| Leases (Notes) | 9 Months Ended |
| Sep. 29, 2019 |
| Leases [Abstract] | |
| Leases | Leases Nature of Leases The Company operates restaurants that are located on sites owned by us and sites leased by us from third parties. In addition, the Company owns sites and leases sites from third parties, which it leases and/or subleases to franchisees. At September 29, 2019 , Wendy’s and its franchisees operated 6,743 Wendy’s restaurants. Of the 356 Company-operated Wendy’s restaurants, Wendy’s owned the land and building for 143 restaurants, owned the building and held long-term land leases for 144 restaurants and held leases covering the land and building for 69 restaurants. Wendy’s also owned 512 and leased 1,255 properties that were either leased or subleased principally to franchisees. The Company also leases restaurant, office and transportation equipment. 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 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 is recognized on a straight-line basis and 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 condensed 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 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.” 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. Company as Lessee The components of lease cost are as follows: Three Months Ended Nine Months Ended September 29, September 29, Finance lease cost: Amortization of finance lease assets $ 3,201 $ 7,949 Interest on finance lease liabilities 10,116 26,808 13,317 34,757 Operating lease cost 23,358 67,087 Variable lease cost (a) 15,435 44,910 Short-term lease cost 1,141 3,420 Total operating lease cost (b) 39,934 115,417 Total lease cost $ 53,251 $ 150,174 _______________ (a) The three and nine months ended September 29, 2019 includes expenses for executory costs of $9,908 and $29,211 , respectively, for which the Company is reimbursed by sublessees. (b) The three and nine months ended September 29, 2019 includes $32,342 and $92,815 , respectively, recorded to “Franchise rental expense” for leased properties that are subsequently leased to franchisees and $6,892 and $20,492 , respectively, recorded to “Cost of sales” for leases for Company-operated restaurants. The following table includes supplemental cash flow and non-cash information related to leases: Nine Months Ended September 29, Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from finance leases $ 29,683 Operating cash flows from operating leases 69,277 Financing cash flows from finance leases 5,178 Right-of-use assets obtained in exchange for lease obligations: Finance lease liabilities 34,084 Operating lease liabilities 8,212 The following table includes supplemental information related to leases: September 29, Weighted-average remaining lease term (years): Finance leases 17.3 Operating leases 15.5 Weighted average discount rate: Finance leases 10.03 % Operating leases 5.10 % The following table illustrates the Company’s future minimum rental payments for non-cancelable leases as of September 29, 2019 : Finance Leases Operating Leases Fiscal Year Company-Operated Franchise and Other Company-Operated Franchise and Other 2019 (a) $ 707 $ 12,759 $ 5,001 $ 17,602 2020 2,862 45,340 19,921 70,690 2021 2,973 46,826 19,733 70,540 2022 3,023 47,830 19,421 70,696 2023 2,975 49,504 19,400 70,655 Thereafter 39,104 704,276 201,762 827,387 Total minimum payments $ 51,644 $ 906,535 $ 285,238 $ 1,127,570 Less interest (23,407 ) (452,484 ) (88,577 ) (369,544 ) Present value of minimum lease payments (b) (c) $ 28,237 $ 454,051 $ 196,661 $ 758,026 _______________ (a) Represents future minimum rental payments for non-cancelable leases for the remainder of 2019. (b) The present value of minimum finance lease payments of $10,584 and $471,704 are included in “Current portion of finance lease liabilities” and “Long-term finance lease liabilities,” respectively. (c) The present value of minimum operating lease payments of $43,474 and $911,213 are included in “Current portion of operating lease liabilities” and “Long-term operating lease liabilities,” respectively. The following table illustrates the Company’s future minimum rental payments for non-cancelable leases as of December 30, 2018: Finance Leases Operating Leases Fiscal Year Company-Operated Franchise and Other Company-Operated Franchise and Other 2019 $ 1,962 $ 45,125 $ 20,174 $ 75,703 2020 1,978 43,969 20,052 73,320 2021 2,082 45,522 19,820 73,167 2022 2,114 46,573 19,530 73,300 2023 2,084 48,109 19,430 73,377 Thereafter 23,558 676,139 203,073 854,964 Total minimum payments $ 33,778 $ 905,437 $ 302,079 $ 1,223,831 Less interest (16,874 ) (466,705 ) Present value of minimum lease payments (a) $ 16,904 $ 438,732 _______________ (a) The present value of minimum finance lease payments of $8,405 and $447,231 are included in “Current portion of finance lease liabilities” and “Long-term finance