurred but not yet reported. Liabilities associated with these claims are estimated, in part, by considering the frequency and severity of historical claims, both specific to us, as well as industry-wide loss experience and other actuarial assumptions. We determine our insurance obligations with the assistance of actuarial firms. Since there are many estimates and assumptions involved in recording insurance liabilities and in the case of workers’ compensation a significant period of time elapses before the ultimate resolution of claims, differences between actual future events and prior estimates and assumptions could result in adjustments to these liabilities.
Leases

Determination of Whether a Contract Contains a Lease

The Company evaluates the contracts it enters into to determine whether such contracts contain leases. A contract contains a lease if the contract conveys the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration. At commencement, contracts containing a lease are further evaluated for classification as an operating or finance lease where the Company is a lessee, or as an operating, sales-type or direct financing lease where the Company is a lessor, based on their terms.

ROU Model and Determination of Lease Term

The Company uses the right-of-use (“ROU”) model to account for leases where the Company is the lessee, which requires an entity to recognize a lease liability and ROU asset on the lease commencement date. A lease liability is measured equal to the present value of the remaining lease payments over the lease term and is discounted using the incremental borrowing rate, as the rate implicit in the Company’s leases is not readily determinable. The incremental borrowing rate is the rate of interest that the Company would have to pay to borrow, on a collateralized basis over a similar term, an amount equal to the lease payments in a similar economic environment. Lease payments include payments made before the commencement date and any residual value guarantees, if applicable. The initial ROU asset consists of the initial measurement of the lease liability, adjusted for any favorable or unfavorable terms for leases acquired from franchisees, as well as payments made before the commencement date, initial direct costs and lease incentives earned. When determining the lease term, the Company includes option periods that it is reasonably certain to exercise as failure to renew the lease would impose a significant economic detriment. For properties used for Company-operated restaurants, the primary economic detriment relates to the existence of unamortized leasehold improvements which might be impaired if we choose not to exercise the available renewal options. The lease term for properties leased or subleased to franchisees is determined based upon the economic detriment to the franchisee and includes consideration of the length of the franchise agreement, historical performance of the restaurant and the existence of bargain renewal options. Lease terms for real estate are generally initially between 15 and 20 years and, in most cases, provide for rent escalations and renewal options.

Operating Leases

For operating leases, minimum lease payments or receipts, including minimum scheduled rent increases, are recognized as rent expense where the Company is a lessee, or income where the Company is a lessor, as applicable, on a straight-line basis (“Straight-Line Rent”) over the applicable lease terms. There is a period under certain lease agreements referred to as a rent holiday (“Rent Holiday”) that generally begins on the possession date and ends on the rent commencement date. During a Rent Holiday, no cash rent payments are typically due under the terms of the lease; however, expense is recorded for that period on a straight-line basis. The excess of the Straight-Line Rent over the minimum rents paid is included in the ROU asset where the Company is a lessee. The excess of the Straight-Line Rent over the minimum rents received is recorded as a deferred lease asset and is included in “Other assets” where the Company is a lessor. Certain leases contain provisions, referred to as contingent rent (“Contingent Rent”), that require additional rental payments based upon restaurant sales volume. Contingent Rent is recognized each period as the liability is incurred or the asset is earned.

Lease cost for operating leases includes the amortization of the ROU asset and interest expense related to the operating lease liability. Variable lease cost for operating leases includes Contingent Rent and payments for executory costs such as real estate taxes, insurance and common area maintenance, which are excluded from the measurement of the lease liability. Short-term lease cost for operating leases includes rental expense for leases with a term of less than 12 months. Lease costs are recorded in the consolidated statements of operations based on the nature of the underlying lease as follows: (1) rental expense related to leases for Company-operated restaurants is recorded to “Cost of sales,” (2) rental expense for leased properties that are subsequently subleased to franchisees is recorded to “Franchise rental expense” and (3) rental expense related to leases for corporate offices and equipment is recorded to “General and administrative.”
Favorable and unfavorable lease amounts for operating leases where the Company is the lessor are recorded as components of “Other intangible assets” and “Other liabilities,” respectively. Favorable and unfavorable lease amounts are amortized on a straight-line basis over the term of the leases. When the expected term of a lease is determined to be shorter than the original amortization period, the favorable or unfavorable lease balance associated with the lease is adjusted to reflect the revised lease term.

Rental income and favorable and unfavorable lease amortization for operating leases on properties leased or subleased to franchisees is recorded to “Franchise rental income.” Lessees’ variable payments to the Company for executory costs under operating leases are recognized on a gross basis as “Franchise rental income” with a corresponding expense recorded to “Franchise rental expense.”

Finance Leases

Lease cost for finance leases where the Company is the lessee includes the amortization of the ROU asset, which is amortized on a straight-line basis and recorded to “Depreciation and amortization,” and interest expense on the finance lease liability, which is calculated using the interest method and recorded to “Interest expense, net.” Finance lease ROU assets are amortized over the shorter of their estimated useful lives or the terms of the respective leases, including periods covered by renewal options that the Company is reasonably certain of exercising.

Sales-Type and Direct Financing Leases

For sales-type and direct financing leases where the Company is the lessor, the Company records its investment in properties leased to franchisees on a net basis, which is comprised of the present value of the lease payments not yet received and the present value of the guaranteed and unguaranteed residual assets. The current and long-term portions of our net investment in sales-type and direct financing leases are included in “Accounts and notes receivable, net” and “Net investment in sales-type and direct financing leases,” respectively. Unearned income is recognized as interest income over the lease term and is included in “Interest expense, net.” Sales-type leases result in the recognition of gain or loss at the commencement of the lease, which is recorded to “Other operating income, net.” The gain or loss recognized upon commencement of the lease is directly affected by the Company’s estimate of the amount to be derived from the guaranteed and unguaranteed residual assets at the end of the lease term. The Company’s main component of this estimate is the expected fair value of the underlying assets, primarily the fair value of land. Lessees’ variable payments to the Company for executory costs under sales-type and direct financing leases are recognized on a gross basis as “Franchise rental income” with a corresponding expense recorded to “Franchise rental expense.”

