10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October 1, 2017

OR

( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________ to _______________

Commission file number: 1-2207

THE WENDY’S COMPANY

(Exact name of registrants as specified in its charter)

Delaware	38-0471180
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
One Dave Thomas Blvd., Dublin, Ohio	43017
(Address of principal executive offices)	(Zip Code)

(614) 764-3100

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [x] No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [x] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [x]                              Accelerated filer [ ]       

Non-accelerated filer [ ] (Do not check if a smaller reporting company)    Smaller reporting company [ ]

Emerging growth company [ ]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [ ] No [x]

There were 242,196,738 shares of The Wendy’s Company common stock outstanding as of November 2, 2017.

THE WENDY’S COMPANY AND SUBSIDIARIES

INDEX TO FORM 10-Q

	Page
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements	3
Unaudited Condensed Consolidated Balance Sheets as of October 1, 2017 and January 1, 2017	3
Unaudited Condensed Consolidated Statements of Operations for the three and nine months ended October 1, 2017 and October 2, 2016	4
Unaudited Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended October 1, 2017 and October 2, 2016	5
Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended October 1, 2017 and October 2, 2016	6
Notes to Condensed Consolidated Financial Statements	8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3. Quantitative and Qualitative Disclosures about Market Risk	35
Item 4. Controls and Procedures	36
PART II: OTHER INFORMATION	37
Item 1. Legal Proceedings	39
Item 1A. Risk Factors	39
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	40
Item 6. Exhibits	41
Signatures	42

2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

THE WENDY’S COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In Thousands Except Per Share Amounts)

	October 1, 2017			January 1, 2017
ASSETS	(Unaudited)
Current assets:
Cash and cash equivalents	$	186,629		$	198,240
Restricted cash	34,042			57,612
Accounts and notes receivable, net	115,390			98,825
Inventories	2,895			2,851
Prepaid expenses and other current assets	23,762			19,244
Advertising funds restricted assets	58,163			75,760
Total current assets	420,881			452,532
Properties	1,252,246			1,192,339
Goodwill	743,508			741,410
Other intangible assets	1,332,130			1,322,531
Investments	58,171			56,981
Net investment in direct financing leases	213,649			123,604
Other assets	69,688			49,917
Total assets	$	4,090,273		$	3,939,314
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	29,359		$	24,652
Accounts payable	25,776			27,635
Accrued expenses and other current liabilities	121,124			102,034
Advertising funds restricted liabilities	58,163			75,760
Total current liabilities	234,422			230,081
Long-term debt	2,696,520			2,487,630
Deferred income taxes	419,293			446,513
Other liabilities	277,443			247,354
Total liabilities	3,627,678			3,411,578
Commitments and contingencies
Stockholders’ equity:
Common stock, $0.10 par value; 1,500,000 shares authorized;      470,424 shares issued; 242,565 and 246,574 shares outstanding, respectively	47,042			47,042
Additional paid-in capital	2,883,504			2,878,589
Accumulated deficit	(305,703		)	(290,857		)
Common stock held in treasury, at cost; 227,859 and 223,850 shares, respectively	(2,117,232		)	(2,043,797		)
Accumulated other comprehensive loss	(45,016		)	(63,241		)
Total stockholders’ equity	462,595			527,736
Total liabilities and stockholders’ equity	$	4,090,273		$	3,939,314

See accompanying notes to condensed consolidated financial statements.

3

THE WENDY’S COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In Thousands Except Per Share Amounts)

	Three Months Ended						Nine Months Ended
	October 1, 2017			October 2, 2016			October 1, 2017			October 2, 2016
	(Unaudited)
Revenues:
Sales	$	158,843		$	228,644		$	467,914		$	747,211
Franchise royalty revenue and fees	98,882			98,039			306,120			275,886
Franchise rental income	50,275			37,329			140,127			102,420
	308,000			364,012			914,161			1,125,517
Costs and expenses:
Cost of sales	132,387			186,546			385,154			603,836
Franchise rental expense	24,076			17,534			64,841			49,684
General and administrative	52,960			58,938			156,690			184,708
Depreciation and amortization	31,216			29,362			91,690			92,456
System optimization losses (gains), net	106			(37,756		)	39,749			(48,106		)
Reorganization and realignment costs	2,888			2,129			20,768			7,866
Impairment of long-lived assets	1,041			361			1,804			12,991
Other operating expense (income), net	1,669			810			5,294			(13,483		)
	246,343			257,924			765,990			889,952
Operating profit	61,657			106,088			148,171			235,565
Interest expense	(29,977		)	(28,731		)	(87,887		)	(85,483		)
Other (expense) income, net	(125		)	498			3,108			1,036
Income before income taxes	31,555			77,855			63,392			151,118
Provision for income taxes	(17,298		)	(28,965		)	(28,639		)	(50,385		)
Net income	$	14,257		$	48,890		$	34,753		$	100,733
Net income per share:
Basic	$	.06		$	.19		$	.14		$	.38
Diluted	.06			.18			.14			.37
Dividends per share	$	.07		$	.06		$	.21		$	.18

See accompanying notes to condensed consolidated financial statements.

4

THE WENDY’S COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In Thousands)

	Three Months Ended					Nine Months Ended
	October 1, 2017		October 2, 2016			October 1, 2017		October 2, 2016
	(Unaudited)
Net income	$	14,257	$	48,890		$	34,753	$	100,733
Other comprehensive income (loss), net:
Foreign currency translation adjustment	8,787		(3,369		)	16,797		10,887
Change in unrecognized pension loss, net of income tax (provision) benefit of $(60) and $34 for the nine months ended October 1, 2017 and October 2, 2016, respectively	—		—			96		(56		)
Effect of cash flow hedges, net of income tax provision of $279 and $838 for both the three and nine months ended October 1, 2017 and October 2, 2016, respectively	444		444			1,332		1,332
Other comprehensive income (loss), net	9,231		(2,925		)	18,225		12,163
Comprehensive income	$	23,488	$	45,965		$	52,978	$	112,896

See accompanying notes to condensed consolidated financial statements.

5

THE WENDY’S COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)

	Nine Months Ended
	October 1, 2017			October 2, 2016
	(Unaudited)
Cash flows from operating activities:
Net income	$	34,753		$	100,733
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	91,690			94,056
Share-based compensation	16,356			14,260
Impairment of long-lived assets	1,804			12,991
Deferred income tax	945			(17,024		)
Non-cash rental income, net	(8,348		)	(5,138		)
Net receipt of deferred vendor incentives	4,547			4,110
System optimization losses (gains), net	39,749			(48,106		)
Gain on sale of investments, net	(1,807		)	—
Distributions received from TimWen joint venture	5,524			8,451
Equity in earnings in joint ventures, net	(6,113		)	(6,495		)
Accretion of long-term debt	927			914
Amortization of deferred financing costs	5,954			5,668
Reclassification of unrealized losses on cash flow hedges	2,170			2,170
Other, net	2,395			4,229
Changes in operating assets and liabilities:
Restricted cash	233			181
Accounts and notes receivable, net	(14,193		)	(29,118		)
Inventories	(44		)	126
Prepaid expenses and other current assets	(1,281		)	(3,958		)
Accounts payable	(1,557		)	(6,412		)
Accrued expenses and other current liabilities	3,039			5,677
Net cash provided by operating activities	176,743			137,315
Cash flows from investing activities:
Capital expenditures	(53,711		)	(108,744		)
Acquisitions	(86,788		)	(2,209		)
Dispositions	80,058			173,849
Proceeds from sale of investments	3,282			—
Payments for investments	(375		)	(172		)
Notes receivable, net	(4,174		)	(2,282		)
Changes in restricted cash	23,624			1,912
Other, net	—			103
Net cash (used in) provided by investing activities	(38,084		)	62,457
Cash flows from financing activities:
Repayments of long-term debt	(20,291		)	(18,678		)
Deferred financing costs	(1,069		)	(1,017		)
Repurchases of common stock	(90,065		)	(161,194		)
Dividends	(51,464		)	(47,793		)
Proceeds from stock option exercises	10,419			10,623
Payments related to tax withholding for share-based compensation	(4,484		)	(4,142		)
Net cash used in financing activities	(156,954		)	(222,201		)
Net cash used in operations before effect of exchange rate changes on cash	(18,295		)	(22,429		)
Effect of exchange rate changes on cash	6,684			3,997
Net decrease in cash and cash equivalents	(11,611		)	(18,432		)
Cash and cash equivalents at beginning of period	198,240			327,216
Cash and cash equivalents at end of period	$	186,629		$	308,784

6

THE WENDY’S COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS—CONTINUED

(In Thousands)

	Nine Months Ended
	October 1, 2017		October 2, 2016
	(Unaudited)
Supplemental cash flow information:
Cash paid for:
Interest	$	93,701	$	85,753
Income taxes, net of refunds	22,092		63,775
Supplemental non-cash investing and financing activities:
Capital expenditures included in accounts payable	$	9,621	$	20,108
Capitalized lease obligations	239,721		102,748

See accompanying notes to condensed consolidated financial statements.

7

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

(1) Basis of Presentation

The accompanying unaudited condensed consolidated financial statements (the “Financial Statements”) of The Wendy’s Company (“The Wendy’s Company” and, together with its subsidiaries, the “Company,” “we,” “us” or “our”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and, therefore, do not include all information and footnotes required by GAAP for complete financial statements. In our opinion, the Financial Statements contain all adjustments of a normal recurring nature necessary to present fairly our financial position as of October 1, 2017 and the results of our operations for the three and nine months ended October 1, 2017 and October 2, 2016 and cash flows for the nine months ended October 1, 2017 and October 2, 2016. The results of operations for the three and nine months ended October 1, 2017 are not necessarily indicative of the results to be expected for the full 2017 fiscal year. These Financial Statements should be read in conjunction with the audited consolidated financial statements for The Wendy’s Company and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended January 1, 2017 (the “Form 10-K”).

The principal subsidiary of the Company is Wendy’s International, LLC and its subsidiaries (“Wendy’s”). The Company manages and internally reports its business geographically. The operation and franchising of Wendy’s^® restaurants in North America (defined as the United States of America (“U.S.”) and Canada) comprises virtually all of our current operations and represents a single reportable segment. The revenues and operating results of Wendy’s restaurants outside of North America are not material.

We report on a fiscal year consisting of 52 or 53 weeks ending on the Sunday closest to or on December 31. All three- and nine-month periods presented herein contain 13 weeks and 39 weeks, respectively. All references to years and quarters relate to fiscal periods rather than calendar periods.

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

(2) System Optimization Losses (Gains), Net

In July 2013, the Company announced a system optimization initiative, as part of its brand transformation, which includes a shift from Company-operated restaurants to franchised restaurants over time, through acquisitions and dispositions, as well as facilitating franchisee-to-franchisee restaurant transfers. In February 2015, the Company announced plans to reduce its ongoing Company-operated restaurant ownership to approximately 5% of the total system, which the Company completed as of January 1, 2017. Wendy’s will continue to optimize its system by facilitating franchisee-to-franchisee restaurant transfers, 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 and drive new restaurant development and accelerate reimages in the Image Activation format.

During the nine months endedOctober 1, 2017, the Company recorded post-closing adjustments on sales of restaurants and completed the sale of other assets, resulting in net gains totaling $3,385. In addition, the Company facilitated the transfer of 270 restaurants between franchisees during the nine months endedOctober 1, 2017 (excluding the DavCo and NPC transactions discussed below).

DavCo and NPC Transactions

As part of our system optimization initiative, the Company acquired 140 Wendy’s restaurants on May 31, 2017 from DavCo Restaurants, LLC (“DavCo”) for total net cash consideration of $86,788, which were immediately sold to NPC International, Inc. (“NPC”), an existing franchisee of the Company, for cash proceeds of $70,688 (the “DavCo and NPC transactions”). As part of the transaction, NPC has agreed to remodel 90 acquired restaurants in the Image Activation format by the end of 2021 and build 15 new Wendy’s restaurants by the end of 2022. Prior to closing the DavCo transaction, seven DavCo restaurants were closed. The acquisition of Wendy’s restaurants from DavCo was not contingent on executing the sale agreement with NPC; as such, the Company accounted for the transactions as an acquisition and subsequent disposition of a business. The total consideration paid to DavCo was allocated to net tangible and identifiable intangible assets acquired based on their estimated fair values. As part of the transactions, the Company retained leases for purposes of subleasing such properties to NPC.