lease liabilities,” respectively. Company as Lessor The components of lease income are as follows: Three Months Ended Nine Months Ended September 29, September 29, Sales-type and direct-financing leases: Selling (loss) profit $ (97 ) $ 1,874 Interest income 7,240 19,045 Operating lease income $ 44,892 $ 134,056 Variable lease income 15,026 42,875 Franchise rental income (a) $ 59,918 $ 176,931 _______________ (a) Includes sublease income of $44,821 and $130,763 recognized during the three and nine months ended September 29, 2019 , respectively, of which $9,683 and $28,894 , respectively, represents lessees’ variable payments to the Company for executory costs. The following table illustrates the Company’s future minimum rental receipts for non-cancelable leases and subleases as of September 29, 2019 : Sales-Type and Direct Financing Leases Operating Leases Fiscal Year Subleases Owned Properties Subleases Owned Properties 2019 (a) $ 6,953 $ 489 $ 27,614 $ 13,129 2020 28,528 2,036 111,227 52,912 2021 29,668 2,068 111,946 54,700 2022 30,342 2,148 113,017 56,173 2023 31,381 2,192 114,021 56,378 Thereafter 486,141 27,115 1,339,940 861,865 Total future minimum receipts 613,013 36,048 $ 1,817,765 $ 1,095,157 Unearned interest income (376,192 ) (19,472 ) Net investment in sales-type and direct financing leases (b) $ 236,821 $ 16,576 _______________ (a) Represents future minimum rental receipts for non-cancelable leases for the remainder of 2019. (b) The present value of minimum direct financing rental receipts of $2,795 and $250,602 are included in “Accounts and notes receivable, net” and “Net investment in sales-type and direct financing leases,” respectively. The present value of minimum direct financing rental receipts includes a net investment in unguaranteed residual assets of $195 . The following table illustrates the Company’s future minimum rental receipts for non-cancelable leases and subleases as of December 30, 2018: Sales-Type and Direct Financing Leases Operating Leases Fiscal Year Subleases Owned Properties Subleases Owned Properties 2019 $ 26,239 $ 1,937 $ 113,180 $ 52,527 2020 26,859 2,006 113,578 53,066 2021 27,904 2,043 114,447 54,615 2022 28,563 2,119 115,552 56,092 2023 29,512 2,159 116,463 56,284 Thereafter 448,851 26,404 1,372,646 858,755 Total future minimum receipts 587,928 36,668 $ 1,945,866 $ 1,131,339 Unearned interest income (377,046 ) (20,338 ) Net investment in sales-type and direct financing leases (a) $ 210,882 $ 16,330 _______________ (a) The present value of minimum direct financing rental receipts of $735 and $226,477 are included in “Accounts and notes receivable, net” and “Net investment in sales-type and direct financing leases,” respectively. Properties owned by the Company and leased to franchisees and other third parties under operating leases include: September 29, Land $ 281,744 Buildings and improvements 310,936 Restaurant equipment 1,726 594,406 Accumulated depreciation and amortization (153,379 ) $ 441,027 |
| Leases | Leases Nature of Leases The Company operates restaurants that are located on sites owned by us and sites leased by us from third parties. In addition, the Company owns sites and leases sites from third parties, which it leases and/or subleases to franchisees. At September 29, 2019 , Wendy’s and its franchisees operated 6,743 Wendy’s restaurants. Of the 356 Company-operated Wendy’s restaurants, Wendy’s owned the land and building for 143 restaurants, owned the building and held long-term land leases for 144 restaurants and held leases covering the land and building for 69 restaurants. Wendy’s also owned 512 and leased 1,255 properties that were either leased or subleased principally to franchisees. The Company also leases restaurant, office and transportation equipment. 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 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 is recognized on a straight-line basis and 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 condensed 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 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.” 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. Company as Lessee The components of lease cost are as follows: Three Months Ended Nine Months Ended September 29, September 29, Finance lease cost: Amortization of finance lease assets $ 3,201 $ 7,949 Interest on finance lease liabilities 10,116 26,808 13,317 34,757 Operating lease cost 23,358 67,087 Variable lease cost (a) 15,435 44,910 Short-term lease cost 1,141 3,420 Total operating lease cost (b) 39,934 115,417 Total lease cost $ 53,251 $ 150,174 _______________ (a) The three and nine months ended September 29, 2019 includes expenses for executory costs of $9,908 and $29,211 , respectively, for which the Company is reimbursed by sublessees. (b) The three and nine months ended September 29, 2019 includes $32,342 