Significant Assumptions and Judgments

Management makes certain estimates and assumptions regarding each new lease and sublease agreement, renewal and amendment, including, but not limited to, property values, market rents, property lives, discount rates and probable term, all of which can impact (1) the classification and accounting for a lease or sublease as operating or finance, including sales-type and direct financing, (2) the Rent Holiday and escalations in payment that are taken into consideration when calculating Straight-Line Rent, (3) the term over which leasehold improvements for each restaurant are amortized and (4) the values and lives of adjustments to the initial ROU asset where the Company is the lessee, or favorable and unfavorable leases where the Company is the lessor. The amount of depreciation and amortization, interest and rent expense and income reported would vary if different estimates and assumptions were used.

Concentration of Risk

Wendy’s had no customers which accounted for 10% or more of consolidated revenues in 2020, 2019 or 2018. As of January 3, 2021, Wendy’s had one main in-line distributor of food, packaging and beverage products, excluding breads, that serviced approximately 67% of Wendy’s restaurants in the U.S. and four additional in-line distributors that, in the aggregate, serviced approximately 32% of Wendy’s restaurants in the U.S. We believe that our vulnerability to risk concentrations related to significant vendors and sources of our raw materials is mitigated as we believe that there are other vendors who would be able to service our requirements. However, if a disruption of service from any of our main in-line distributors was to occur, we could experience short-term increases in our costs while distribution channels were adjusted.
Wendy’s restaurants are principally located throughout the U.S. and to a lesser extent, in 30 foreign countries and U.S. territories with the largest number in Canada. Wendy’s U.S. restaurants are located in 50 states and the District of Columbia, with the largest number in Florida, Texas, Ohio, Georgia, California, North Carolina, Pennsylvania and Michigan. Because our restaurant operations are generally located throughout the U.S. and to a much lesser extent, Canada and other foreign countries and U.S. territories, we believe the risk of geographic concentration is not significant. We could be adversely affected by changing consumer preferences resulting from concerns over nutritional or safety aspects of beef, chicken, french fries or other products we sell or the effects of food safety events or disease outbreaks. Our exposure to foreign exchange risk is primarily related to fluctuations in the Canadian dollar relative to the U.S. dollar for our Canadian operations. However, our exposure to Canadian dollar foreign currency risk is mitigated by the fact that there are no Company-operated restaurants in Canada and less than 10% of Wendy’s franchised restaurants are in Canada.

The Company is subject to credit risk through its accounts receivable consisting primarily of amounts due from franchisees for royalties, franchise fees and rent. In addition, we have notes receivable from certain of our franchisees. The financial condition of these franchisees is largely dependent upon the underlying business trends of the Wendy’s brand and market conditions within the quick-service restaurant industry. This concentration of credit risk is mitigated, in part, by the number of franchisees and the short-term nature of the franchise receivables.

New Accounting Standards Adopted

Income Taxes

In December 2019, the Financial Accounting Standards Board (“FASB”) issued new guidance to simplify the accounting for income taxes by removing certain exceptions to the general principles and the simplification of areas such as franchise taxes, transactions that result in a step-up in the tax basis of goodwill, separate entity financial statements and interim recognition of enactment of tax laws or tax rate changes. The Company early adopted this amendment during the first quarter of 2020. The adoption of this guidance did not have a material impact on our consolidated financial statements.

Fair Value Measurement

In August 2018, the FASB issued new guidance on disclosure requirements for fair value measurements. The objective of the new guidance is to provide additional information about assets and liabilities measured at fair value in the statement of financial position or disclosed in the notes to financial statements. New incremental disclosure requirements include the amount of fair value hierarchy level 3 changes in unrealized gains and losses and the range and weighted average used to develop significant unobservable inputs for level 3 fair value measurements. The Company adopted this guidance during the first quarter of 2020. The adoption of this guidance did not have a material impact on our consolidated financial statements.

Goodwill Impairment

In January 2017, the FASB issued new guidance that simplifies the accounting for goodwill impairment by eliminating step two from the goodwill impairment test. The Company adopted this amendment during the first quarter of 2020. The adoption of this guidance did not have a material impact on our consolidated financial statements.

Credit Losses

In June 2016, the FASB issued an amendment that requires the Company to use a current expected credit loss model that results in the immediate recognition of an estimate of credit losses that are expected to occur over the life of the financial instruments that are within the scope of the guidance, including trade receivables. The Company adopted this amendment during the first quarter of 2020. The adoption of this guidance did not have a material impact on our consolidated financial statements.
Leases

In February 2016, the FASB issued new guidance on leases, which outlines principles for the recognition, measurement, presentation and disclosure of leases applicable to both lessors and lessees. The new guidance requires lessees to recognize on the balance sheet the assets and liabilities for the rights and obligations created by finance and operating leases. The Company adopted the new guidance during the first quarter of 2019 using the effective date as the date of initial application; therefore, the comparative periods have not been adjusted and continue to be reported under the previous lease guidance.