8

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

The following is a summary of the activity recorded as a result of the DavCo and NPC transactions:

	Nine Months Ended
	October 1, 2017
Acquisition (a)
Total consideration paid	$	86,788
Identifiable assets and liabilities assumed:
Net assets held for sale	70,688
Capital lease assets	49,360
Deferred taxes	27,639
Capital lease obligations	(97,046		)
Net unfavorable leases (b)	(22,330		)
Other liabilities (c)	(6,999		)
Total identifiable net assets	21,312
Goodwill (d)	$	65,476
Disposition
Proceeds	$	70,688
Net assets sold	(70,688		)
Goodwill (d)	(65,476		)
Net favorable leases (e)	24,034
Other (f)	(1,692		)
Loss on DavCo and NPC transactions	$	(43,134	)

_______________

(a) The fair values of the identifiable intangible assets and taxes related to the acquisition are provisional amounts as of October 1, 2017, pending final valuations and purchase accounting adjustments. The Company utilized management estimates and consultation with an independent third-party valuation firm to assist in the valuation process. For the three months endedOctober 1, 2017, the Company recorded adjustments to the fair value of deferred taxes and net unfavorable leases, resulting in a decrease in goodwill of $27.

(b) Includes favorable lease assets of $1,229 and unfavorable lease liabilities of $23,559.

(c) Includes a supplemental purchase price estimated at $6,344 to be paid to DavCo for the resolution of certain lease-related matters, which is included in “Accrued expenses and other current liabilities.”

(d) Includes tax deductible goodwill of $21,870.

(e) The Company recorded favorable lease assets of $30,068 and unfavorable lease liabilities of $6,034 as a result of subleasing land, buildings and leasehold improvements to NPC.

(f) Includes cash payments for selling and other costs associated with the transaction. For the three and nine months ended October 1, 2017, the Company recorded additional selling and other costs of $12.

Gains and losses recognized on dispositions are recorded to “System optimization losses (gains), net” in our condensed consolidated statements of operations. Costs related to our system optimization initiative were historically recorded to “Reorganization and realignment costs.” Costs incurred during 2017 in connection with the DavCo and NPC transactions continue to be recorded to “Reorganization and realignment costs.” All other costs incurred during 2017 related to facilitating franchisee-to-franchisee restaurant transfers are recorded to “Other operating expense (income), net.” See Note 4 for further information.

9

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

The following is a summary of the disposition activity recorded as a result of our system optimization initiative:

	Three Months Ended						Nine Months Ended
	October 1, 2017			October 2, 2016			October 1, 2017			October 2, 2016
Number of restaurants sold to franchisees	—			156			—			211
Proceeds from sales of restaurants	$	—		$	124,765		$	—		$	164,380
Net assets sold (a)	—			(58,227		)	—			(75,282		)
Goodwill related to sales of restaurants	—			(24,254		)	—			(30,630		)
Net unfavorable leases (b)	—			(6,225		)	—			(11,131		)
Other	—			(726		)	—			(1,521		)
	—			35,333			—			45,816
Post-closing adjustments on sales of restaurants (c)	418			(120		)	1,345			(1,710		)
Gain on sales of restaurants, net	418			35,213			1,345			44,106
(Loss) gain on sales of other assets, net (d)	(539		)	2,543			2,040			4,000
Gain (loss) on DavCo and NPC transactions	15			—			(43,134		)	—
System optimization (losses) gains, net	$	(106	)	$	37,756		$	(39,749	)	$	48,106

_______________

(a) Net assets sold consisted primarily of equipment.

(b) During the three and nine months endedOctober 2, 2016, the Company recorded favorable lease assets of $2,114 and $2,297, respectively, and unfavorable lease liabilities of $8,339 and $13,428, respectively, as a result of leasing and/or subleasing land, buildings and/or leasehold improvements to franchisees in connection with sales of restaurants.

(c) The three and nine months endedOctober 1, 2017 includes cash payments, net of proceeds received, of $333 and $33, respectively, related to post-closing reconciliations with franchisees. The nine months endedOctober 1, 2017 also includes the recognition of a deferred gain of $312 as a result of the resolution of certain contingencies related to the extension of lease terms for a Canadian restaurant.

(d) During the three and nine months endedOctober 1, 2017, the Company received cash proceeds of $2,411 and $9,403, respectively, primarily from the sale of surplus properties. The nine months endedOctober 1, 2017 also includes the recognition of a deferred gain of $375 related to the sale of a share in an aircraft. During the three and nine months endedOctober 2, 2016, the Company received cash proceeds of $4,006 and $9,469, respectively, primarily from the sale of surplus properties.

As of October 1, 2017 and January 1, 2017, the Company had assets held for sale of $2,509 and $4,800, respectively, primarily consisting of surplus properties. Assets held for sale are included in “Prepaid expenses and other current assets.”

10

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

(3) Acquisitions

The table below presents the allocation of the total purchase price to the fair value of assets acquired and liabilities assumed for acquisitions of franchised restaurants:

	Nine Months Ended
	October 1, 2017		October 2, 2016
Restaurants acquired from franchisees	—		2
Total consideration paid, net of cash received	$	—	$	2,209
Identifiable assets acquired and liabilities assumed:
Properties	—		2,218
Deferred taxes and other assets	—		9
Other liabilities	—		(18		)
Total identifiable net assets	—		2,209
Goodwill	$	—	$	—

On May 31, 2017, the Company also entered into the DavCo and NPC transactions. See Note 2 for further information.

(4) Reorganization and Realignment Costs

The following is a summary of the initiatives included in “Reorganization and realignment costs:”

	Three Months Ended				Nine Months Ended
	October 1, 2017		October 2, 2016		October 1, 2017		October 2, 2016
System optimization initiative	$	232	$	2,091	$	867	$	6,895
G&A realignment - November 2014 plan	—		38		—		971
G&A realignment - May 2017 plan	2,656		—		19,901		—
Reorganization and realignment costs	$	2,888	$	2,129	$	20,768	$	7,866

System Optimization Initiative

The Company has recognized costs related to its system optimization initiative, which includes a shift from Company-operated restaurants to franchised restaurants over time, through acquisitions and dispositions, as well as facilitating franchisee-to-franchisee restaurant transfers. The Company does not expect to incur additional costs during the remainder of 2017 in connection with the DavCo and NPC transactions. All other costs incurred during 2017 related to facilitating franchisee-to-franchisee restaurant transfers are recorded to “Other operating expense (income), net.”

11

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

The following is a summary of the costs recorded as a result of our system optimization initiative:

	Three Months Ended				Nine Months Ended				Total Incurred Since Inception
	October 1, 2017		October 2, 2016		October 1, 2017		October 2, 2016
Severance and related employee costs	$	—	$	28	$	3	$	46	$	18,237
Professional fees	232		1,991		794		5,137		17,404
Other (a)	—		72		70		112		5,813
	232		2,091		867		5,295		41,454
Accelerated depreciation and amortization (b)	—		—		—		1,600		25,398
Share-based compensation (c)	—		—		—		—		5,013
Total system optimization initiative	$	232	$	2,091	$	867	$	6,895	$	71,865

_______________

(a) The nine months ended October 2, 2016 includes a reversal of an accrual of $50 as a result of a change in estimate.

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

(c) 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 tables below present a rollforward of our accrual for our system optimization initiative, which is included in “Accrued expenses and other current liabilities.”

	Balance January 1, 2017		Charges		Payments			Balance October 1, 2017
Severance and related employee costs	$	—	$	3	$	(3	)	$	—
Professional fees	101		794		(885		)	10
Other	—		70		(70		)	—
	$	101	$	867	$	(958	)	$	10

	Balance January 3, 2016		Charges		Payments			Balance October 2, 2016
Severance and related employee costs	$	77	$	46	$	(123	)	$	—
Professional fees	708		5,137		(5,740		)	105
Other	90		112		(202		)	—
	$	875	$	5,295	$	(6,065	)	$	105

General and Administrative (“G&A”) Realignment

November 2014 Plan

In November 2014, the Company initiated a plan to reduce its G&A expenses.  The plan included a realignment and reinvestment of resources to focus primarily on accelerated restaurant development and consumer-facing restaurant technology to drive long-term growth.  The Company achieved the majority of the expense reductions through the realignment of its U.S. field operations and savings at its Restaurant Support Center in Dublin, Ohio, which was substantially completed by the end of the second quarter of 2015.  The Company recognized costs totaling $38 and $971 during the three and nine months endedOctober 2, 2016, respectively, and $23,960 in aggregate since inception.  The Company did not incur any expenses during the three and nine months endedOctober 1, 2017 and does not expect to incur additional costs related to the plan.

12

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

May 2017 Plan

In May 2017, the Company initiated a new plan to further reduce its G&A expenses. The Company expects to incur total costs aggregating approximately $28,000 to $33,000 related to the plan. The Company recognized costs totaling $2,656 and $19,901 during the three and nine months ended October 1, 2017, respectively, which primarily included severance and related employee costs and share-based compensation. The Company expects to incur additional costs aggregating approximately $8,000 to $13,000, comprised of (1) severance and related employee costs of approximately $3,000, (2) recruitment and relocation costs of approximately $4,000, (3) third-party and other costs of approximately $1,000 and (4) share-based compensation of approximately $3,000. The Company expects costs to be recognized during the remainder of 2017 and continue into 2019, with approximately two-thirds to be recognized during 2017.

The following is a summary of the activity recorded as a result of the May 2017 plan:

	Three Months Ended		Nine Months Ended
	October 1, 2017		October 1, 2017
Severance and related employee costs	$	1,210	$	14,436
Recruitment and relocation costs	145		145
Third-party and other costs	496		821
	1,851		15,402
Share-based compensation (a)	805		4,499
Total G&A realignment - May 2017 plan	$	2,656	$	19,901

_______________

(a) Primarily represents incremental share-based compensation resulting from the modification of stock options in connection with the termination of employees under our May 2017 plan. The three and nine months ended October 1, 2017 includes incremental share-based compensation of $652 related to the modification of stock options granted during August 2017.

As of October 1, 2017, the accruals for our May 2017 plan are included in “Accrued expenses and other current liabilities” and “Other liabilities” and totaled $7,766 and $5,429, respectively. The table below presents a rollforward of our accruals for the May 2017 plan.

	Balance January 1, 2017		Charges		Payments			Balance October 1, 2017
Severance and related employee costs	$	—	$	14,436	$	(1,350	)	$	13,086
Recruitment and relocation costs	—		145		(36		)	109
Third-party and other costs	—		821		(821		)	—
	$	—	$	15,402	$	(2,207	)	$	13,195

(5) Investments

Equity Investments

Wendy’s 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, a wholly-owned subsidiary of Wendy’s has a 20% share in a joint venture for the operation of Wendy’s restaurants in Brazil (the “Brazil JV”). The Company has significant influence over these investees. Such investments 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 expense (income), net.”

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THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

During the three months ended October 1, 2017, a wholly-owned subsidiary of Wendy’s agreed to lend the Brazil JV an aggregate amount up to, but not to exceed, $4,800, which is in addition to $8,000 previously loaned. During the three months ended October 1, 2017, $1,500 was loaned to the Brazil JV under this agreement. 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 are due October 20, 2020 and bear interest at 6.5% per year.

Presented below is activity related to our investment in TimWen and the Brazil JV included in our condensed consolidated financial statements:

	Nine Months Ended
	October 1, 2017			October 2, 2016
Balance at beginning of period	$	54,545		$	55,541
Investment	375			172
Equity in earnings for the period	7,844			8,207
Amortization of purchase price adjustments (a)	(1,731		)	(1,712		)
	6,113			6,495
Distributions received (b)	(8,128		)	(8,451		)
Foreign currency translation adjustment included in “Other comprehensive income, net”	4,304			3,204
Balance at end of period	$	57,209		$	56,961

_______________

(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.

(b) The nine months ended October 1, 2017 includes a distribution receivable from TimWen of $2,604, which is included in “Accounts and notes receivable, net.”

(6) Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Valuation techniques under the accounting guidance related to fair value measurements are based on observable and unobservable inputs. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect our market assumptions. These inputs are classified into the following hierarchy:

• Level 1 Inputs - Quoted prices for identical assets or liabilities in active markets.

• Level 2 Inputs - Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

• Level 3 Inputs - Pricing inputs are unobservable for the assets or liabilities and include situations where there is little, if any, market activity for the assets or liabilities. The inputs into the determination of fair value require significant management judgment or estimation.