and $92,815 , respectively, recorded to “Franchise rental expense” for leased properties that are subsequently leased to franchisees and $6,892 and $20,492 , respectively, recorded to “Cost of sales” for leases for Company-operated restaurants. The following table includes supplemental cash flow and non-cash information related to leases: Nine Months Ended September 29, Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from finance leases $ 29,683 Operating cash flows from operating leases 69,277 Financing cash flows from finance leases 5,178 Right-of-use assets obtained in exchange for lease obligations: Finance lease liabilities 34,084 Operating lease liabilities 8,212 The following table includes supplemental information related to leases: September 29, Weighted-average remaining lease term (years): Finance leases 17.3 Operating leases 15.5 Weighted average discount rate: Finance leases 10.03 % Operating leases 5.10 % The following table illustrates the Company’s future minimum rental payments for non-cancelable leases as of September 29, 2019 : Finance Leases Operating Leases Fiscal Year Company-Operated Franchise and Other Company-Operated Franchise and Other 2019 (a) $ 707 $ 12,759 $ 5,001 $ 17,602 2020 2,862 45,340 19,921 70,690 2021 2,973 46,826 19,733 70,540 2022 3,023 47,830 19,421 70,696 2023 2,975 49,504 19,400 70,655 Thereafter 39,104 704,276 201,762 827,387 Total minimum payments $ 51,644 $ 906,535 $ 285,238 $ 1,127,570 Less interest (23,407 ) (452,484 ) (88,577 ) (369,544 ) Present value of minimum lease payments (b) (c) $ 28,237 $ 454,051 $ 196,661 $ 758,026 _______________ (a) Represents future minimum rental payments for non-cancelable leases for the remainder of 2019. (b) The present value of minimum finance lease payments of $10,584 and $471,704 are included in “Current portion of finance lease liabilities” and “Long-term finance lease liabilities,” respectively. (c) The present value of minimum operating lease payments of $43,474 and $911,213 are included in “Current portion of operating lease liabilities” and “Long-term operating lease liabilities,” respectively. The following table illustrates the Company’s future minimum rental payments for non-cancelable leases as of December 30, 2018: Finance Leases Operating Leases Fiscal Year Company-Operated Franchise and Other Company-Operated Franchise and Other 2019 $ 1,962 $ 45,125 $ 20,174 $ 75,703 2020 1,978 43,969 20,052 73,320 2021 2,082 45,522 19,820 73,167 2022 2,114 46,573 19,530 73,300 2023 2,084 48,109 19,430 73,377 Thereafter 23,558 676,139 203,073 854,964 Total minimum payments $ 33,778 $ 905,437 $ 302,079 $ 1,223,831 Less interest (16,874 ) (466,705 ) Present value of minimum lease payments (a) $ 16,904 $ 438,732 _______________ (a) The present value of minimum finance lease payments of $8,405 and $447,231 are included in “Current portion of finance lease liabilities” and “Long-term finance lease liabilities,” respectively. Company as Lessor The components of lease income are as follows: Three Months Ended Nine Months Ended September 29, September 29, Sales-type and direct-financing leases: Selling (loss) profit $ (97 ) $ 1,874 Interest income 7,240 19,045 Operating lease income $ 44,892 $ 134,056 Variable lease income 15,026 42,875 Franchise rental income (a) $ 59,918 $ 176,931 _______________ (a) Includes sublease income of $44,821 and $130,763 recognized during the three and nine months ended September 29, 2019 , respectively, of which $9,683 and $28,894 , respectively, represents lessees’ variable payments to the Company for executory costs. The following table illustrates the Company’s future minimum rental receipts for non-cancelable leases and subleases as of September 29, 2019 : Sales-Type and Direct Financing Leases Operating Leases Fiscal Year Subleases Owned Properties Subleases Owned Properties 2019 (a) $ 6,953 $ 489 $ 27,614 $ 13,129 2020 28,528 2,036 111,227 52,912 2021 29,668 2,068 111,946 54,700 2022 30,342 2,148 113,017 56,173 2023 31,381 2,192 114,021 56,378 Thereafter 486,141 27,115 1,339,940 861,865 Total future minimum receipts 613,013 36,048 $ 1,817,765 $ 1,095,157 Unearned interest income (376,192 ) (19,472 ) Net investment in sales-type and direct financing leases (b) $ 236,821 $ 16,576 _______________ (a) Represents future minimum rental receipts for non-cancelable leases for the remainder of 2019. (b) The present value of minimum direct financing rental receipts of $2,795 and $250,602 are included in “Accounts and notes receivable, net” and “Net investment in sales-type and direct financing leases,” respectively. The present value of minimum direct financing rental receipts includes a net investment in unguaranteed residual assets of $195 . The following table illustrates the Company’s future minimum rental receipts for non-cancelable leases and subleases as of December 30, 2018: Sales-Type and Direct