The new standard provides a number of optional practical expedients in transition. The Company elected the package of practical expedients, which permits us not to reassess under the new standard our prior conclusions about lease identification, lease classification and initial direct costs. For those leases that fall under the definition of a short-term lease, the Company elected the short-term lease recognition exemption. Under this practical expedient, for those leases that qualify, we did not recognize ROU assets or liabilities, which included not recognizing ROU assets or lease liabilities for existing short-term leases of those assets in transition. The Company also elected the practical expedient for lessees to account for lease components and nonlease components as a single lease component for all underlying classes of assets. In addition, the Company elected the practical expedient for lessors to account for lease components and nonlease components as a single lease component in instances where the lease component is predominant, the timing and pattern of transfer for the lease component and nonlease component are the same and the lease component, if accounted for separately, would be classified as an operating lease. The Company did not elect the use-of-hindsight practical expedient.

The standard had a material impact on our consolidated balance sheets and related disclosures. Upon adoption at the beginning of 2019, we recognized operating lease liabilities of $1,011,000 based on the present value of the remaining minimum rental payments, with corresponding ROU assets of $934,000. The measurement of the operating lease ROU assets included, among other items, favorable lease amounts of $23,000 and unfavorable lease amounts of $30,000, which were previously included in “Other intangible assets” and “Other liabilities,” respectively, as well as the excess of rent expense recognized on a straight-line basis over the minimum rents paid of $67,000, which was previously included in “Other liabilities.” In addition, the standard requires lessors to recognize lessees’ payments to the Company for executory costs on a gross basis as revenue with a corresponding expense, which resulted in an increase of approximately $38,000 to our 2019 franchise rental income and expense. The Company also recognized a decrease to retained earnings of $1,105 as a result of impairing newly recognized ROU assets upon transition to the new guidance. The adoption of the guidance did not have a material impact on our consolidated statement of cash flows.

New Accounting Standards

Financial Instruments

In August 2020, the FASB issued an amendment that simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. The amendment simplifies accounting for convertible instruments by removing major separation models required under current accounting guidance. In addition, the amendment removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for the exception, and also simplifies the diluted earnings per share calculation in certain areas. The amendment is effective commencing with our 2022 fiscal year. We are currently evaluating the impact of the adoption of this guidance on our consolidated financial statements.
v3.20.4
Revenue (Notes)
12 Months Ended
Jan. 03, 2021
Revenue [Abstract]  
Revenue from Contract with Customer Revenue
Nature of Goods and Services

The Company generates revenues from sales at Company-operated restaurants and earns fees and rental income from franchised restaurants. Revenues are recognized upon delivery of food to the customer at Company-operated restaurants or upon the fulfillment of terms outlined in the franchise agreement for franchised restaurants. The franchise agreement provides the franchisee the right to construct, own and operate a Wendy’s restaurant upon a site accepted by Wendy’s and to use the Wendy’s system in connection with the operation of the restaurant at that site. The franchise agreement generally provides for a 20-year term and a 10-year renewal subject to certain conditions. The initial term may be extended up to 25 years and the renewal extended up to 20 years for qualifying restaurants under certain new restaurant development and reimaging programs.

The franchise agreement requires that the franchisee pay a royalty based on a percentage of sales at the franchised restaurant, as well as make contributions to the Advertising Funds based on a percentage of sales. Wendy’s may offer development incentive programs from time to time that provide for a discount or lesser royalty amount or Advertising Fund contribution for a limited period of time. The agreement also typically requires that the franchisee pay Wendy’s a technical assistance fee. The technical assistance fee is used to defray some of the costs to Wendy’s for training, start-up and transitional services related to new and existing franchisees acquiring restaurants and in the development and opening of new restaurants.

Wendy’s also enters into development agreements with certain franchisees. The development agreement generally provides the franchisee with the right to develop a specified number of new Wendy’s restaurants using the Image Activation design within a stated, non-exclusive territory for a specified period, subject to the franchisee meeting interim new restaurant development requirements.

Wendy’s owns and leases sites from third parties, which it leases and/or subleases to franchisees. Noncancelable lease terms are generally initially between 15 and 20 years and, in most cases, provide for rent escalations and renewal options. The initial lease term for properties leased or subleased to franchisees is generally set to be coterminous with the initial 20-year term of the related franchise agreement and any renewal term is coterminous with the 10-year renewal term of the related franchise agreement.

Royalties and contributions to the Advertising Funds are generally due within the month subsequent to which the revenue was generated through sales at the franchised restaurant. Technical assistance fees and renewal fees are generally due upon execution of the related franchise agreement. Rental income is due in accordance with the terms of each lease, which is generally at the beginning of each month.

Disaggregation of Revenue

The following tables disaggregate revenue by segment and source for 2020, 2019 and 2018:
2020
Wendy’s U.S.Wendy’s InternationalGlobal Real Estate & DevelopmentTotal
Sales at Company-operated restaurants$722,764 $— $— $722,764 
Franchise royalty revenue373,162 43,346 — 416,508 
Franchise fees22,126 1,962 4,153 28,241 
Franchise rental income— — 232,648 232,648 
Advertising funds revenue313,330 20,334 — 333,664 
Total revenues$1,431,382 $65,642 $236,801 $1,733,825 
2019
Wendy’s U.S.Wendy’s InternationalGlobal Real Estate & DevelopmentTotal
Sales at Company-operated restaurants$707,485 $— $— $707,485 
Franchise royalty revenue355,702 44,998 — 400,700 
Franchise fees21,889 2,978 3,432 28,299 
Franchise rental income— — 233,065 233,065 
Advertising funds revenue319,231 20,222 — 339,453 
Total revenues$1,404,307 $68,198 $236,497 $1,709,002 

2018
Wendy’s U.S.Wendy’s InternationalGlobal Real Estate & DevelopmentTotal
Sales at Company-operated restaurants$651,577 $— $— $651,577 
Franchise royalty revenue335,500 42,446 — 377,946 
Franchise fees18,972 5,607 6,518 31,097 
Franchise rental income— — 203,297 203,297 
Advertising funds revenue306,442 19,577 — 326,019 
Total revenues$1,312,491 $67,630 $209,815 $1,589,936 

Contract Balances

The following table provides information about receivables and contract liabilities (deferred franchise fees) from contracts with customers:
January 3,
2021 (a)
December 29,
2019 (a)
Receivables, which are included in “Accounts and notes receivable, net” (b)$57,677 $39,188 
Receivables, which are included in “Advertising funds restricted assets”
63,252 54,394 
Deferred franchise fees (c)97,785 100,689 
_______________

(a)Excludes funds collected from the sale of gift cards, which are primarily reimbursed to franchisees upon redemption at franchised restaurants and do not ultimately result in the recognition of revenue in the Company’s consolidated statements of operations.