14

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

Financial Instruments

The following table presents the carrying amounts and estimated fair values of the Company’s financial instruments:

	October 1, 2017				January 1, 2017
	Carrying Amount		Fair Value		Carrying Amount		Fair Value		Fair Value Measurements
Financial assets
Cash equivalents	$	337	$	337	$	5,335	$	5,335	Level 1
Non-current cost method investments (a)	962		325,869		2,436		326,283		Level 3
Financial liabilities
Series 2015-1 Class A-2-I Notes (b)	857,500		863,417		864,063		857,349		Level 2
Series 2015-1 Class A-2-II Notes (b)	882,000		900,169		888,750		880,005		Level 2
Series 2015-1 Class A-2-III Notes (b)	490,000		504,112		493,750		474,543		Level 2
7% debentures, due in 2025 (b)	89,204		106,000		88,277		99,750		Level 2
Guarantees of franchisee loan obligations (c)	224		224		280		280		Level 3

_______________

(a) The fair value of our indirect investment in Arby’s Restaurant Group, Inc. (“Arby’s”) is based on applying a multiple to Arby’s adjusted earnings before income taxes, depreciation and amortization per its current unaudited financial information. The carrying value of our indirect investment in Arby’s was reduced to zero during 2013 in connection with the receipt of a dividend. The fair values of our remaining investments are not significant and are based on our review of information provided by the investment managers or investees which was based on (1) valuations performed by the investment managers or investees, (2) quoted market or broker/dealer prices for similar investments and (3) quoted market or broker/dealer prices adjusted by the investment managers for legal or contractual restrictions, risk of nonperformance or lack of marketability, depending upon the underlying investments.

(b) The fair values were based on quoted market prices in markets that are not considered active markets.

(c) Wendy’s has provided loan guarantees to various lenders on behalf of franchisees entering into debt arrangements for new restaurant development and equipment financing. In addition, during 2012, Wendy’s provided a guarantee to a lender for a franchisee in connection with the refinancing of the franchisee’s debt. We have accrued a liability for the fair value of these guarantees, the calculation of which was based upon a weighted average risk percentage established at inception and adjusted for a history of defaults.

The carrying amounts of cash, accounts payable and accrued expenses approximated fair value due to the short-term nature of those items. The carrying amounts of accounts and notes receivable, net (both current and non-current) approximated fair value due to the effect of the related allowance for doubtful accounts. Our cash and cash equivalents and guarantees are the only financial assets and liabilities measured and recorded at fair value on a recurring basis.

Derivative Instruments

The Company’s primary objective for entering into interest rate swap agreements was to manage its exposure to changes in interest rates, as well as to maintain an appropriate mix of fixed and variable rate debt.

Our derivative instruments for 2015 included seven forward-starting interest rate swaps designated as cash flow hedges to change the floating rate interest payments for $350,000 and $100,000 in borrowings associated with the Term A and Term B Loans, respectively, under the Company’s prior credit agreement, to fixed rate interest payments beginning June 30, 2015 and maturing on December 31, 2017. In May 2015, the Company terminated these interest rate swaps and paid $7,275, which was recorded against the derivative liability. The unrealized loss on the cash flow hedges at termination of $7,275 is being reclassified on a straight-line basis from “Accumulated other comprehensive loss” to “Interest expense” beginning June 30, 2015 (the original effective date of the interest rate swaps) through December 31, 2017 (the original maturity date of the interest rate swaps).

15

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

Reclassifications of unrealized losses on cash flow hedges from “Accumulated other comprehensive loss” to “Interest expense” were $723 and $2,170 for both the three and nine months ended October 1, 2017 and October 2, 2016, respectively.

Non-Recurring Fair Value Measurements

Assets and liabilities remeasured to fair value on a non-recurring basis resulted in impairment that we have recorded to “Impairment of long-lived assets” in our condensed consolidated statements of operations.

Total impairment losses may reflect the impact of remeasuring long-lived assets held and used (including land, buildings, leasehold improvements and favorable lease assets) to fair value as a result of (1) the Company’s decision to lease and/or sublease the land and/or buildings to franchisees in connection with the sale or anticipated sale of restaurants and (2) declines in operating performance at Company-operated restaurants. The fair value of long-lived assets held and used presented in the tables below represents the remaining carrying value and was estimated based on either discounted cash flows of future anticipated lease and sublease income or current market values.

Total impairment losses may also include the impact of remeasuring long-lived assets held for sale, which primarily include surplus properties. The fair value of long-lived assets held for sale presented in the tables below represents the remaining carrying value and was estimated based on current market values. See Note 7 for further information on impairment of our long-lived assets.

			Fair Value Measurements
	October 1, 2017		Level 1		Level 2		Level 3
Held and used	$	915	$	—	$	—	$	915
Held for sale	1,290		—		—		1,290
Total	$	2,205	$	—	$	—	$	2,205

			Fair Value Measurements
	January 1, 2017		Level 1		Level 2		Level 3
Held and used	$	5,462	$	—	$	—	$	5,462
Held for sale	1,552		—		—		1,552
Total	$	7,014	$	—	$	—	$	7,014

Total impairment losses for the three and nine months ended October 1, 2017 included remeasuring long-lived assets held and used of $928 and $1,146, respectively, and remeasuring long-lived assets held for sale of $113 and $658, respectively. Total impairment losses for the three and nine months ended October 2, 2016 included remeasuring long-lived assets held and used of $242 and $12,768, respectively, and remeasuring long-lived assets held for sale of $119 and $223, respectively.

In addition, the Company measured assets acquired and liabilities assumed at fair value as part of the DavCo and NPC transactions during the three and nine months ended October 1, 2017. See Note 2 for further information.

(7) Impairment of Long-Lived Assets

During the three and nine months endedOctober 1, 2017 and October 2, 2016, the Company recorded impairment charges on long-lived assets as a result of (1) the Company’s decision to lease and/or sublease properties to franchisees in connection with the sale or anticipated sale of Company-operated restaurants, (2) closing Company-operated restaurants and classifying such surplus properties as held for sale and (3) the deterioration in operating performance of certain Company-operated restaurants and charges for capital improvements in previously impaired restaurants that did not subsequently recover. The Company may recognize additional impairment charges resulting from leasing or subleasing additional properties to franchisees in connection with sales of Company-operated restaurants to franchisees.

16

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

The following is a summary of impairment losses recorded, which represent the excess of the carrying amount over the fair value of the affected assets and are included in “Impairment of long-lived assets.”

	Three Months Ended				Nine Months Ended
	October 1, 2017		October 2, 2016		October 1, 2017		October 2, 2016
Restaurants leased or subleased to franchisees	$	95	$	163	$	95	$	12,654
Surplus properties	113		119		658		223
Company-operated restaurants	833		79		1,051		114
	$	1,041	$	361	$	1,804	$	12,991

(8) Income Taxes

The Company’s effective tax rate for the three months endedOctober 1, 2017 and October 2, 2016 was 54.8% and 37.2%, respectively. The Company’s effective tax rate varies from the U.S. federal statutory rate of 35% due to the effect of (1) the system optimization initiative provision of $5,019 and $2,332 in the third quarter of 2017 and 2016, respectively, reflecting goodwill adjustments, changes to valuation allowances on state net operating loss carryforwards and state deferred taxes, (2) state income taxes net of federal benefits, including non-recurring changes to state deferred taxes, (3) the adoption of an amendment issued by the Financial Accounting Standards Board (“FASB”), which requires that excess tax benefits and tax deficiencies related to share-based payments be recognized in net income and (4) the rate differential between foreign and domestic taxes.

The Company’s effective tax rate for the nine months ended October 1, 2017 and October 2, 2016 was 45.2% and 33.3%, respectively. The Company’s effective tax rate varies from the U.S. federal statutory rate of 35% due to the effect of (1) the system optimization initiative, reflecting goodwill adjustments, changes to valuation allowances on state net operating loss carryforwards and state deferred taxes (including corrections to prior years identified and recorded in the first nine months of 2017 and 2016, which resulted in a benefit of $2,248 and $7,113, respectively), (2) the adoption of an amendment issued by the FASB, which requires that excess tax benefits and tax deficiencies related to share-based payments be recognized in net income, which resulted in a benefit of $5,205 during the nine months ended October 1, 2017, (3) state income taxes net of federal benefits, including non-recurring changes to state deferred taxes, and (4) the rate differential between foreign and domestic taxes.

During the next twelve months, we believe that it is reasonably possible the Company will reduce its unrecognized tax benefits by up to $7,030, primarily due to expected settlements with taxing authorities.

The current portion of refundable income taxes was $16,165 and $18,111 as of October 1, 2017 and January 1, 2017, respectively, and is included in “Accounts and notes receivable, net” in the condensed consolidated balance sheets.  Long-term refundable income taxes are included in “Other assets” and amounted to $960 and $239 as of October 1, 2017 and January 1, 2017, respectively.

(9) Net Income Per Share

Basic net income per share 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 net income per share were as follows:

	Three Months Ended		Nine Months Ended
	October 1, 2017	October 2, 2016	October 1, 2017	October 2, 2016
Common stock:
Weighted average basic shares outstanding	243,354	260,976	245,073	265,702
Dilutive effect of stock options and restricted shares	8,383	3,832	8,103	4,239
Weighted average diluted shares outstanding	251,737	264,808	253,176	269,941

17

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

Diluted net income per share for the three and nine months ended October 1, 2017 and October 2, 2016 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 1,617 and 618 for the three and nine months ended October 1, 2017, respectively, and 2,233 and 2,072 for the three and nine months ended October 2, 2016, respectively, from our diluted net income per share calculation as they would have had anti-dilutive effects.

(10) Stockholders’ Equity

Stockholders’ Equity

The following is a summary of the changes in stockholders’ equity:

	Nine Months Ended
	October 1, 2017			October 2, 2016
Balance at beginning of period	$	527,736		$	752,914
Comprehensive income	52,978			112,896
Cash dividends	(51,464		)	(47,793		)
Repurchases of common stock	(90,964		)	(162,492		)
Share-based compensation	16,356			14,260
Exercises of stock options	10,194			10,600
Vesting of restricted shares	(4,260		)	(3,853		)
Cumulative effect of change in accounting principle (a)	1,880			—
Tax benefit from share-based compensation	—			1,898
Other	139			145
Balance at end of period	$	462,595		$	678,575

_______________

(a) During the nine months ended October 1, 2017, the Company recognized a tax benefit as a reduction to the Company’s deferred tax liability with an equal offsetting increase to “Accumulated deficit.” The adjustment was recognized as a result of adoption of an amendment to the accounting for employee share-based payment transactions. See Note 15 for further information.

Repurchases of Common Stock

In February 2017, our Board of Directors authorized a repurchase program for up to $150,000 of our common stock through March 4, 2018, when and if market conditions warrant and to the extent legally permissible. During the nine months ended October 1, 2017, the Company repurchased 6,131 shares with an aggregate purchase price of $90,876, of which $899 was accrued at October 1, 2017 and excluding commissions of $88. As of October 1, 2017, the Company had $59,124 of availability remaining under its February 2017 authorization. Subsequent to October 1, 2017 through November 2, 2017, the Company repurchased 428 shares with an aggregate purchase price of $6,628, excluding commissions of $6.

On June 1, 2015, our Board of Directors authorized a repurchase program for up to $1,400,000 of our common stock through January 1, 2017, when and if market conditions warranted and to the extent legally permissible. During the nine months ended October 2, 2016, the Company repurchased 16,034 shares with an aggregate purchase price of $162,252, of which $2,998 was accrued at October 2, 2016 and excluding commissions of $240.