Financing Leases Operating Leases Fiscal Year Subleases Owned Properties Subleases Owned Properties 2019 $ 26,239 $ 1,937 $ 113,180 $ 52,527 2020 26,859 2,006 113,578 53,066 2021 27,904 2,043 114,447 54,615 2022 28,563 2,119 115,552 56,092 2023 29,512 2,159 116,463 56,284 Thereafter 448,851 26,404 1,372,646 858,755 Total future minimum receipts 587,928 36,668 $ 1,945,866 $ 1,131,339 Unearned interest income (377,046 ) (20,338 ) Net investment in sales-type and direct financing leases (a) $ 210,882 $ 16,330 _______________ (a) The present value of minimum direct financing rental receipts of $735 and $226,477 are included in “Accounts and notes receivable, net” and “Net investment in sales-type and direct financing leases,” respectively. Properties owned by the Company and leased to franchisees and other third parties under operating leases include: September 29, Land $ 281,744 Buildings and improvements 310,936 Restaurant equipment 1,726 594,406 Accumulated depreciation and amortization (153,379 ) $ 441,027 |
| Leases | Leases Nature of Leases The Company operates restaurants that are located on sites owned by us and sites leased by us from third parties. In addition, the Company owns sites and leases sites from third parties, which it leases and/or subleases to franchisees. At September 29, 2019 , Wendy’s and its franchisees operated 6,743 Wendy’s restaurants. Of the 356 Company-operated Wendy’s restaurants, Wendy’s owned the land and building for 143 restaurants, owned the building and held long-term land leases for 144 restaurants and held leases covering the land and building for 69 restaurants. Wendy’s also owned 512 and leased 1,255 properties that were either leased or subleased principally to franchisees. The Company also leases restaurant, office and transportation equipment. 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 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 is recognized on a straight-line basis and 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 condensed 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 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.” 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. Company as Lessee The components of lease cost are as follows: Three Months Ended Nine Months Ended September 29, September 29, Finance lease cost: Amortization of finance lease assets $ 3,201 $ 7,949 Interest on finance lease liabilities 10,116 26,808 13,317 34,757 Operating lease cost 23,358 67,087 Variable lease cost (a) 15,435 44,910 Short-term lease cost 1,141 3,420 Total operating lease cost (b) 39,934 115,417 Total lease cost $ 53,251 $ 150,174 _______________ (a) The three and nine months ended September 29, 2019 includes expenses for executory costs of $9,908 and $29,211 , respectively, for which the Company is reimbursed by sublessees. (b) The three and nine months ended September 29, 2019 includes $32,342 and $92,815 , respectively, recorded to “Franchise rental expense” for leased properties that are subsequently leased to franchisees and $6,892 and $20,492 , respectively, recorded to “Cost of sales” for leases for Company-operated restaurants. The following table includes supplemental cash flow and non-cash information related to leases: Nine Months Ended September 29, Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from finance leases $ 29,683 Operating cash flows from operating leases 69,277 Financing cash flows from finance leases 5,178 Right-of-use assets obtained in exchange for lease obligations: Finance lease liabilities 34,084 Operating lease liabilities 8,212 The following table includes supplemental information related to leases: September 29, Weighted-average remaining lease term (years): Finance leases 17.3 Operating leases 15.5 Weighted average discount rate: Finance leases 10.03 % Operating leases 5.10 % The following table illustrates the Company’s future minimum rental payments for non-cancelable leases as of September 29, 2019 : Finance Leases Operating Leases Fiscal Year Company-Operated Franchise and Other Company-Operated Franchise and Other 2019 (a) $ 707 $ 12,759 $ 5,001 $ 17,602 2020 2,862 45,340 19,921 70,690 2021 2,973 46,826 19,733 70,540 2022 3,023 47,830 19,421 70,696 2023 2,975 49,504 19,400 70,655 Thereafter 39,104 704,276 201,762 827,387 Total minimum payments $ 51,644 $ 906,535 $ 285,238 $ 1,127,570 Less interest (23,407 ) (452,484 ) (88,577 ) (369,544 ) Present value of minimum lease payments (b) (c) $ 28,237 $ 454,051 $ 196,661 $ 758,026 _______________ (a) Represents future minimum rental payments for non-cancelable leases for the remainder of 2019. (b) The present value of minimum finance lease payments of $10,584 and $471,704 are included in “Current portion of finance lease liabilities” and “Long-term finance lease liabilities,” respectively. (c) The present value of minimum operating lease payments