(b)Includes receivables related to “Sales” and “Franchise royalty revenue and fees.”

(c)Deferred franchise fees are included in “Accrued expenses and other current liabilities” and “Deferred franchise fees” and totaled $8,691 and $89,094 as of January 3, 2021, respectively, and $8,899 and $91,790 as of December 29, 2019, respectively.
Significant changes in deferred franchise fees are as follows:
202020192018
Deferred franchise fees at beginning of period$100,689 $102,205 $102,492 
Revenue recognized during the period
(8,955)(9,487)(9,641)
New deferrals due to cash received and other6,051 7,971 9,354 
Deferred franchise fees at end of period$97,785 $100,689 $102,205 

Anticipated Future Recognition of Deferred Franchise Fees

The following table reflects the estimated franchise fees to be recognized in the future related to performance obligations that are unsatisfied at the end of the period:
Estimate for fiscal year:
2021$8,691 
20226,140 
20235,968 
20245,770 
20255,581 
Thereafter65,635 
$97,785 
v3.20.4
System Optimization Gains, Net
12 Months Ended
Jan. 03, 2021
Plant, Property and Equipment  
System Optimization Gains, Net Properties
Year End
January 3, 2021December 29, 2019
Land$372,473 $375,109 
Buildings and improvements504,504 508,602 
Leasehold improvements409,306 405,158 
Office, restaurant and transportation equipment255,469 279,799 
1,541,752 1,568,668 
Accumulated depreciation and amortization(625,863)(591,668)
$915,889 $977,000 

Depreciation and amortization expense related to properties was $77,656, $81,219 and $79,009 during 2020, 2019 and 2018, respectively.
System Optimization  
Plant, Property and Equipment  
System Optimization Gains, Net System Optimization Gains, Net
The Company’s system optimization initiative included a shift from Company-operated restaurants to franchised restaurants over time, through acquisitions and dispositions, as well as facilitating Franchise Flips. As of January 1, 2017, the Company completed its plan to reduce its ongoing Company-operated restaurant ownership to approximately 5% of the total system. While the Company has no plans to reduce its ownership below the approximately 5% level, the Company expects to continue to optimize the Wendy’s system through Franchise Flips, as well as evaluating strategic acquisitions of franchised restaurants and strategic dispositions of Company-operated restaurants to existing and new franchisees, to further strengthen the franchisee base, drive new restaurant development and accelerate reimages. During 2020, 2019 and 2018, the Company facilitated 54, 37 and 96 Franchise Flips, respectively. Additionally, during 2020 and 2018, the Company completed the sale of one and three Company-operated restaurants to franchisees, respectively. No Company-operated restaurants were sold to franchisees during 2019. The Company expects to sell 43 Company-operated restaurants in New York to franchisees in the second quarter of 2021.

Gains and losses recognized on dispositions are recorded to “System optimization gains, net” in our consolidated statements of operations. Costs related to acquisitions and dispositions under our system optimization initiative are recorded to “Reorganization and realignment costs,” which are further described in Note 5. All other costs incurred related to facilitating Franchise Flips are recorded to “Franchise support and other costs.”
The following is a summary of the disposition activity recorded as a result of our system optimization initiative:
Year Ended
202020192018
Number of restaurants sold to franchisees— 
Proceeds from sales of restaurants$50 $— $1,436 
Net assets sold (a)(34)— (1,370)
Goodwill related to sales of restaurants— — (208)
Net favorable leases— — 220 
Other — — 11 
16 — 89 
Post-closing adjustments on sales of restaurants (b)362 1,087 445 
Gain on sales of restaurants, net378 1,087 534 
Gain (loss) on sales of other assets, net (c)2,770 196 (71)
System optimization gains, net$3,148 $1,283 $463 
_______________

(a)Net assets sold consisted primarily of equipment.

(b)2020, 2019 and 2018 include the recognition of deferred gains of $368, $911 and $1,029, respectively, as a result of the resolution of certain contingencies related to the extension of lease terms for restaurants previously sold to franchisees. 2018 also includes cash proceeds, net of payments, of $6 related to post-closing reconciliations with franchisees.

(c)During 2020, 2019 and 2018, Wendy’s received cash proceeds of $6,041, $3,448 and $1,781, respectively, primarily from the sale of surplus and other properties.

Assets Held for Sale

January 3, 2020December 29, 2019
Number of restaurants classified as held for sale43 — 
Net restaurant assets held for sale (a)$20,587 $— 
Other assets held for sale (b)$1,732 $1,437 
_______________

(a)Net restaurant assets held for sale include the New York Company-operated restaurants we expect to sell in the second quarter of 2021 and consist primarily of cash, inventory, property and an estimate of allocable goodwill.

(b)Other assets held for sale primarily consist of surplus properties.