18

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

Accumulated Other Comprehensive Loss

The following table provides a rollforward of the components of accumulated other comprehensive loss, net of tax as applicable:

	Foreign Currency Translation			Cash Flow Hedges (a)			Pension			Total
Balance at January 1, 2017	$	(60,299	)	$	(1,797	)	$	(1,145	)	$	(63,241	)
Current-period other comprehensive income	16,797			1,332			96			18,225
Balance at October 1, 2017	$	(43,502	)	$	(465	)	$	(1,049	)	$	(45,016	)
Balance at January 3, 2016	$	(66,163	)	$	(3,571	)	$	(1,089	)	$	(70,823	)
Current-period other comprehensive income (loss)	10,887			1,332			(56		)	12,163
Balance at October 2, 2016	$	(55,276	)	$	(2,239	)	$	(1,145	)	$	(58,660	)

_______________

(a) Current-period other comprehensive income (loss) includes the reclassification of unrealized losses on cash flow hedges from “Accumulated other comprehensive loss” to our condensed consolidated statements of operations of $444 and $1,332 for both the three and nine months ended October 1, 2017 and October 2, 2016, respectively. The reclassification of unrealized losses on cash flow hedges consists of $723 and $2,170 for both the three and nine months ended October 1, 2017 and October 2, 2016, respectively, recorded to “Interest expense,” net of the related income tax benefit of $279 and $838 for both the three and nine months ended October 1, 2017 and October 2, 2016, respectively, recorded to “Provision for income taxes.” See Note 6 for further information.

(11)Leases

At October 1, 2017, Wendy’s and its franchisees operated 6,586 Wendy’s restaurants. Of the 333 Company-operated Wendy’s restaurants, Wendy’s owned the land and building for 146 restaurants, owned the building and held long-term land leases for 137 restaurants and held leases covering land and building for 50 restaurants. Wendy’s also owned 521 and leased 1,270 properties that were either leased or subleased principally to franchisees.

Rental expense for operating leases consists of the following components:

	Three Months Ended				Nine Months Ended
	October 1, 2017		October 2, 2016		October 1, 2017		October 2, 2016
Rental expense:
Minimum rentals	$	23,997	$	19,137	$	66,701	$	59,139
Contingent rentals	5,395		5,254		14,405		13,786
Total rental expense (a)	$	29,392	$	24,391	$	81,106	$	72,925

_______________

(a) Amounts exclude sublease income of $35,022 and $92,434 recognized during the three and nine months endedOctober 1, 2017, respectively, and $25,127 and $68,400 recognized during the three and nine months endedOctober 2, 2016, respectively.

19

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

Rental income for operating leases and subleases consists of the following components:

	Three Months Ended				Nine Months Ended
	October 1, 2017		October 2, 2016		October 1, 2017		October 2, 2016
Rental income:
Minimum rentals	$	44,682	$	31,902	$	124,847	$	87,409
Contingent rentals	5,593		5,427		15,280		15,011
Total rental income	$	50,275	$	37,329	$	140,127	$	102,420

The following table illustrates the Company’s future minimum rental payments and rental receipts for non-cancelable leases and subleases, including rental receipts for direct financing leases as of October 1, 2017. Rental receipts below are presented separately for owned properties and for leased properties based on the classification of the underlying lease.

	Rental Payments					Rental Receipts
Fiscal Year	Capital Leases			Operating Leases		Capital Leases		Operating Leases		Owned Properties
2017 (a)	$	11,989		$	24,894	$	15,868	$	18,782	$	13,436
2018	43,406			93,431		60,844		75,167		53,896
2019	42,717			93,272		61,368		75,267		54,866
2020	43,660			92,434		62,469		74,983		55,489
2021	45,249			91,892		64,260		74,672		57,102
Thereafter	748,736			1,188,165		1,045,693		973,428		1,008,243
Total minimum payments	$	935,757		$	1,584,088	$	1,310,502	$	1,292,299	$	1,243,032
Less interest	(499,703		)
Present value of minimum capital lease payments (b)	$	436,054

_______________

(a) Represents future minimum rental payments and rental receipts for non-cancelable leases and subleases for the remainder of our 2017 fiscal year.

(b) The present value of minimum capital lease payments of $6,608 and $429,446 are included in “Current portion of long-term debt” and “Long-term debt,” respectively.

Properties owned by the Company and leased to franchisees and other third parties under operating leases include:

	October 1, 2017			January 1, 2017
Land	$	271,840		$	271,160
Buildings and improvements	312,796			312,067
Restaurant equipment	1,491			1,507
	586,127			584,734
Accumulated depreciation and amortization	(122,970		)	(110,166		)
	$	463,157		$	474,568

20

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

Our net investment in direct financing leases is as follows:

	October 1, 2017			January 1, 2017
Future minimum rental receipts	$	630,352		$	401,452
Unearned interest income	(416,221		)	(277,747		)
Net investment in direct financing leases	214,131			123,705
Net current investment in direct financing leases (a)	(482		)	(101		)
Net non-current investment in direct financing leases (b)	$	213,649		$	123,604

_______________

(a) Included in “Accounts and notes receivable, net.”

(b) Included in “Net investment in direct financing leases.”

(12) Transactions with Related Parties

Except as described below, the Company did not have any significant changes in or transactions with its related parties during the current fiscal period since those reported in the Form 10-K.

TimWen Lease and Management Fee Payments

A wholly-owned subsidiary of Wendy’s leases restaurant facilities from TimWen for the operation of Wendy’s/Tim Hortons combo units in Canada. During the nine months ended October 1, 2017 and October 2, 2016, Wendy’s paid TimWen $9,362 and $8,926, respectively, under these lease agreements. In addition, TimWen paid Wendy’s a management fee under the TimWen joint venture agreement of $158 and $156 during the nine months ended October 1, 2017 and October 2, 2016, respectively, which has been included as a reduction to “General and administrative.”

(13) Guarantees and Other Commitments and Contingencies

The Company did not have any significant changes in guarantees and other commitments and contingencies during the current fiscal period since those reported in the Form 10-K. Refer to the Form 10-K for further information regarding the Company’s additional commitments and obligations.

Franchisee Image Activation Incentive Programs

In order to promote Image Activation new restaurant development, Wendy’s has an incentive program for franchisees that provides for reductions in royalty and national advertising payments for up to the first two years of operation for qualifying new restaurants opened by December 31, 2020, with the value of the incentives declining in the later years of the program. Wendy’s also has incentive programs for 2017 available to franchisees that commence Image Activation restaurant remodels by December 15, 2017. The remodel incentive programs provide for reductions in royalty payments for one year after the completion of construction.

Lease Guarantees

Wendy’s has guaranteed the performance of certain leases and other obligations, primarily from former Company-operated restaurant locations now operated by franchisees, amounting to $56,299 as of October 1, 2017. These leases extend through 2056. We have not received any notice of default related to these leases as of October 1, 2017. In the event of default by a franchise owner, Wendy’s generally retains the right to acquire possession of the related restaurant locations.

Wendy’s is contingently liable for certain other leases which have been assigned to unrelated third parties who have indemnified Wendy’s against future liabilities amounting to $637 as of October 1, 2017. These leases expire on various dates through 2021.

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THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

Letters of Credit

As of October 1, 2017, the Company had outstanding letters of credit with various parties totaling $32,575, of which $3,205 were cash collateralized. The outstanding letters of credit include amounts outstanding against the securitized financing facility. The related cash collateral is classified as “Restricted cash” in the condensed consolidated balance sheets. We do not expect any material loss to result from these letters of credit.

(14) Legal and Environmental Matters

We are involved in litigation and claims incidental to our current and prior businesses. We provide accruals for such litigation and claims when payment is probable and reasonably estimable. As of October 1, 2017, the Company had accruals for all of its legal and environmental matters aggregating $1,639. We cannot estimate the aggregate possible range of loss due to most proceedings, including those described below, being in preliminary stages, with various motions either yet to be submitted or pending, discovery yet to occur and significant factual matters unresolved. In addition, most cases seek an indeterminate amount of damages and many involve multiple parties. Predicting the outcomes of settlement discussions or judicial or arbitral decisions is thus inherently difficult. Based on currently available information, including legal defenses available to us, and given the aforementioned accruals and our insurance coverage, we do not believe that the outcome of these legal and environmental matters will have a material effect on our consolidated financial position or results of operations.

We previously described certain legal proceedings under Note 14 to our Condensed Consolidated Financial Statements in our Quarterly Report on Form 10-Q for the second quarter of 2017, as filed with the SEC on August 9, 2017. Except as set forth below, there were no material developments in those legal proceedings during the third quarter of 2017.

As previously reported, the Company has been named as a defendant in putative class action lawsuits alleging, among other things, that the Company failed to safeguard customer credit card information and failed to provide notice that credit card information had been compromised.  Jonathan Torres and other consumers filed an action in the U.S. District Court for the Middle District of Florida (the “Torres case”). The operative complaint seeks to certify a nationwide class of consumers, or in the alternative, statewide classes of consumers for Florida, New York, New Jersey, Texas, and Tennessee, as well as statewide classes of consumers under those states’ consumer protection and unfair trade practices laws. On October 27, 2017, the Company moved to dismiss the operative complaint. The Company’s motion is pending before the court.

(15) New Accounting Standards

New Accounting Standards

In May 2017, the FASB issued new guidance on the scope of modification accounting for share-based payment arrangements. The new guidance will provide relief to entities that make non-substantive changes to their share-based payment arrangements. The Company does not expect the amendment, which requires prospective adoption and is effective commencing with our 2018 fiscal year, to have a material impact on our consolidated financial statements.

In March 2017, the FASB issued new guidance on the presentation of net periodic benefit costs that requires entities to disaggregate the current service cost component from the other components of net benefit cost in the income statement. The Company does not expect the amendment, which requires retrospective adoption and is effective commencing with our 2018 fiscal year, to have a material impact on our consolidated financial statements.

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 with lease terms of more than 12 months. The amendment requires the recognition and measurement of leases at the beginning of the earliest period presented using a modified retrospective approach.  We are currently evaluating the impact of the adoption of this guidance on our consolidated financial statements and plan to reflect adoption when effective in the first quarter of our 2019 fiscal year. As shown in Note 11, there are $1,584,088 in future minimum rental payments for operating leases that are not currently on our balance sheet; therefore, we expect this will have a material impact on our balance sheet and related disclosures.

In May 2014, the FASB issued amended guidance for revenue recognition. The new guidance outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. The core principle of the guidance is

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THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. Additionally, the guidance requires improved disclosure to help users of financial statements better understand the nature, amount, timing, and uncertainty of revenue that is recognized. The new guidance supersedes most current revenue recognition guidance, including industry-specific guidance, and is effective commencing with our 2018 fiscal year. The guidance allows for either a full retrospective or modified retrospective transition method. We currently expect to apply the modified retrospective method upon adoption. This guidance will not impact our recognition of revenue from Company-operated restaurant sales or our recognition of continuing royalty revenues from franchisees, which are based on a percentage of franchise sales. Under current guidance, we recognize initial fees from franchisees when we have performed all material obligations and services, which generally occurs when the franchised restaurant opens. Additionally, under current guidance, our advertising fund contributions from franchisees and the related advertising expenditures are reported on a net basis in our consolidated balance sheet as “Advertising funds restricted assets” and “Advertising funds restricted liabilities.” Under the new guidance, we anticipate recognizing the initial fees from franchisees over the life of the related franchise agreements and we expect to consolidate the operations and cash flow results of our national advertising funds, both of which will have a material impact on our consolidated financial statements.

New Accounting Standards Adopted

In March 2016, the FASB issued an amendment related to equity method accounting, which eliminates the requirement to retrospectively apply the equity method to an investment that subsequently qualifies for such accounting as a result of an increase in level of ownership interest or degree of influence. The Company adopted this amendment, prospectively, during the first quarter of 2017. The adoption of this guidance did not impact our consolidated financial statements.

In March 2016, the FASB issued an amendment that clarifies the steps for assessing triggering events of embedded contingent put and call options within debt instruments. The Company adopted this amendment during the first quarter of 2017. The adoption of this guidance did not impact our consolidated financial statements.

In March 2016, the FASB issued an amendment that modifies several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures and statutory withholding requirements, as well as statement of cash flows presentation. The transition requirement is generally modified retrospective, with the exception of recognition of excess tax benefits and tax deficiencies that requires prospective adoption. The Company adopted this amendment during the first quarter of 2017. The cash flows used in financing activities related to the excess tax benefits from share-based compensation arrangements, which amounted to $2,376 during the nine months ended October 2, 2016, was reclassified retrospectively to cash flows provided by operating activities. Additionally, during the nine months ended October 2, 2016, $4,142 was paid to taxing authorities for withheld shares on share-based compensation arrangement activities, which was reclassified retrospectively from cash flows provided by operating activities to cash flows used in financing activities. Upon adopting the amendment in the first quarter of 2017, the Company recognized $1,880 in unrecognized tax benefits for deductions in excess of cumulative compensation costs relating to the exercise of stock options and vesting of restricted stock. This tax benefit was recognized as a reduction to the Company’s deferred tax liability with an equal offsetting increase to “Accumulated deficit.” The Company will continue to estimate forfeitures each period.