of $43,474 and $911,213 are included in “Current portion of operating lease liabilities” and “Long-term operating lease liabilities,” respectively. The following table illustrates the Company’s future minimum rental payments for non-cancelable leases as of December 30, 2018: Finance Leases Operating Leases Fiscal Year Company-Operated Franchise and Other Company-Operated Franchise and Other 2019 $ 1,962 $ 45,125 $ 20,174 $ 75,703 2020 1,978 43,969 20,052 73,320 2021 2,082 45,522 19,820 73,167 2022 2,114 46,573 19,530 73,300 2023 2,084 48,109 19,430 73,377 Thereafter 23,558 676,139 203,073 854,964 Total minimum payments $ 33,778 $ 905,437 $ 302,079 $ 1,223,831 Less interest (16,874 ) (466,705 ) Present value of minimum lease payments (a) $ 16,904 $ 438,732 _______________ (a) The present value of minimum finance lease payments of $8,405 and $447,231 are included in “Current portion of finance lease liabilities” and “Long-term finance lease liabilities,” respectively. Company as Lessor The components of lease income are as follows: Three Months Ended Nine Months Ended September 29, September 29, Sales-type and direct-financing leases: Selling (loss) profit $ (97 ) $ 1,874 Interest income 7,240 19,045 Operating lease income $ 44,892 $ 134,056 Variable lease income 15,026 42,875 Franchise rental income (a) $ 59,918 $ 176,931 _______________ (a) Includes sublease income of $44,821 and $130,763 recognized during the three and nine months ended September 29, 2019 , respectively, of which $9,683 and $28,894 , respectively, represents lessees’ variable payments to the Company for executory costs. The following table illustrates the Company’s future minimum rental receipts for non-cancelable leases and subleases as of September 29, 2019 : Sales-Type and Direct Financing Leases Operating Leases Fiscal Year Subleases Owned Properties Subleases Owned Properties 2019 (a) $ 6,953 $ 489 $ 27,614 $ 13,129 2020 28,528 2,036 111,227 52,912 2021 29,668 2,068 111,946 54,700 2022 30,342 2,148 113,017 56,173 2023 31,381 2,192 114,021 56,378 Thereafter 486,141 27,115 1,339,940 861,865 Total future minimum receipts 613,013 36,048 $ 1,817,765 $ 1,095,157 Unearned interest income (376,192 ) (19,472 ) Net investment in sales-type and direct financing leases (b) $ 236,821 $ 16,576 _______________ (a) Represents future minimum rental receipts for non-cancelable leases for the remainder of 2019. (b) The present value of minimum direct financing rental receipts of $2,795 and $250,602 are included in “Accounts and notes receivable, net” and “Net investment in sales-type and direct financing leases,” respectively. The present value of minimum direct financing rental receipts includes a net investment in unguaranteed residual assets of $195 . The following table illustrates the Company’s future minimum rental receipts for non-cancelable leases and subleases as of December 30, 2018: Sales-Type and Direct Financing Leases Operating Leases Fiscal Year Subleases Owned Properties Subleases Owned Properties 2019 $ 26,239 $ 1,937 $ 113,180 $ 52,527 2020 26,859 2,006 113,578 53,066 2021 27,904 2,043 114,447 54,615 2022 28,563 2,119 115,552 56,092 2023 29,512 2,159 116,463 56,284 Thereafter 448,851 26,404 1,372,646 858,755 Total future minimum receipts 587,928 36,668 $ 1,945,866 $ 1,131,339 Unearned interest income (377,046 ) (20,338 ) Net investment in sales-type and direct financing leases (a) $ 210,882 $ 16,330 _______________ (a) The present value of minimum direct financing rental receipts of $735 and $226,477 are included in “Accounts and notes receivable, net” and “Net investment in sales-type and direct financing leases,” respectively. Properties owned by the Company and leased to franchisees and other third parties under operating leases include: September 29, Land $ 281,744 Buildings and improvements 310,936 Restaurant equipment 1,726 594,406 Accumulated depreciation and amortization (153,379 ) $ 441,027 |
| Leases | Leases Nature of Leases The Company operates restaurants that are located on sites owned by us and sites leased by us from third parties. In addition, the Company owns sites and leases sites from third parties, which it leases and/or subleases to franchisees. At September 29, 2019 , Wendy’s and its franchisees operated 6,743 Wendy’s restaurants. Of the 356 Company-operated Wendy’s restaurants, Wendy’s owned the land and building for 143 restaurants, owned the building and held long-term land leases for 144 restaurants and held leases covering the land and building for 69 restaurants. Wendy’s also owned 512 and leased 1,255 properties that were either leased or subleased principally to franchisees. The Company also leases restaurant, office and transportation equipment. 