Assets held for sale are included in “Prepaid expenses and other current assets.”
v3.20.4
Acquisitions
12 Months Ended
Jan. 03, 2021
Business Combinations [Abstract]  
Acquisitions Acquisitions
No restaurants were acquired from franchisees during 2020. During 2019 and 2018, the Company acquired five restaurants and 16 restaurants from franchisees, respectively. The Company did not incur any material acquisition-related costs associated with the acquisitions and such transactions were not significant to our consolidated financial statements. The table below presents the allocation of the total purchase price to the fair value of assets acquired and liabilities assumed for restaurants acquired from franchisees:
Year Ended
20192018 (a)
Restaurants acquired from franchisees16 
Total consideration paid, net of cash received$5,052 $21,401 
Identifiable assets acquired and liabilities assumed:
Properties666 4,363 
Acquired franchise rights1,354 10,127 
Finance lease assets5,350 5,360 
Other assets— 621 
Finance lease liabilities(4,084)(3,135)
Unfavorable leases— (733)
Other(2,316)(2,240)
Total identifiable net assets970 14,363 
Goodwill$4,082 $7,038 
_______________

(a)The fair values of the identifiable intangible assets related to restaurants acquired in 2018 were provisional amounts as of December 30, 2018, pending final purchase accounting adjustments. The Company finalized the purchase price allocation during the three months ended March 31, 2019, which resulted in a decrease in the fair value of acquired franchise rights of $2,989 and an increase in deferred tax assets of $140.

NPC Quality Burgers, Inc. (“NPC”)

As previously announced, NPC, the Company’s largest franchisee, filed for chapter 11 bankruptcy in July 2020 and commenced a process to sell all or substantially all of its assets, including its interest in approximately 393 Wendy’s restaurants across eight different markets, pursuant to a court-approved auction process. On November 18, 2020, the Company submitted a consortium bid together with a group of pre-qualified franchisees to acquire NPC’s Wendy’s restaurants. Under the terms of the consortium bid, several existing and new franchisees would have been the ultimate purchasers of seven of the NPC markets, while the Company would have acquired one market. As part of the consortium bid, the Company submitted a deposit of $43,240, which is included in “Prepaid expenses and other current assets” as of January 3, 2021. The deposit included $38,361 received from the group of prequalified franchisees, which was payable to the franchisees and included in “Accrued expenses and other current liabilities” as of January 3, 2021 pending resolution of the bankruptcy sale process.

On January 7, 2021, following a court-approved mediation process, NPC and certain affiliates of Flynn Restaurant Group (“FRG”) and the Company entered into separate asset purchase agreements under which all of NPC’s Wendy’s restaurants will be sold to Wendy’s approved franchisees. Under the proposed transaction, FRG will acquire approximately half of NPC’s Wendy’s restaurants in four markets, while several existing Wendy’s franchisees that were part of the Company’s consortium bid will acquire the other half of NPC’s Wendy’s restaurants in the other four markets. The Company does not expect to acquire and operate any restaurants as part of this transaction. The Company expects that the sale of the restaurants will be completed in the late first quarter or early second quarter of 2021, subject to the satisfaction of various closing conditions specified in the asset purchase agreements.
v3.20.4
Reorganization and Realignment Costs
12 Months Ended
Jan. 03, 2021
Restructuring and Related Activities [Abstract]  
Reorganization and Realignment Costs Reorganization and Realignment Costs
The following is a summary of the initiatives included in “Reorganization and realignment costs:”
Year Ended
202020192018
Operations and field realignment$3,801 $— $— 
IT realignment7,288 9,127 — 
G&A realignment614 7,749 8,785 
System optimization initiative4,327 89 283 
Reorganization and realignment costs$16,030 $16,965 $9,068 

Operations and Field Realignment

In September 2020, the Company initiated a plan to reallocate resources to better support the long-term growth strategies for Company and franchise operations (the “Operations and Field Realignment Plan”). The Operations and Field Realignment Plan realigns the Company’s restaurant operations team, including transitioning from separate leaders of Company and franchise operations to a single leader of all U.S. restaurant operations. We also expect to incur contract termination charges, including the planned closure of certain field offices. The Company expects to incur total costs aggregating approximately $7,000 to $9,000 related to the Operations and Field Realignment Plan. During 2020, the Company recognized costs totaling $3,801, which primarily included severance and related employee costs and share-based compensation. The Company expects to incur additional costs aggregating approximately $3,000 to $5,000, comprised primarily of third-party and other costs. The Company expects to recognize the majority of the remaining costs associated with the Operations and Field Realignment Plan during 2021.

The following is a summary of the activity recorded as a result of the Operations and Field Realignment Plan:

Year Ended
2020
Severance and related employee costs$3,113 
Third party and other costs67 
3,180 
Share-based compensation (a)621 
Total operations and field realignment$3,801 
_______________

(a)Primarily represents incremental share-based compensation resulting from the modification of stock options in connection with the termination of employees under the Operations and Field Realignment Plan.

The accruals for the Operations and Field Realignment Plan are included in “Accrued expenses and other current liabilities” and “Other liabilities” and totaled $2,487 and $113 as of January 3, 2021. The table below presents a rollforward of our accruals for the Operations and Field Realignment Plan.