In July 2015, the FASB issued an amendment that requires entities to measure inventory at the lower of cost and net realizable value, rather than the lower of cost or market, with market value represented by replacement cost, net realizable value or net realizable value less a normal profit margin. The Company adopted this amendment during the first quarter of 2017. The adoption of this guidance did not impact our consolidated financial statements.

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Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Introduction

This “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of The Wendy’s Company (“The Wendy’s Company” and, together with its subsidiaries, the “Company,” “we,” “us,” or “our”) should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and the related notes included elsewhere within this report and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended January 1, 2017 (the “Form 10-K”). There have been no material changes as of October 1, 2017 to the application of our critical accounting policies as described in Item 7 of the Form 10-K. Certain statements we make under this Item 2 constitute “forward-looking statements” under the Private Securities Litigation Reform Act of 1995. See “Special Note Regarding Forward-Looking Statements and Projections” in “Part II - Other Information” preceding Item 1 of Part II of this report. You should consider our forward-looking statements in light of our unaudited condensed consolidated financial statements, related notes and other financial information appearing elsewhere in this report, the Form 10-K and our other filings with the Securities and Exchange Commission (the “SEC”).

The Wendy’s Company is the parent company of its 100% owned subsidiary holding company, Wendy’s Restaurants, LLC (“Wendy’s Restaurants”). The principal 100% owned subsidiary of Wendy’s Restaurants is Wendy’s International, LLC and its subsidiaries (“Wendy’s”). Wendy’s franchises and operates Wendy’s^® quick-service restaurants throughout North America (defined as the United States of America (“U.S.”) and Canada). Wendy’s also has franchised restaurants in 29 foreign countries and U.S. territories.

Wendy’s restaurants offer an extensive menu specializing in hamburger sandwiches and featuring fillet of chicken breast sandwiches, chicken nuggets, chili, french fries, baked potatoes, freshly prepared salads, soft drinks, Frosty^® desserts and kids’ meals. In addition, the restaurants sell a variety of promotional products on a limited basis.

The Company manages and internally reports its business geographically. The operation and franchising of Wendy’s restaurants in North America comprises virtually all of our current operations and represents a single reportable segment. The revenues and operating results of Wendy’s restaurants outside of North America are not material. The results of operations discussed below may not necessarily be indicative of future results.

The Company reports on a fiscal year consisting of 52 or 53 weeks ending on the Sunday closest to or on December 31. All three- and nine-month periods presented herein contain 13 weeks and 39 weeks, respectively. All references to years and quarters relate to fiscal periods rather than calendar periods.

Executive Overview

Our Business

As of October 1, 2017, the Wendy’s restaurant system was comprised of 6,586 restaurants, of which 333 were owned and operated by the Company. All of our Company-operated restaurants are located in the U.S.

Wendy’s operating results are impacted by a number of external factors, including unemployment, general economic trends, intense price competition, commodity costs, labor costs and weather.

Wendy’s long-term growth opportunities will be driven by a combination of brand relevance and economic relevance. Key components of growth include (1) systemwide same-restaurant sales growth through continuing core menu improvement, product innovation and customer count growth, (2) investing in our Image Activation program, which includes innovative exterior and interior restaurant designs for our new and reimaged restaurants and focused execution of operational excellence, (3) growth in new restaurants, including global growth, (4) increased restaurant utilization in various dayparts and brand access utilizing mobile technology, (5) building shareholder value through financial management strategies and (6) our system optimization initiative.

Wendy’s revenues for the first nine months of 2017 include (1) $467.9 million of sales at Company-operated restaurants, (2) $306.1 million of franchise royalty revenue and fees and (3) $140.2 million of franchise rental income. Substantially all of our Wendy’s royalty agreements provide for royalties of 4.0% of franchisees’ revenues.

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Key Business Measures

We track our results of operations and manage our business using the following key business measures, which include non-GAAP financial measures:

• Same-Restaurant Sales - We report same-restaurant sales commencing after new restaurants have been open for 15 continuous months and as soon as reimaged restaurants reopen. This methodology is consistent with the metric used by our management for internal reporting and analysis. The table summarizing same-restaurant sales below in “Results of Operations” provides the same-restaurant sales percent changes. Same-restaurant sales exclude the impact of currency translation.

• Restaurant Margin - We define restaurant margin as sales from Company-operated restaurants less cost of sales divided by sales from Company-operated restaurants. Cost of sales includes food and paper, restaurant labor and occupancy, advertising and other operating costs. Restaurant margin is influenced by factors such as restaurant openings, remodels and closures, price increases, the effectiveness of our advertising and marketing initiatives, featured products, product mix, the level of our fixed and semi-variable costs and fluctuations in food and labor costs.

• Systemwide Sales - Systemwide sales is a non-GAAP financial measure, which includes sales by both Company-operated restaurants and franchised restaurants. Franchised restaurants’ sales are reported by our franchisees and represent their revenues from sales at franchised Wendy’s restaurants. The Company’s consolidated financial statements do not include sales by franchised restaurants to their customers. The Company believes systemwide sales data is useful in assessing consumer demand for the Company’s products, the overall success of the Wendy’s brand and, ultimately, the performance of the Company. The Company’s royalty revenues are computed as percentages of sales made by Wendy’s franchisees. As a result, sales by Wendy’s franchisees have a direct effect on the Company’s royalty revenues and therefore on the Company’s profitability.

The Company reviews same-restaurant sales and systemwide sales on a constant currency basis. Constant currency results exclude the impact of foreign currency translation and are derived by translating current year results at prior year average exchange rates. The Company believes excluding the impact of foreign currency translation provides better year over year comparability.

System Optimization Initiative

In July 2013, the Company announced a system optimization initiative, as part of its brand transformation, which includes a shift from Company-operated restaurants to franchised restaurants over time, through acquisitions and dispositions, as well as facilitating franchisee-to-franchisee restaurant transfers. In February 2015, the Company announced plans to reduce its ongoing Company-operated restaurant ownership to approximately 5% of the total system, which the Company completed as of January 1, 2017. Wendy’s will continue to optimize its system by facilitating franchisee-to-franchisee restaurant transfers, 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 and drive new restaurant development and accelerate reimages in the Image Activation format.

During the first nine months of 2017, the Company recorded post-closing adjustments on sales of restaurants and completed the sale of other assets, resulting in net gains totaling $3.4 million. Gains and losses recognized on dispositions are recorded to “System optimization losses (gains), net” in our condensed consolidated statements of operations. In addition, the Company facilitated the transfer of 270 restaurants between franchisees during the first nine months of 2017 (excluding the DavCo and NPC transactions discussed below).

DavCo and NPC Transactions

As part of our system optimization initiative, the Company acquired 140 Wendy’s restaurants on May 31, 2017 from DavCo Restaurants, LLC (“DavCo”) for total net cash consideration of $86.8 million, which were immediately sold to NPC International, Inc. (“NPC”), an existing franchisee of the Company, for cash proceeds of $70.7 million (the “DavCo and NPC transactions”). As part of the transaction, NPC has agreed to remodel 90 acquired restaurants in the Image Activation format by the end of 2021 and build 15 new Wendy’s restaurants by the end of 2022. Prior to closing the DavCo transaction, seven DavCo restaurants were closed. The acquisition of Wendy’s restaurants from DavCo was not contingent on executing the sale agreement with NPC; as such, the Company accounted for the transactions as an acquisition and subsequent disposition of a business. The total consideration paid to DavCo was allocated to net tangible and identifiable intangible assets acquired based on their estimated fair values. As part of the transactions, the Company retained leases for purposes of subleasing such properties to NPC. As a result of the transactions, the Company recognized a loss of $43.1 million during the first nine months of 2017.

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Costs related to our system optimization initiative were historically recorded to “Reorganization and realignment costs.” Costs incurred during 2017 in connection with the DavCo and NPC transactions continue to be recorded to “Reorganization and realignment costs.” All other costs incurred during 2017 related to facilitating franchisee-to-franchisee restaurant transfers are recorded to “Other operating expense (income), net.” During the first nine months of 2017, the Company recognized reorganization and realignment costs totaling $0.9 million, which primarily included professional fees. The Company does not expect to incur additional costs during the remainder of 2017 in connection with the DavCo and NPC transactions.

General and Administrative (“G&A”) Realignment

November 2014 Plan

In November 2014, the Company initiated a plan to reduce its G&A expenses.  The plan included a realignment and reinvestment of resources to focus primarily on accelerated restaurant development and consumer-facing restaurant technology to drive long-term growth.  The Company achieved the majority of the expense reductions through the realignment of its U.S. field operations and savings at its Restaurant Support Center in Dublin, Ohio, which was substantially completed by the end of the second quarter of 2015.  Costs related to the plan are recorded to “Reorganization and realignment costs.” The Company recognized costs totaling $1.0 million during the first nine months of 2016 and $24.0 million in aggregate since inception. The Company did not incur any expenses during the first nine months of 2017 and does not expect to incur additional costs related to the plan.

May 2017 Plan

In May 2017, the Company initiated a new plan to further reduce its G&A expenses. The Company expects that approximately three-quarters of the total G&A expense reduction of approximately $35.0 million will be realized by the end of 2018, with the remainder of the savings being realized in 2019. The Company expects to incur total costs aggregating approximately $28.0 million to $33.0 million, of which $23.0 million to $27.0 million will be cash expenditures, related to such savings. The cash expenditures are expected to continue into 2019, with approximately half of the total cash expenditures occurring in 2018. Costs related to the plan are recorded to “Reorganization and realignment costs.” The Company recognized costs totaling $19.9 million during the first nine months of 2017, which primarily included severance and related employee costs and share-based compensation. The Company expects to incur additional costs aggregating approximately $8.0 million to $13.0 million, comprised of (1) severance and related employee costs of approximately $3.0 million, (2) recruitment and relocation costs of approximately $4.0 million, (3) third-party and other costs of approximately $1.0 million and (4) share-based compensation of approximately $3.0 million. The Company expects costs to be recognized during the remainder of 2017 and continue into 2019, with approximately two-thirds to be recognized during 2017.

Related Party Transactions

TimWen Lease and Management Fee Payments

A wholly-owned subsidiary of Wendy’s leases restaurant facilities from TimWen for the operation of Wendy’s/Tim Hortons combo units in Canada. During the first nine months of 2017 and 2016, Wendy’s paid TimWen $9.4 million and $8.9 million, respectively, under these lease agreements. In addition, TimWen paid Wendy’s a management fee under the TimWen joint venture agreement of $0.2 million during both the first nine months of 2017 and 2016, which has been included as a reduction to “General and administrative.”

Cybersecurity Incident

The Company first reported unusual payment card activity affecting some franchise-owned restaurants in February 2016 and that malware had been discovered on certain systems. Subsequently, on June 9, 2016, the Company reported that an additional malware variant had been identified and disabled. On July 7, 2016, the Company, on behalf of affected franchise locations, provided information about specific restaurant locations that may have been impacted by these attacks, all of which are located in the United States, along with support for customers who may have been affected by the malware variants. See “Item 1 - Financial Statements,” Note 14 to the Condensed Consolidated Financial Statements for further information.

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Results of Operations

The tables included throughout Results of Operations set forth in millions the Company’s condensed consolidated results of operations for the third quarter and the first nine months of 2017 and 2016.