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 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 is recognized on a straight-line basis and 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 condensed 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 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.” 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. Company as Lessee The components of lease cost are as follows: Three Months Ended Nine Months Ended September 29, September 29, Finance lease cost: Amortization of finance lease assets $ 3,201 $ 7,949 Interest on finance lease liabilities 10,116 26,808 13,317 34,757 Operating lease cost 23,358 67,087 Variable lease cost (a) 15,435 44,910 Short-term lease cost 1,141 3,420 Total operating lease cost (b) 39,934 115,417 Total lease cost $ 53,251 $ 150,174 _______________ (a) The three and nine months ended September 29, 2019 includes expenses for executory costs of $9,908 and $29,211 , respectively, for which the Company is reimbursed by sublessees. (b) The three and nine months ended September 29, 2019 includes $32,342 and $92,815 , respectively, recorded to “Franchise rental expense” for leased properties that are subsequently leased to franchisees and $6,892 and $20,492 , respectively, recorded to “Cost of sales” for leases for Company-operated restaurants. The following table includes supplemental cash flow and non-cash information related to leases: Nine Months Ended September 29, Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from finance leases $ 29,683 Operating cash flows from operating leases 69,277 Financing cash flows from finance leases 5,178 Right-of-use assets obtained in exchange for lease obligations: Finance lease liabilities 34,084 Operating lease liabilities 8,212 The following table includes supplemental information related to leases: September 29, Weighted-average remaining lease term (years): Finance leases 17.3 Operating leases 15.5 Weighted average discount rate: Finance leases 10.03 % Operating leases 5.10 % The following table illustrates the Company’s future minimum rental payments for non-cancelable leases as of September 29, 2019 : Finance Leases Operating Leases Fiscal Year Company-Operated Franchise and Other Company-Operated Franchise and Other 2019 (a) $ 707 $ 12,759 $ 5,001 $ 17,602 2020 2,862 45,340 19,921 70,690 2021 2,973 46,826 19,733 70,540 2022 3,023 47,830 19,421 70,696 2023 2,975 49,504 19,400 70,655 Thereafter 39,104 704,276 201,762 827,387 Total minimum payments $ 51,644 $ 906,535 $ 285,238 $ 1,127,570 Less interest (23,407 ) (452,484 ) (88,577 ) (369,544 ) Present value of minimum lease payments (b) (c) $ 28,237 $ 454,051 $ 196,661 $ 758,026 _______________ (a) Represents future minimum rental payments for non-cancelable leases for the remainder of 2019. (b) The present value of minimum finance lease payments of $10,584 and $471,704 are included in “Current portion of finance lease liabilities” and “Long-term finance lease liabilities,” respectively. (c) The present value of minimum operating lease payments of $43,474 and $911,213 are included in “Current portion of operating lease liabilities” and “Long-term operating lease liabilities,” respectively. The following table illustrates the Company’s future minimum rental payments for non-cancelable leases as of December 30, 2018: Finance Leases Operating Leases Fiscal Year Company-Operated Franchise and Other Company-Operated Franchise and Other 2019 $ 1,962 $ 45,125 $ 20,174 $ 75,703 2020 1,978 43,969 20,052 73,320 2021 2,082 45,522 19,820 73,167 2022 2,114 46,573 19,530 73,300 2023 2,084 48,109 19,430 73,377 Thereafter 23,558 676,139 203,073 854,964 Total minimum payments $ 33,778 $ 905,437 $ 302,079 $ 1,223,831 Less interest (16,874 ) (466,705 ) Present value of minimum lease payments (a) $ 16,904 $ 438,732 _______________ (a) The present value of minimum finance lease payments of $8,405 and $447,231 are included in “Current portion of finance lease liabilities” and “Long-term finance lease liabilities,” respectively. Company as Lessor The components of lease income are as follows: Three Months Ended Nine Months Ended September 29, September 29, Sales-type and direct-financing leases: Selling (loss) profit $ (97 ) $ 1,874 Interest income 7,240 19,045 Operating lease income $ 44,892 $ 134,056 Variable lease income 15,026 42,875 Franchise rental income (a) $ 59,918 $ 176,931 _______________ (a) Includes sublease income of $44,821 and $130,763 recognized during the three and nine months ended September 29, 2019 , respectively, of which $9,683 and $28,894 , respectively, represents lessees’ variable payments to the Company for executory costs. The following table illustrates the Company’s future minimum rental receipts for non-cancelable leases and subleases as of September 29, 2019 : Sales-Type and Direct Financing Leases Operating Leases Fiscal Year Subleases Owned Properties Subleases Owned Properties 2019 (a) $ 6,953 $ 489 $ 27,614 $ 13,129 2020 28,528 2,036 111,227 52,912 2021 29,668 2,068 