Balance December 29, 2019ChargesPaymentsBalance January 3, 2021
Severance and related employee costs$— $3,113 $(513)$2,600 
Third party and other costs— 67 (67)— 
$— $3,180 $(580)$2,600 
Information Technology (IT”) Realignment

In December 2019, our Board of Directors approved a plan to realign and reinvest resources in the Company’s IT organization to strengthen its ability to accelerate growth (the “IT Realignment Plan”). The Company has partnered with a third-party global IT consultant on this new structure to leverage their global capabilities, which will enable a more seamless integration between its digital and corporate IT assets. The IT Realignment Plan has reduced certain employee compensation and other related costs that the Company has reinvested back into IT to drive additional capabilities and capacity across all of its technology platforms. Additionally, in June 2020, the Company made changes to its leadership structure that included the elimination of the Chief Digital Experience Officer position and the creation of a Chief Information Officer position, for which the Company completed the hiring process in October 2020. During 2020 and 2019, the Company recognized costs totaling $7,288 and $9,127, respectively, which primarily included third-party and other costs and recruitment and relocation costs in 2020 and severance and related employee costs and third-party and other costs in 2019. The Company does not expect to incur any material additional costs under the IT Realignment Plan.

The following is a summary of the activity recorded as a result of the IT Realignment Plan:
Year EndedTotal Incurred Since Inception
20202019
Severance and related employee costs$843 $7,548 $8,391 
Recruitment and relocation costs1,296 — 1,296 
Third-party and other costs5,149 1,386 6,535 
7,288 8,934 16,222 
Share-based compensation (a)— 193 193 
Total IT realignment $7,288 $9,127 $16,415 
_______________

(a)Primarily represents incremental share-based compensation resulting from the modification of stock options in connection with the termination of employees under the IT realignment plan.

As of January 3, 2021, the accruals for our IT Realignment Plan are included in “Accrued expenses and other current liabilities.” As of December 29, 2019, the accruals for our IT Realignment Plan are included in “Accrued expenses and other current liabilities” and “Other liabilities” and totaled $8,025 and $599, respectively. The tables below present a rollforward of our accruals for the IT Realignment Plan:
Balance December 29, 2019ChargesPaymentsBalance January 3, 2021
Severance and related employee costs$7,548 $843 $(6,883)$1,508 
Recruitment and relocation costs— 1,296 (1,296)— 
Third-party and other costs1,076 5,149 (6,225)— 
$8,624 $7,288 $(14,404)$1,508 

Balance December 30, 2018ChargesPaymentsBalance December 29, 2019
Severance and related employee costs$— $7,548 $— $7,548 
Recruitment and relocation costs— — — — 
Third-party and other costs— 1,386 (310)1,076 
$— $8,934 $(310)$8,624 
General and Administrative (G&A”) Realignment

In May 2017, the Company initiated a plan to further reduce its G&A expenses (the “G&A Realignment Plan”). Additionally, in May 2019, the Company announced changes to its management and operating structure that included the creation of two new positions, a President, U.S and Chief Commercial Officer and a President, International and Chief Development Officer, and the elimination of the Chief Operations Officer position. During 2020, 2019 and 2018, the Company recognized costs related to the plan totaling $614, $7,749 and $8,785, respectively, which primarily included recruitment and relocation costs and share-based compensation in 2020 and severance and related employee costs and share-based compensation in 2019 and 2018. The Company does not expect to incur any material additional costs under the G&A Realignment Plan.

The following is a summary of the activity recorded as a result of the G&A Realignment Plan:
Year EndedTotal Incurred
Since Inception
202020192018
Severance and related employee costs$28 $5,485 $3,797 $24,266 
Recruitment and relocation costs360 950 1,077 2,876 
Third-party and other costs13 100 1,019 2,223 
401 6,535 5,893 29,365 
Share-based compensation (a)213 1,214 1,557 8,111 
Termination of defined benefit plans (b)— — 1,335 1,335 
Total G&A realignment$614 $7,749 $8,785 $38,811 
_______________

(a)Primarily represents incremental share-based compensation resulting from the modification of stock options in connection with the termination of employees under the G&A Realignment Plan.

(b)During 2018, the Company terminated two frozen defined benefit plans. See Note 19 for further information.

As of January 3, 2021, the accruals for the G&A Realignment Plan are included in “Accrued expenses and other current liabilities.” As of December 29, 2019, the accruals for the G&A Realignment Plan are included in “Accrued expenses and other current liabilities” and “Other liabilities” and totaled $4,504 and $855, respectively. The tables below present a rollforward of our accruals for the G&A Realignment Plan.
Balance
December 29,
2019
ChargesPaymentsBalance
January 3,
2021
Severance and related employee costs$5,276 $28 $(4,372)$932 
Recruitment and relocation costs83 360 (443)— 
Third-party and other costs— 13 (13)— 
$5,359 $401 $(4,828)$932 
Balance
December 30,
2018
ChargesPaymentsBalance
December 29,
2019
Severance and related employee costs$7,241 $5,485 $(7,450)$5,276 
Recruitment and relocation costs83 950 (950)83 
Third-party and other costs— 100 (100)— 
$7,324 $6,535 $(8,500)$5,359 
System Optimization Initiative

The Company recognizes costs related to acquisitions and dispositions under its system optimization initiative. During 2020, the Company recognized costs totaling $4,327, which were primarily comprised of professional fees related to the NPC bankruptcy sale process. See Note 4 for further information. The Company expects to incur additional costs of approximately $3,000 related to the NPC bankruptcy sale process during 2021.

The following is a summary of the costs recorded as a result of our system optimization initiative:
Year EndedTotal Incurred Since Inception
202020192018
Severance and related employee costs$— $— $— $18,237 
Professional fees4,323 72 264 22,107 
Other17 19 5,853 
4,327 89 283 46,197 
Accelerated depreciation and amortization (a)— — — 25,398 
Share-based compensation (b)— — — 5,013 
Total system optimization initiative$4,327 $89 $283 $76,608 
_______________

(a)Primarily includes accelerated amortization of previously acquired franchise rights related to Company-operated restaurants in territories that have been sold to franchisees in connection with our system optimization initiative.

(b)Represents incremental share-based compensation resulting from the modification of stock options and performance-based awards in connection with the termination of employees under our system optimization initiative.