	Third Quarter									Nine Months
	2017			2016			Change			2017			2016			Change
Revenues:
Sales	$	158.8		$	228.6		$	(69.8	)	$	467.9		$	747.2		$	(279.3	)
Franchise royalty revenue and fees	98.9			98.0			0.9			306.1			275.9			30.2
Franchise rental income	50.3			37.4			12.9			140.2			102.4			37.8
	308.0			364.0			(56.0		)	914.2			1,125.5			(211.3		)
Costs and expenses:
Cost of sales	132.4			186.5			(54.1		)	385.2			603.8			(218.6		)
Franchise rental expense	24.1			17.5			6.6			64.8			49.7			15.1
General and administrative	52.9			58.9			(6.0		)	156.7			184.7			(28.0		)
Depreciation and amortization	31.2			29.4			1.8			91.7			92.4			(0.7		)
System optimization losses (gains), net	0.1			(37.8		)	37.9			39.7			(48.1		)	87.8
Reorganization and realignment costs	2.9			2.1			0.8			20.8			7.9			12.9
Impairment of long-lived assets	1.0			0.4			0.6			1.8			13.0			(11.2		)
Other operating expense (income), net	1.7			0.9			0.8			5.3			(13.5		)	18.8
	246.3			257.9			(11.6		)	766.0			889.9			(123.9		)
Operating profit	61.7			106.1			(44.4		)	148.2			235.6			(87.4		)
Interest expense	(30.0		)	(28.7		)	(1.3		)	(87.9		)	(85.5		)	(2.4		)
Other (loss) income, net	(0.1		)	0.5			(0.6		)	3.1			1.0			2.1
Income before income taxes	31.6			77.9			(46.3		)	63.4			151.1			(87.7		)
Provision for income taxes	(17.3		)	(29.0		)	11.7			(28.6		)	(50.4		)	21.8
Net income	$	14.3		$	48.9		$	(34.6	)	$	34.8		$	100.7		$	(65.9	)

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	Third Quarter								Nine Months
	2017		% of Total Revenues		2016		% of Total Revenues		2017		% of Total Revenues		2016		% of Total Revenues
Revenues:
Sales	$	158.8	51.6	%	$	228.6	62.8	%	$	467.9	51.2	%	$	747.2	66.4	%
Franchise royalty revenue and fees:
Royalty revenue	93.7		30.4	%	87.9		24.1	%	275.0		30.1	%	255.0		22.6	%
Franchise fees	5.2		1.7	%	10.1		2.8	%	31.1		3.4	%	20.9		1.9	%
Total franchise royalty revenue and fees	98.9		32.1	%	98.0		26.9	%	306.1		33.5	%	275.9		24.5	%
Franchise rental income	50.3		16.3	%	37.4		10.3	%	140.2		15.3	%	102.4		9.1	%
Total revenues	$	308.0	100.0	%	$	364.0	100.0	%	$	914.2	100.0	%	$	1,125.5	100.0	%
	Third Quarter								Nine Months
	2017		% of  Sales		2016		% of  Sales		2017		% of  Sales		2016		% of  Sales
Cost of sales:
Food and paper	$	51.8	32.6	%	$	69.3	30.3	%	$	147.1	31.4	%	$	226.9	30.4	%
Restaurant labor	45.6		28.7	%	64.8		28.4	%	135.8		29.0	%	211.7		28.3	%
Occupancy, advertising and other operating costs	35.0		22.0	%	52.4		22.9	%	102.3		21.9	%	165.2		22.1	%
Total cost of sales	$	132.4	83.3	%	$	186.5	81.6	%	$	385.2	82.3	%	$	603.8	80.8	%

	Third Quarter								Nine Months
	2017		% of Sales		2016		% of Sales		2017		% of Sales		2016		% of Sales
Restaurant margin	$	26.4	16.7	%	$	42.1	18.4	%	$	82.7	17.7	%	$	143.4	19.2	%

	Third Quarter				Nine Months
	2017		2016		2017		2016
Key business measures:
North America same-restaurant sales:
Company-operated	(0.5	)%	2.7	%	0.7	%	2.9	%
Franchised	2.1	%	1.2	%	2.4	%	1.7	%
Systemwide	2.0	%	1.4	%	2.3	%	1.8	%
Total same-restaurant sales:
Company-operated	(0.5	)%	2.7	%	0.7	%	2.9	%
Franchised (a)	2.1	%	1.3	%	2.4	%	1.6	%
Systemwide (a)	1.9	%	1.4	%	2.3	%	1.7	%

________________

(a) Includes international franchised same-restaurant sales (excluding Venezuela due to the impact of Venezuela’s highly inflationary economy).

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	Third Quarter				Nine Months
	2017		2016		2017		2016
Key business measures (continued):
Systemwide sales: (a)
Company-operated	$	158.8	$	228.6	$	467.9	$	747.2
North America franchised	2,347.2		2,198.2		6,897.4		6,381.8
International franchised (b)	119.4		106.9		351.6		309.6
Global systemwide sales	$	2,625.4	$	2,533.7	$	7,716.9	$	7,438.6

________________

(a) During the third quarter of 2017 and 2016, North America systemwide sales increased 3.0% and 1.8%, respectively, international franchised sales increased 13.4% and 9.0%, respectively, and global systemwide sales increased 3.4% and 2.1%, respectively, on a constant currency basis. During the first nine months of 2017 and 2016, North America systemwide sales increased 3.2% and 2.9%, respectively, international franchised sales increased 15.0% and 4.1%, respectively, and global systemwide sales increased 3.7% and 3.0%, respectively, on a constant currency basis.

(b) Excludes Venezuela due to the impact of Venezuela’s highly inflationary economy.

	Third Quarter
	Company-operated		North America Franchised		International Franchised		Systemwide
Restaurant count:
Restaurant count at July 2, 2017	331		5,762		471		6,564
Opened	4		25		13		42
Closed	(2	)	(15	)	(3	)	(20	)
Restaurant count at October 1, 2017	333		5,772		481		6,586
	Nine Months
	Company-operated		North America Franchised		International Franchised		Systemwide
Restaurant count at January 1, 2017	330		5,768		439		6,537
Opened	7		50		53		110
Closed	(4	)	(46	)	(11	)	(61	)
Restaurant count at October 1, 2017	333		5,772		481		6,586

Sales	Change
	Third Quarter			Nine Months
Sales	$	(69.8	)	$	(279.3	)

The decrease in sales for both the third quarter and the first nine months of 2017 was primarily due to the impact of Wendy’s Company-operated restaurants sold under our system optimization initiative, which resulted in a reduction in sales of $74.1 million and $295.9 million during the third quarter and the first nine months of 2017, respectively. For the third quarter of 2017, Company-operated same-restaurant sales declined due to a decrease in customer count, which was partially offset by an increase in our average per customer check amount. A portion of the customer count decline in the third quarter of 2017 resulted from the hurricanes in the U.S. For the first nine months of 2017, Company-operated same-restaurant sales benefited from an increase in our average per customer check amount, which was partially offset by a decrease in customer count. Our per customer check amount increased during the third quarter and the first nine months of 2017 primarily due to benefits from strategic price increases on our menu items and changes in product mix. Sales also benefited from higher sales growth at our new and remodeled Image Activation restaurants.

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Franchise Royalty Revenue and Fees	Change
	Third Quarter			Nine Months
Royalty revenue	$	5.8		$	20.0
Franchise fees	(4.9		)	10.2
	$	0.9		$	30.2

The increase in franchise royalty revenue and fees during the third quarter of 2017 was primarily due to higher royalty revenue resulting from sales of Company-operated restaurants to franchisees under our system optimization initiative. Royalty revenue also benefited from a 2.1% increase in franchise same-restaurant sales. These increases were largely offset by a decrease in franchise fees driven by lower initial franchise fees because no sales of Company-operated restaurants or franchisee-to-franchisee restaurant transfers occurred during the third quarter of 2017.

The increase in franchise royalty revenue and fees during the first nine months of 2017 was due to sales of Company-operated restaurants to franchisees and facilitating franchisee-to-franchisee restaurant transfers under our system optimization initiative. Royalty revenue also benefited from a 2.4% increase in franchise same-restaurant sales.

Franchise Rental Income	Change
	Third Quarter		Nine Months
Franchise rental income	$	12.9	$	37.8

The increase in franchise rental income during the third quarter and the first nine months of 2017 was primarily due to leasing and/or subleasing properties to franchisees in connection with the sale of Company-operated restaurants and facilitating franchisee-to-franchisee restaurant transfers.

Cost of Sales, as a Percent of Sales	Change
	Third Quarter		Nine Months
Food and paper	2.3	%	1.0	%
Restaurant labor	0.3	%	0.7	%
Occupancy, advertising and other operating costs	(0.9	)%	(0.2	)%
	1.7	%	1.5	%

The increase in cost of sales, as a percent of sales, during the third quarter of 2017 was primarily due to an increase in commodity costs, reflecting higher beef and bacon costs.

The increase in cost of sales, as a percent of sales, during the first nine months of 2017 was primarily due to an increase in commodity costs, reflecting higher chicken and bacon costs. The first nine months of 2017 were also negatively impacted by increased restaurant labor rates.

Franchise Rental Expense	Change
	Third Quarter		Nine Months
Franchise rental expense	$	6.6	$	15.1

The increase in franchise rental expense during the third quarter and the first nine months of 2017 was primarily due to subleasing properties to franchisees that were previously Company-operated restaurants and as such, had been previously recorded in cost of sales. Rental expense also increased as a result of entering into new leases in connection with facilitating franchisee-to-franchisee restaurant transfers for purposes of subleasing such properties to the franchisee.

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General and Administrative	Change
	Third Quarter			Nine Months
Professional services	$	(5.5	)	$	(11.7	)
Employee compensation and related expenses	(2.2		)	(7.7		)
Severance	(0.7		)	(3.5		)
Share-based compensation	(0.2		)	(2.4		)
Incentive compensation	1.1			(2.0		)
Other, net	1.5			(0.7		)
	$	(6.0	)	$	(28.0	)

The decrease in general and administrative expenses during the third quarter of 2017 was primarily due to decreases in (1) professional services due to legal and other costs associated with the cybersecurity incident recognized during the third quarter of 2016 (see “Item 1 - Financial Statements,” Note 14 to the Condensed Consolidated Financial Statements for further information) and (2) employee compensation and related expenses primarily as a result of changes in staffing driven by our system optimization initiative.

The decrease in general and administrative expenses during the first nine months of 2017 was primarily due to decreases in (1) professional services due to legal and other costs associated with the cybersecurity incident recognized during the first nine months of 2016 (see “Item 1 - Financial Statements,” Note 14 to the Condensed Consolidated Financial Statements for further information), (2) employee compensation and related expenses primarily as a result of changes in staffing driven by our system optimization initiative, (3) severance expense, (4) share-based compensation primarily as a result of awards granted and timing of expense recognition and (5) incentive compensation accruals due to a decrease in operating performance as compared to plan in 2017 versus 2016.

Depreciation and Amortization	Change
	Third Quarter			Nine Months
Restaurants	$	(0.1	)	$	(4.7	)
Corporate and other	1.9			4.0
	$	1.8		$	(0.7	)

The decrease in restaurant depreciation and amortization during the third quarter and the first nine months of 2017 was primarily due to a decrease in depreciation on assets sold under our system optimization initiative of $0.2 million and $3.9 million, respectively. Corporate and other depreciation expense increased due to an increase in depreciation and amortization for technology investments.

System Optimization Losses (Gains), Net	Third Quarter					Nine Months
	2017		2016			2017		2016
System optimization losses (gains), net	$	0.1	$	(37.8	)	$	39.7	$	(48.1	)

The change in system optimization losses (gains), net was because no sales of Company-operated restaurants occurred during the third quarter of 2017, compared with the sale of 156 restaurants during the third quarter of 2016.

The change in system optimization losses (gains), net during the first nine months of 2017 was due to the DavCo and NPC transactions, which resulted in a loss of $43.1 million during the first nine months of 2017. During the first nine months of 2016, the Company sold 211 Company-operated restaurants to franchisees.

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Reorganization and Realignment Costs	Third Quarter				Nine Months
	2017		2016		2017		2016
System optimization initiative	$	0.2	$	2.1	$	0.9	$	6.9
G&A realignment - November 2014 plan	—		—		—		1.0
G&A realignment - May 2017 plan	2.7		—		19.9		—
	$	2.9	$	2.1	$	20.8	$	7.9

During the third quarter of 2017 and 2016, the Company recognized costs associated with its system optimization initiative totaling $0.2 million and $2.1 million, respectively. In both the third quarter of 2017 and 2016, costs primarily included professional fees.

During the first nine months of 2017 and 2016, the Company recognized costs associated with its system optimization initiative totaling $0.9 million and $6.9 million, respectively. In the first nine months of 2017, costs primarily included professional fees. In the first nine months of 2016, costs primarily included professional fees of $5.1 million and accelerated amortization of previously acquired franchise rights of $1.6 million.

In November 2014, the Company initiated the realignment of its U.S. field operations and Restaurant Support Center in Dublin, Ohio to reduce its G&A expenses. During the first nine months of 2016, the Company recognized costs associated with this plan totaling $1.0 million, which primarily included recruitment and relocation costs. The Company did not incur any expenses during the first nine months of 2017 and does not expect to incur additional costs related to the plan.