111,946 54,700 2022 30,342 2,148 113,017 56,173 2023 31,381 2,192 114,021 56,378 Thereafter 486,141 27,115 1,339,940 861,865 Total future minimum receipts 613,013 36,048 $ 1,817,765 $ 1,095,157 Unearned interest income (376,192 ) (19,472 ) Net investment in sales-type and direct financing leases (b) $ 236,821 $ 16,576 _______________ (a) Represents future minimum rental receipts for non-cancelable leases for the remainder of 2019. (b) The present value of minimum direct financing rental receipts of $2,795 and $250,602 are included in “Accounts and notes receivable, net” and “Net investment in sales-type and direct financing leases,” respectively. The present value of minimum direct financing rental receipts includes a net investment in unguaranteed residual assets of $195 . The following table illustrates the Company’s future minimum rental receipts for non-cancelable leases and subleases as of December 30, 2018: Sales-Type and Direct Financing Leases Operating Leases Fiscal Year Subleases Owned Properties Subleases Owned Properties 2019 $ 26,239 $ 1,937 $ 113,180 $ 52,527 2020 26,859 2,006 113,578 53,066 2021 27,904 2,043 114,447 54,615 2022 28,563 2,119 115,552 56,092 2023 29,512 2,159 116,463 56,284 Thereafter 448,851 26,404 1,372,646 858,755 Total future minimum receipts 587,928 36,668 $ 1,945,866 $ 1,131,339 Unearned interest income (377,046 ) (20,338 ) Net investment in sales-type and direct financing leases (a) $ 210,882 $ 16,330 _______________ (a) The present value of minimum direct financing rental receipts of $735 and $226,477 are included in “Accounts and notes receivable, net” and “Net investment in sales-type and direct financing leases,” respectively. Properties owned by the Company and leased to franchisees and other third parties under operating leases include: September 29, Land $ 281,744 Buildings and improvements 310,936 Restaurant equipment 1,726 594,406 Accumulated depreciation and amortization (153,379 ) $ 441,027 |
| Leases | Leases Nature of Leases The Company operates restaurants that are located on sites owned by us and sites leased by us from third parties. In addition, the Company owns sites and leases sites from third parties, which it leases and/or subleases to franchisees. At September 29, 2019 , Wendy’s and its franchisees operated 6,743 Wendy’s restaurants. Of the 356 Company-operated Wendy’s restaurants, Wendy’s owned the land and building for 143 restaurants, owned the building and held long-term land leases for 144 restaurants and held leases covering the land and building for 69 restaurants. Wendy’s also owned 512 and leased 1,255 properties that were either leased or subleased principally to franchisees. The Company also leases restaurant, office and transportation equipment. 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 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 is recognized on a straight-line basis and 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 condensed 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 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.” 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. Company as Lessee The components of lease cost are as follows: Three Months Ended Nine Months Ended September 29, September 29, Finance lease cost: Amortization of finance lease assets $ 3,201 $ 7,949 Interest on finance lease liabilities 10,116 26,808 13,317 34,757 Operating lease cost 23,358 67,087 Variable lease cost (a) 15,435 44,910 Short-term lease cost 1,141 3,420 Total operating lease cost (b) 39,934 115,417 Total lease cost $ 53,251 $ 150,174 _______________ (a) The three and nine months ended September 29, 2019 includes expenses for executory costs of $9,908 and $29,211 , respectively, for which the Company is reimbursed by sublessees. (b) The three and nine months ended September 29, 2019 includes $32,342 and $92,815 , respectively, recorded to “Franchise rental expense” for leased properties that are subsequently leased to franchisees and $6,892 and $20,492 , respectively, recorded to “Cost of sales” for leases for Company-operated restaurants. The following table includes supplemental cash flow and non-cash information related to leases: Nine Months Ended September 29, Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from finance leases $ 29,683 Operating cash flows from operating leases 69,277 Financing cash flows from finance leases 5,178 Right-of-use assets obtained in exchange for lease obligations: Finance lease liabilities 34,084 Operating lease liabilities 8,212 The following table includes supplemental information related to leases: September 29, Weighted-average remaining lease term (years): Finance leases 17.3 Operating leases 15.5 Weighted average discount rate: Finance leases 10.03 % Operating leases 5.10 % The following table illustrates the Company’s future minimum rental payments for