The table below presents a rollforward of our accruals for our system optimization initiative, which are included in “Accrued expenses and other current liabilities.”
Balance
December 29, 2019
ChargesPaymentsBalance
January 3, 2021
Professional fees$— $4,323 $(3,093)$1,230 
Other— (4)— 
$— $4,327 $(3,097)$1,230 
v3.20.4
Income Per Share
12 Months Ended
Jan. 03, 2021
Earnings Per Share [Abstract]  
Income Per Share Income Per Share
Basic income per share for 2020, 2019 and 2018 was computed by dividing net income amounts by the weighted average number of common shares outstanding.

The weighted average number of shares used to calculate basic and diluted income per share were as follows:
Year Ended
202020192018
Common stock:
Weighted average basic shares outstanding223,684 229,944 237,797 
Dilutive effect of stock options and restricted shares4,330 5,131 7,166 
Weighted average diluted shares outstanding228,014 235,075 244,963 
Diluted net income per share was computed by dividing net income by the weighted average number of basic shares outstanding plus the potential common share effect of dilutive stock options and restricted shares. We excluded potential common shares of 2,064, 2,518 and 1,520 for 2020, 2019 and 2018, respectively, from our diluted net income per share calculation as they would have had anti-dilutive effects.
v3.20.4
Cash and Receivables (Notes)
12 Months Ended
Jan. 03, 2021
Cash and Receivables [Abstract]  
Cash and Receivables Disclosure [Text Block] Cash and Receivables
Year End
January 3, 2021December 29, 2019
Cash and cash equivalents
Cash$231,922 $185,203 
Cash equivalents75,067 114,992 
306,989 300,195 
Restricted cash
Accounts held by trustee for the securitized financing facility 33,635 34,209 
Other338 330 
33,973 34,539 
Advertising Funds (a)77,279 23,973 
111,252 58,512 
Total cash, cash equivalents and restricted cash
$418,241 $358,707 
_______________

(a)Included in “Advertising funds restricted assets.”

January 3, 2021December 29, 2019
GrossAllowance for Doubtful AccountsNetGrossAllowance for Doubtful AccountsNet
Accounts and Notes Receivable, Net
Current
Accounts receivable (a) (b)$97,399 $(3,739)$93,660 $103,852 $(3,314)$100,538 
Notes receivable from franchisees (c) (d)21,227 (4,996)16,231 23,628 (6,705)16,923 
$118,626 $(8,735)$109,891 $127,480 $(10,019)$117,461 
Non-current (e)
Notes receivable from franchisees (d)$6,759 $(629)$6,130 $1,617 $— $1,617 
_______________

(a)Includes income tax refund receivables of $5,399 and $13,555 as of January 3, 2021 and December 29, 2019, respectively. Additionally, 2019 includes receivables of $25,350 related to insurance coverage for the financial institutions class action. See Note 11 for further information on our legal reserves.

(b)During 2020, rent receivables increased by $5,226 due to actions taken by the Company in response to the COVID-19 pandemic, which included offering to defer base rent payments on properties owned by Wendy’s and leased to franchisees by 50% and offering to pass along any deferrals that were obtained on properties leased by Wendy’s and subleased to franchisees by up to 100%, beginning in May for a three month period, which are being repaid over a 12 month period beginning in August 2020.

(c)Includes the current portion of sales-type and direct financing lease receivables of $5,965 and $3,146 as of January 3, 2021 and December 29, 2019, respectively. See Note 20 for further information.
Included a note receivable from a U.S. franchisee totaling $1,000 as of December 29, 2019. The note was repaid during 2020.

(d)Includes a note receivable from a franchisee in India, of which $356 and $1,000 are included in current notes receivable as of January 3, 2021 and December 29, 2019, respectively, and $629 which is included in non-current notes receivable as of January 3, 2021. As of January 3, 2021 and December 29, 2019, the Company had a reserve of $985 on the loan outstanding to the franchisee in India.

Includes a note receivable from a franchisee in Indonesia, of which $831 and $1,262 are included in current notes receivable and $1,780 and $1,617 are included in non-current notes receivable as of January 3, 2021 and December 29, 2019, respectively.

Includes notes receivable related to the Brazil JV, of which $12,775 and $15,920 are included in current notes receivable as of January 3, 2021 and December 29, 2019, respectively, and $4,350 is included in non-current notes receivable as of January 3, 2021. As of January 3, 2021 and December 29, 2019, the Company had reserves of $4,640 and $5,720, respectively, on the loans outstanding related to the Brazil JV. See Note 8 for further information.

(e)Included in “Other assets.”

The following is an analysis of the allowance for doubtful accounts:
Accounts ReceivableNotes ReceivableTotal
2020
Balance at December 29, 2019
$3,314 $6,705 $10,019 
Provision for doubtful accounts647 206 853 
Uncollectible accounts written off, net of recoveries(222)(1,286)(1,508)
Balance at January 3, 2021
$3,739 $5,625 $9,364 
2019
Balance at December 30, 2018
$4,939 $2,000 $6,939 
Provision for doubtful accounts(1,618)4,912 3,294 
Uncollectible accounts written off, net of recoveries(7)(207)(214)
Balance at December 29, 2019
$3,314 $6,705 $10,019 
2018
Balance at December 31, 2017$4,546 $— $4,546 
Provision for doubtful accounts606 1,956 2,562 
Uncollectible accounts written off, net of recoveries(213)44 (169)
Balance at December 30, 2018
$4,939 $2,000 $6,939 
v3.20.4
Investments
12 Months Ended
Jan. 03, 2021
Investments [Abstract]  
Investments Investments
The following is a summary of the carrying value of our investments:
Year End
January 3,
2021
December 29,
2019
Equity method investments$44,574 $45,310 
Other investments in equity securities— 639 
$44,574 $45,949 

Equity Method Investments

Wendy’s has a 50% share in the TimWen real estate joint venture and a 20% share in the Brazil JV, both of which are accounted for using the equity method of accounting, under which our results of operations include our share of the income (loss) of the investees in “Other operating income, net.”