In May 2017, the Company initiated a new plan to further reduce its G&A expenses. During the third quarter of 2017, the Company recognized costs associated with this plan totaling $2.7 million, which primarily included (1) severance and related employee costs of $1.2 million, (2) share-based compensation of $0.8 million and (3) third-party and other costs of $0.5 million.

During the first nine months of 2017, the Company recognized costs associated with its May 2017 plan totaling $19.9 million, which primarily included (1) severance and related employee costs of $14.4 million, (2) share-based compensation of $4.5 million and (3) third-party and other costs of $0.8 million.

Impairment of Long-Lived Assets	Change
	Third Quarter		Nine Months
Impairment of long-lived assets	$	0.6	$	(11.2	)

Impairment of long-lived assets increased during the third quarter of 2017 primarily due to the deterioration in operating performance of certain Company-operated restaurants and charges for capital improvements in previously impaired restaurants that did not subsequently recover.

Impairment of long-lived assets decreased during the first nine months of 2017 primarily due to lower impairment charges resulting from the remeasurement of properties to fair value upon determination that the assets will be leased and/or subleased to franchisees in connection with the sale of Company-operated restaurants. This decrease was partially offset by higher impairment charges due to the deterioration in operating performance of certain Company-operated restaurants and charges for capital improvements in previously impaired restaurants that did not subsequently recover.

Other Operating Expense (Income), Net	Third Quarter						Nine Months
	2017			2016			2017			2016
Lease buyout	$	0.2		$	—		$	0.1		$	(11.6	)
Equity in earnings in joint ventures, net	(2.3		)	(2.2		)	(6.1		)	(6.5		)
Other, net	3.8			3.1			11.3			4.6
	$	1.7		$	0.9		$	5.3		$	(13.5	)

The change in other operating expense (income), net during the third quarter of 2017 was primarily due to costs incurred to provide information technology services to our franchisees, as well as costs related to facilitating franchisee-to-franchisee restaurant transfers.

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Other operating expense (income), net during the first nine months of 2017 includes costs incurred to provide information technology services to our franchisees, as well as costs related to facilitating franchisee-to-franchisee restaurant transfers. The first nine months of 2016 includes a gain recognized on a lease buyout during the first quarter of 2016.

Interest Expense	Change
	Third Quarter		Nine Months
Interest expense	$	1.3	$	2.4

Interest expense increased during the third quarter and the first nine months of 2017 primarily due to an increase in capital lease obligations resulting from facilitating franchisee-to-franchisee restaurant transfers and subleasing such properties to the franchisee.

Provision for Income Taxes	Third Quarter						Nine Months
	2017			2016			2017			2016
Income before income taxes	$	31.6		$	77.9		$	63.4		$	151.1
Provision for income taxes	17.3			29.0			28.6			50.4
Effective tax rate on income	54.8		%	37.2		%	45.2		%	33.3		%

Our effective tax rates in the third quarter of 2017 and 2016 were impacted by variations in income before income taxes, adjusted for recurring items such as non-deductible expenses and state income taxes, as well as non-recurring discrete items. Discrete items, which may occur in any given year but are not consistent from year to year include the following: (1) our system optimization initiative, (2) state income taxes net of federal benefits, including non-recurring changes to state deferred taxes, (3) the adoption of an amendment issued by the Financial Accounting Standards Board (“FASB”), which requires that excess tax benefits and tax deficiencies related to share-based payments be recognized in net income (see “Item 1 - Financial Statements,” Note 15 to the Condensed Consolidated Financial Statements for further information) and (4) the rate differential between foreign and domestic taxes.

Our effective tax rates in the first nine months of 2017 and 2016 were impacted by variations in income before income taxes, adjusted for recurring items such as non-deductible expenses and state income taxes, as well as non-recurring discrete items. Discrete items, which may occur in any given year but are not consistent from year to year include the following: (1) our system optimization initiative (including corrections to prior years identified and recorded in the first nine months of 2017 and 2016, which resulted in a benefit of $2.2 million and $7.1 million, respectively), (2) the adoption of an amendment issued by the FASB, which requires that excess tax benefits and tax deficiencies related to share-based payments be recognized in net income, which resulted in a benefit of $5.2 million in the first nine months of 2017 (see “Item 1 - Financial Statements,” Note 15 to the Condensed Consolidated Financial Statements for further information), (3) state income taxes net of federal benefits, including non-recurring changes to state deferred taxes, and (4) the rate differential between foreign and domestic taxes.

The impact of our system optimization initiative on the provision for income taxes included the effects of changes to our state deferred taxes and valuation allowances on state net operating losses caused by the shifting relative taxable presence in the various states as our system optimization initiative is executed, and the disposition of non-deductible goodwill. These items, which are non-recurring, increased the provision for income taxes by $5.0 million and $2.3 million during the third quarter of 2017 and 2016, respectively, and increased the provision for income taxes by $7.1 million and decreased the provision by $1.3 million during the first nine months of 2017 and 2016, respectively.

Deferred income taxes are not recorded for temporary differences related to our investments in non-U.S. subsidiaries that we consider permanently invested outside of the U.S. At October 1, 2017, our cash balances held outside of the U.S. totaled $107.7 million.

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Liquidity and Capital Resources

The tables included throughout Liquidity and Capital Resources present dollars in millions.

Cash Flows

Our primary sources of liquidity and capital resources are cash flows from operations and borrowings under our securitized

financing facility. Principal uses of cash are operating expenses, capital expenditures, repurchases of common stock and dividends to shareholders.

Our anticipated consolidated sources of cash and cash requirements for the remainder of 2017, exclusive of operating cash flow requirements, consist principally of:

• capital expenditures of approximately $26.0 million to $31.0 million, resulting in total anticipated cash capital expenditures for the year of approximately $80.0 million to $85.0 million.

• cash dividends aggregating up to approximately $17.0 million as discussed below in “Dividends;” and

• potential stock repurchases of up to $59.1 million, of which $6.6 million was repurchased subsequent to October 1, 2017 through November 2, 2017 as discussed below in “Stock Repurchases.”

Based on current levels of operations, the Company expects that available cash and cash flows from operations will provide sufficient liquidity to meet operating cash requirements for the next 12 months.

The table below summarizes our cash flows from operating, investing and financing activities for the first nine months of 2017 and 2016:

	Nine Months
	2017			2016			Change
Net cash provided by (used in):
Operating activities	$	176.7		$	137.3		$	39.4
Investing activities	(38.1		)	62.5			(100.6		)
Financing activities	(156.9		)	(222.2		)	65.3
Effect of exchange rate changes on cash	6.7			4.0			2.7
Net decrease in cash and cash equivalents	$	(11.6	)	$	(18.4	)	$	6.8

Operating Activities

Cash provided by operating activities was $176.7 and $137.3 in the first nine months of 2017 and 2016, respectively. Cash provided by operating activities consists primarily of net income, adjusted for non-cash expenses such as depreciation and amortization, deferred income tax and share-based compensation, and the net change in operating assets and liabilities.

Cash provided by operating activities increased $39.4 million during the first nine months of 2017 as compared to the first nine months of 2016, due to (1) an increase of $19.7 million in net income adjusted for non-cash expenses and (2) a favorable change in operating assets and liabilities of $19.7 million. The favorable change in operating assets and liabilities resulted primarily from a decrease in income tax payments, net of refunds and a decrease in payments for incentive compensation for the 2016 fiscal year.

Investing Activities

Cash used in investing activities increased $100.6 million during the first nine months of 2017 as compared to the first nine months of 2016, due to (1) a decrease in proceeds from dispositions of Company-operated restaurants and other assets of $164.5 million and (2) net cash used in the DavCo and NPC transactions of $16.1 million. These unfavorable changes were partially offset by (1) a decrease of $55.0 million in capital expenditures and (2) a decrease of $21.7 million in restricted cash for the reinvestment in capital assets under our securitized financing facility.

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Financing Activities

Cash used in financing activities decreased$65.3 million during the first nine months of 2017 as compared to the first nine months of 2016, primarily due to a decrease in repurchases of common stock of $71.1 million.

Dividends

On March 15, 2017, June 15, 2017 and September 15, 2017, The Wendy’s Company paid quarterly cash dividends of $0.07 per share on its common stock, aggregating $51.5 million. On November 2, 2017, The Wendy’s Company declared a dividend of $0.07 per share to be paid on December 15, 2017 to shareholders of record as of December 1, 2017. As a result of the declaration, The Wendy’s Company’s total cash requirements for the fourth quarter of 2017 will be approximately $17.0 million based on the number of shares of common stock outstanding at November 2, 2017. The Wendy’s Company currently intends to continue to declare and pay quarterly cash dividends; however, there can be no assurance that any quarterly dividends will be declared or paid in the future or of the amount or timing of such dividends, if any.

Stock Repurchases

In February 2017, our Board of Directors authorized a repurchase program for up to $150.0 million of our common stock through March 4, 2018, when and if market conditions warrant and to the extent legally permissible. During the nine months ended October 1, 2017, the Company repurchased 6.1 million shares with an aggregate purchase price of $90.9 million, of which $0.9 million was accrued at October 1, 2017 and excluding commissions of $0.1 million. As of October 1, 2017, the Company had $59.1 million of availability remaining under its February 2017 authorization. Subsequent to October 1, 2017 through November 2, 2017, the Company repurchased 0.4 million shares with an aggregate purchase price of $6.6 million, excluding commissions.

On June 1, 2015, our Board of Directors authorized a repurchase program for up to $1,400.0 million of our common stock through January 1, 2017, when and if market conditions warranted and to the extent legally permissible. During the nine months ended October 2, 2016, the Company repurchased 16.0 million shares with an aggregate purchase price of $162.3 million, of which $3.0 million was accrued at October 2, 2016 and excluding commissions of $0.2 million.

General Inflation, Commodities and Changing Prices

We believe that general inflation did not have a significant effect on our condensed consolidated results of operations during the reporting periods. We manage any inflationary costs and commodity price increases primarily through selective menu price increases. Delays in implementing such menu price increases and competitive pressures may limit our ability to recover such cost increases in the future. Inherent volatility experienced in certain commodity markets, such as those for beef, chicken, corn, pork and cheese could have an unfavorable effect on our results of operations in the future. The extent of any impact will depend on our ability and timing to increase food prices.

Seasonality

Our restaurant operations are moderately impacted by seasonality; Wendy’s restaurant revenues are normally higher during the summer months than during the winter months. Because our business is moderately seasonal, results for any future quarter will not necessarily be indicative of the results that may be achieved for any other quarter or for the full fiscal year.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

As of October 1, 2017 there were no material changes from the information contained in the Form 10-K for the fiscal year ended January 1, 2017.

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Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

The management of the Company, under the supervision and with the participation of its Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of October 1, 2017. Based on such evaluations, the Chief Executive Officer and Chief Financial Officer concluded that, as of October 1, 2017, the disclosure controls and procedures of the Company were effective at a reasonable assurance level in (1) recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act and (2) ensuring that information required to be disclosed by the Company in such reports is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There were no changes in the internal control over financial reporting of the Company during the third quarter of 2017 that materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

There are inherent limitations in the effectiveness of any control system, including the potential for human error and the possible circumvention or overriding of controls and procedures. Additionally, judgments in decision-making can be faulty and breakdowns can occur because of a simple error or mistake. An effective control system can provide only reasonable, not absolute, assurance that the control objectives of the system are adequately met. Accordingly, the management of the Company, including its Chief Executive Officer and Chief Financial Officer, does not expect that the control system can prevent or detect all errors or fraud. Finally, projections of any evaluation or assessment of effectiveness of a control system to future periods are subject to the risks that, over time, controls may become inadequate because of changes in an entity’s operating environment or deterioration in the degree of compliance with policies or procedures.