non-cancelable leases as of September 29, 2019 : Finance Leases Operating Leases Fiscal Year Company-Operated Franchise and Other Company-Operated Franchise and Other 2019 (a) $ 707 $ 12,759 $ 5,001 $ 17,602 2020 2,862 45,340 19,921 70,690 2021 2,973 46,826 19,733 70,540 2022 3,023 47,830 19,421 70,696 2023 2,975 49,504 19,400 70,655 Thereafter 39,104 704,276 201,762 827,387 Total minimum payments $ 51,644 $ 906,535 $ 285,238 $ 1,127,570 Less interest (23,407 ) (452,484 ) (88,577 ) (369,544 ) Present value of minimum lease payments (b) (c) $ 28,237 $ 454,051 $ 196,661 $ 758,026 _______________ (a) Represents future minimum rental payments for non-cancelable leases for the remainder of 2019. (b) The present value of minimum finance lease payments of $10,584 and $471,704 are included in “Current portion of finance lease liabilities” and “Long-term finance lease liabilities,” respectively. (c) The present value of minimum operating lease payments of $43,474 and $911,213 are included in “Current portion of operating lease liabilities” and “Long-term operating lease liabilities,” respectively. The following table illustrates the Company’s future minimum rental payments for non-cancelable leases as of December 30, 2018: Finance Leases Operating Leases Fiscal Year Company-Operated Franchise and Other Company-Operated Franchise and Other 2019 $ 1,962 $ 45,125 $ 20,174 $ 75,703 2020 1,978 43,969 20,052 73,320 2021 2,082 45,522 19,820 73,167 2022 2,114 46,573 19,530 73,300 2023 2,084 48,109 19,430 73,377 Thereafter 23,558 676,139 203,073 854,964 Total minimum payments $ 33,778 $ 905,437 $ 302,079 $ 1,223,831 Less interest (16,874 ) (466,705 ) Present value of minimum lease payments (a) $ 16,904 $ 438,732 _______________ (a) The present value of minimum finance lease payments of $8,405 and $447,231 are included in “Current portion of finance lease liabilities” and “Long-term finance lease liabilities,” respectively. Company as Lessor The components of lease income are as follows: Three Months Ended Nine Months Ended September 29, September 29, Sales-type and direct-financing leases: Selling (loss) profit $ (97 ) $ 1,874 Interest income 7,240 19,045 Operating lease income $ 44,892 $ 134,056 Variable lease income 15,026 42,875 Franchise rental income (a) $ 59,918 $ 176,931 _______________ (a) Includes sublease income of $44,821 and $130,763 recognized during the three and nine months ended September 29, 2019 , respectively, of which $9,683 and $28,894 , respectively, represents lessees’ variable payments to the Company for executory costs. The following table illustrates the Company’s future minimum rental receipts for non-cancelable leases and subleases as of September 29, 2019 : Sales-Type and Direct Financing Leases Operating Leases Fiscal Year Subleases Owned Properties Subleases Owned Properties 2019 (a) $ 6,953 $ 489 $ 27,614 $ 13,129 2020 28,528 2,036 111,227 52,912 2021 29,668 2,068 111,946 54,700 2022 30,342 2,148 113,017 56,173 2023 31,381 2,192 114,021 56,378 Thereafter 486,141 27,115 1,339,940 861,865 Total future minimum receipts 613,013 36,048 $ 1,817,765 $ 1,095,157 Unearned interest income (376,192 ) (19,472 ) Net investment in sales-type and direct financing leases (b) $ 236,821 $ 16,576 _______________ (a) Represents future minimum rental receipts for non-cancelable leases for the remainder of 2019. (b) The present value of minimum direct financing rental receipts of $2,795 and $250,602 are included in “Accounts and notes receivable, net” and “Net investment in sales-type and direct financing leases,” respectively. The present value of minimum direct financing rental receipts includes a net investment in unguaranteed residual assets of $195 . The following table illustrates the Company’s future minimum rental receipts for non-cancelable leases and subleases as of December 30, 2018: Sales-Type and Direct Financing Leases Operating Leases Fiscal Year Subleases Owned Properties Subleases Owned Properties 2019 $ 26,239 $ 1,937 $ 113,180 $ 52,527 2020 26,859 2,006 113,578 53,066 2021 27,904 2,043 114,447 54,615 2022 28,563 2,119 115,552 56,092 2023 29,512 2,159 116,463 56,284 Thereafter 448,851 26,404 1,372,646 858,755 Total future minimum receipts 587,928 36,668 $ 1,945,866 $ 1,131,339 Unearned interest income (377,046 ) (20,338 ) Net investment in sales-type and direct financing leases (a) $ 210,882 $ 16,330 _______________ (a) The present value of minimum direct financing rental receipts of $735 and $226,477 are included in “Accounts and notes receivable, net” and “Net investment in sales-type and direct financing leases,” respectively. Properties owned by the Company and leased to franchisees and other third parties under operating leases include: September 29, Land $ 281,744 Buildings and improvements 310,936 Restaurant equipment 1,726 594,406 Accumulated depreciation and amortization (153,379 ) $ 441,027 |