A wholly-owned subsidiary of Wendy’s entered into the Brazil JV during the second quarter of 2015 for the operation of Wendy’s restaurants in Brazil.  Wendy’s, Starboard International Holdings B.V. and Infinity Holding E Participações Ltda. contributed $1, $2 and $2, respectively, each receiving proportionate equity interests of 20%, 40% and 40%, respectively.  The Company did not receive any distributions and our share of the Brazil JV’s net losses was $417, $1,022 and $1,344 during 2020, 2019 and 2018, respectively. A wholly-owned subsidiary of Wendy’s has loans outstanding related to the Brazil JV totaling $17,125 and $15,920 as of January 3, 2021 and December 29, 2019, respectively. The loans are denominated in U.S. Dollars, which is also the functional currency of the subsidiary; therefore, there is no exposure to changes in foreign currency rates. The loans bear interest at rates ranging from 3.25% to 6.5% per year. Of the total loans outstanding as of January 3, 2021, $12,775 was due primarily in the fourth quarter of 2020 and $4,350 is due in 2024. As of January 3, 2021 and December 29, 2019, the Company had reserves of $4,640 on the past due loans and $5,720 on the current loans outstanding, respectively, related to the Brazil JV. The Company is currently pursuing collection of certain of the past due amounts. See Note 7 for further information.

The carrying value of our investment in TimWen exceeded our interest in the underlying equity of the joint venture by $23,433 and $25,160 as of January 3, 2021 and December 29, 2019, respectively, primarily due to purchase price adjustments from the 2008 merger of Triarc Companies, Inc. and Wendy’s International, Inc. (the “Wendy’s Merger”).

Presented below is activity related to our portion of TimWen and the Brazil JV included in our consolidated balance sheets and consolidated statements of operations as of and for the years ended January 3, 2021, December 29, 2019 and December 30, 2018.
Year Ended
202020192018
Balance at beginning of period$45,310 $47,021 $55,363 
Investment— — 13 
Equity in earnings for the period8,389 10,943 10,402 
Amortization of purchase price adjustments (a)(2,293)(2,270)(2,326)
6,096 8,673 8,076 
Distributions received(8,376)(13,400)(13,390)
Foreign currency translation adjustment included in
“Other comprehensive income (loss), net” and other
1,544 3,016 (3,041)
Balance at end of period$44,574 $45,310 $47,021 
_______________
(a)Purchase price adjustments that impacted the carrying value of the Company’s investment in TimWen are being amortized over the average original aggregate life of 21 years.

Indirect Investment in Inspire Brands

In connection with the sale of Arby’s Restaurant Group, Inc. (“Arby’s”) during 2011, Wendy’s Restaurants obtained an 18.5% equity interest in ARG Holding Corporation (“ARG Parent”) (through which Wendy’s Restaurants indirectly retained an 18.5% interest in Arby’s). The carrying value of our investment was reduced to zero during 2013 in connection with the receipt of a dividend that was determined to be a return of our investment.

Our 18.5% equity interest was diluted to 12.3% in February 2018, when a subsidiary of ARG Parent acquired Buffalo Wild Wings, Inc. As a result of the acquisition, our diluted ownership interest included both the Arby’s and Buffalo Wild Wings brands under the newly formed combined company, Inspire Brands, Inc. (“Inspire Brands”). In August 2018, the Company sold its remaining 12.3% ownership interest to Inspire Brands for $450,000 and incurred transaction costs of $55, which were recorded to “Investment (loss) income, net.” The Company recorded income tax expense of $97,501 on the transaction, of which $95,038 was paid during the fourth quarter of 2018.

Other Investments in Equity Securities

In October 2019, the Company received a $25,000 cash settlement related to a previously held investment. As a result, the Company recorded $24,366 to “Investment (loss) income, net” and $634 to “General and administrative” for the reimbursement of related costs during the fourth quarter of 2019.
v3.20.4
Properties (Notes)
12 Months Ended
Jan. 03, 2021
Property, Plant and Equipment [Abstract]  
Properties Properties
Year End
January 3, 2021December 29, 2019
Land$372,473 $375,109 
Buildings and improvements504,504 508,602 
Leasehold improvements409,306 405,158 
Office, restaurant and transportation equipment255,469 279,799 
1,541,752 1,568,668 
Accumulated depreciation and amortization(625,863)(591,668)
$915,889 $977,000 

Depreciation and amortization expense related to properties was $77,656, $81,219 and $79,009 during 2020, 2019 and 2018, respectively.
v3.20.4
Goodwill And Other Intangible Assets
12 Months Ended
Jan. 03, 2021
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill and Other Intangible Assets Goodwill and Other Intangible Assets
Goodwill activity for 2020 and 2019 was as follows:

Wendy’s U.S.Wendy’s
International
Global Real Estate & DevelopmentTotal
Balance at December 30, 2018:
Goodwill, gross$595,560 $39,173 $122,548 $757,281 
Accumulated impairment losses (a)— (9,397)— (9,397)
Goodwill, net595,560 29,776 122,548 747,884 
Changes in goodwill:
Restaurant acquisitions (b)6,931 — — 6,931 
Currency translation adjustment— 1,096 — 1,096 
Balance at December 29, 2019:
Goodwill, gross602,491 40,269 122,548 765,308