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PART II. OTHER INFORMATION

Special Note Regarding Forward-Looking Statements and Projections

This Quarterly Report on Form 10-Q and oral statements made from time to time by representatives of the Company may contain or incorporate by reference certain statements that are not historical facts, including, most importantly, information concerning possible or assumed future results of operations of the Company. Those statements, as well as statements preceded by, followed by, or that include the words “may,” “believes,” “plans,” “expects,” “anticipates,” or the negation thereof, or similar expressions, constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Reform Act”). All statements that address future operating, financial or business performance; strategies, initiatives or expectations; future synergies, efficiencies or overhead savings; anticipated costs or charges; future capitalization; and anticipated financial impacts of recent or pending transactions are forward-looking statements within the meaning of the Reform Act. The forward-looking statements are based on our expectations at the time such statements are made, speak only as of the dates they are made and are susceptible to a number of risks, uncertainties and other factors. Our actual results, performance and achievements may differ materially from any future results, performance or achievements expressed or implied by our forward-looking statements. For all of our forward-looking statements, we claim the protection of the safe harbor for forward-looking statements contained in the Reform Act. Many important factors could affect our future results and could cause those results to differ materially from those expressed in or implied by the forward-looking statements contained herein. Such factors, all of which are difficult or impossible to predict accurately, and many of which are beyond our control, include, but are not limited to, the following:

• competition, including pricing pressures, couponing, aggressive marketing and the potential impact of competitors’ new unit openings on sales of Wendy’s restaurants;

• consumers’ perceptions of the relative quality, variety, affordability and value of the food products we offer;

• food safety events, including instances of food-borne illness (such as salmonella or E. coli) involving Wendy’s or its supply chain;

• consumer concerns over nutritional aspects of beef, poultry, french fries or other products we sell, concerns regarding the ingredients in our products and/or cooking processes used in our restaurants, or concerns regarding the effects of disease outbreaks, epidemics or pandemics impacting the Company’s customers or food supplies;

• the effects of negative publicity that can occur from increased use of social media;

• success of operating and marketing initiatives, including advertising and promotional efforts and new product and concept development by us and our competitors;

• the impact of general economic conditions and increases in unemployment rates on consumer spending, particularly in geographic regions that contain a high concentration of Wendy’s restaurants;

• changes in consumer tastes and preferences, and in discretionary consumer spending;

• changes in spending patterns and demographic trends, such as the extent to which consumers eat meals away from home;

• certain factors affecting our franchisees, including the business and financial viability of franchisees, the timely payment of such franchisees’ obligations due to us or to national or local advertising organizations, and the ability of our franchisees to open new restaurants and remodel existing restaurants in accordance with their development and franchise commitments, including their ability to finance restaurant development and remodels;

• increased labor costs due to competition or increased minimum wage or employee benefit costs;     

• changes in commodity costs (including beef, chicken and corn), labor, supplies, fuel, utilities, distribution and other operating costs;

• availability, location and terms of sites for restaurant development by us and our franchisees;

• development costs, including real estate and construction costs;

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• delays in opening new restaurants or completing reimages of existing restaurants, including risks associated with the Image Activation program;

• the timing and impact of acquisitions and dispositions of restaurants;

• anticipated or unanticipated restaurant closures by us and our franchisees;

• our ability to identify, attract and retain potential franchisees with sufficient experience and financial resources to develop and operate Wendy’s restaurants successfully;

• availability of qualified restaurant personnel to us and to our franchisees, and the ability to retain such personnel;

• our ability, if necessary, to secure alternative distribution of supplies of food, equipment and other products to Wendy’s restaurants at competitive rates and in adequate amounts, and the potential financial impact of any interruptions in such distribution;

• availability and cost of insurance;

• adverse weather conditions;

• availability, terms (including changes in interest rates) and deployment of capital;

• changes in, and our ability to comply with, legal, regulatory or similar requirements, including franchising laws, payment card industry rules, overtime rules, minimum wage rates, wage and hour laws, government-mandated health care benefits, tax legislation, federal ethanol policy and accounting standards (including the amended guidance for revenue recognition that will become effective for the Company’s 2018 fiscal year and that may impact the Company’s adjusted EBITDA margin goal for 2020, as well as the new guidance on leases that will become effective for fiscal year 2019);

• the costs, uncertainties and other effects of legal, environmental and administrative proceedings;

• the effects of charges for impairment of goodwill or for the impairment of other long-lived assets;

• the effects of war or terrorist activities;

• risks associated with failures, interruptions or security breaches of the Company’s computer systems or technology, or the occurrence of cyber incidents or a deficiency in cybersecurity that impacts the Company or its franchisees, including the cybersecurity incident described in Item 1 below;

• the difficulty in predicting the impact of the sale of Company-operated restaurants to franchisees on ongoing operations, any tax impact from the sale of restaurants and the future impact to the Company’s earnings, restaurant operating margins, cash flow and depreciation;

• the difficulty in predicting the ultimate costs that will be incurred in connection with the Company’s plan to reduce its general and administrative expense, and the future impact on the Company’s earnings;

• risks associated with the Company’s securitized financing facility, including the ability to generate sufficient cash flow to meet increased debt service obligations, compliance with operational and financial covenants, and restrictions on the Company’s ability to raise additional capital;

• risks associated with the amount and timing of share repurchases under the $150.0 million share repurchase program approved by the Board of Directors; and

• other risks and uncertainties affecting us and our subsidiaries referred to in our Annual Report on Form 10-K for the fiscal year ended January 1, 2017 (the “Form 10-K”) (see especially “Item 1A. Risk Factors” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations”) and in our other current and periodic filings with the SEC.

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All future written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. New risks and uncertainties arise from time to time, and it is impossible for us to predict these events or how they may affect us. We assume no obligation to update any forward-looking statements after the date of this Quarterly Report on Form 10-Q as a result of new information, future events or developments, except as required by federal securities laws. In addition, it is our policy generally not to endorse any projections regarding future performance that may be made by third parties.

Item 1. Legal Proceedings.

We are involved in litigation and claims incidental to our current and prior businesses. We provide accruals for such litigation and claims when payment is probable and reasonably estimable. The Company believes it has adequate accruals for continuing operations for all of its legal and environmental matters. We cannot estimate the aggregate possible range of loss due to most proceedings, including those described below, being in preliminary stages, with various motions either yet to be submitted or pending, discovery yet to occur and significant factual matters unresolved. In addition, most cases seek an indeterminate amount of damages and many involve multiple parties. Predicting the outcomes of settlement discussions or judicial or arbitral decisions is thus inherently difficult. Based on our currently available information, including legal defenses available to us, and given the aforementioned accruals and our insurance coverage, we do not believe that the outcome of these legal and environmental matters will have a material effect on our consolidated financial position or results of operations.

We previously described certain legal proceedings under Item 1 of Part II in our Quarterly Report on Form 10-Q for the second quarter of 2017, as filed with the SEC on August 9, 2017. Except as set forth below, there were no material developments in those legal proceedings during the third quarter of 2017.

As we previously reported, the Company has been named as a defendant in putative class action lawsuits alleging, among other things, that the Company failed to safeguard customer credit card information and failed to provide notice that credit card information had been compromised.  Jonathan Torres and other consumers filed an action in the U.S. District Court for the Middle District of Florida (the “Torres case”). The operative complaint seeks to certify a nationwide class of consumers, or in the alternative, statewide classes of consumers for Florida, New York, New Jersey, Texas, and Tennessee, as well as statewide classes of consumers under those states’ consumer protection and unfair trade practices laws. On October 27, 2017, the Company moved to dismiss the operative complaint. The Company’s motion is pending before the court.

Item 1A. Risk Factors.

In addition to the information contained in this report, you should carefully consider the risk factors disclosed in our Form 10-K, which could materially affect our business, financial condition or future results. Except as described elsewhere in this report, there have been no material changes from the risk factors previously disclosed in our Form 10-K.

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Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds.

The following table provides information with respect to repurchases of shares of our common stock by us and our “affiliated purchasers” (as defined in Rule 10b-18(a)(3) under the Exchange Act) during the third quarter of 2017:

Issuer Repurchases of Equity Securities

Period	Total Number of Shares Purchased (1)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans (2)
July 3, 2017 through August 6, 2017	934,795		$15.64	917,452		$83,214,931
August 7, 2017 through September 3, 2017	877,515		$15.11	795,500		$71,230,388
September 4, 2017 through October 1, 2017	806,500		$15.03	806,500		$59,123,593
Total	2,618,810		$15.27	2,519,452		$59,123,593

(1) Includes 99,358 shares reacquired by the Company from holders of share-based awards to satisfy certain requirements associated with the vesting or exercise of the respective awards. The shares were valued at the average of the high and low trading prices of our common stock on the vesting or exercise date of such awards.

(2) In February 2017, our Board of Directors authorized the repurchase of up to $150 million of our common stock through March 4, 2018, when and if market conditions warrant and to the extent legally permissible.

Subsequent to October 1, 2017 through November 2, 2017, the Company repurchased 0.4 million shares with an aggregate purchase price of $6.6 million, excluding commissions.

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Item 6. Exhibits.

EXHIBIT NO.	DESCRIPTION
10.1	Form of Nonqualified Stock Option Award Agreement under The Wendy’s Company 2010 Omnibus Award Plan.* **
31.1	Certification of the Chief Executive Officer of The Wendy’s Company, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
31.2	Certification of the Chief Financial Officer of The Wendy’s Company, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
32.1	Certifications of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
101.INS	XBRL Instance Document*
101.SCH	XBRL Taxonomy Extension Schema Document*
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document*
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document*
101.LAB	XBRL Taxonomy Extension Label Linkbase Document*
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document*

____________________

*	Filed herewith.
**	Identifies a management contract or compensatory plan or arrangement.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	THE WENDY’S COMPANY (Registrant)
Date: November 8, 2017	By: /s/ Gunther Plosch
	Gunther Plosch
	Chief Financial Officer
	(On behalf of the Company)
Date: November 8, 2017	By: /s/ Leigh A. Burnside
	Leigh A. Burnside
	Chief Accounting Officer
	(Principal Accounting Officer)

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EX-10.1

EXHIBIT 10.1

NONQUALIFIED STOCK OPTION AWARD AGREEMENT (the “Agreement”)

UNDER THE WENDY’S COMPANY

2010 OMNIBUS AWARD PLAN

_____________ Shares of Common Stock

The Wendy’s Company (the “Company”), pursuant to the provisions of The Wendy’s Company 2010 Omnibus Award Plan (as amended, the “Plan”), hereby irrevocably grants to _______________________ (the “Optionee”) the right and option (the “Option”) to purchase ___________ shares of Common Stock, par value $0.10 per share (the “Common Stock”), of the Company upon and subject to the following terms and conditions:

1.The Option is not intended to qualify as an incentive stock option under the provisions of Section 422 of the Internal Revenue Code of 1986, as amended, or its predecessor (the “Code”).

2. _________________, 20___ is the date of grant of the Option (“Date of Grant”).

3. The purchase price of the shares of Common Stock subject to the Option shall be $________ per share (the “Exercise Price”), which is the Fair Market Value on the Date of Grant, as determined by the Committee.

4.Subject to the Optionee’s continued provision of services to the Company, the Option shall be exercisable as follows:

(a)One-third of the shares of Common Stock subject to the Option shall be exercisable on or after the first anniversary of the Date of Grant;

(b)One-third of the shares of Common Stock subject to the Option shall be exercisable on or after the second anniversary of the Date of Grant; and

(c)One-third of the shares of Common Stock subject to the Option shall be exercisable on or after the third anniversary of the Date of Grant.

    Notwithstanding the foregoing, in the event the Optionee’s employment or service to the Company and its Subsidiaries are terminated as follows, the Option shall be fully (100%) vested and immediately exercisable as of the date of such termination of employment or service: (i) by the Company or its Subsidiaries other than for Cause (and other than due to death or Disability) within twelve (12) months following a Change in Control; (ii) by the Optionee for Good Reason within twelve (12) months following a Change in Control; (iii) as a result of the Optionee’s death; or (iv) due to the Optionee’s Disability.

5.The unexercised portion of the Option shall automatically and without notice terminate and become null and void at the earlier of (i) the tenth anniversary of the Date of Grant (the “Option Period”) and (ii) the earliest applicable time set forth below:

(a)In the event the Optionee’s employment or service to the Company and its Subsidiaries are terminated by the Company or its Subsidiaries for Cause, all outstanding Options granted to the Optionee shall immediately terminate and expire;

1

(b)In the event the Optionee’s employment or service to the Company and its Subsidiaries are terminated by the Company or its Subsidiaries due to death or Disability, each outstanding vested Option shall remain exercisable for one (1) year thereafter (but in no event beyond the expiration of the Option Period);

(c)Unless otherwise provided by the Committee, in the event (i) the Optionee’s employment or service to the Company and its Subsidiaries are terminated by the Company or its Subsidiaries other than for Cause (and other than for any reason stated above in Section 4) and (ii) the Optionee is Retirement Eligible, each outstanding unvested Option granted to the Optionee shall immediately terminate and expire, and each outstanding vested Option shall remain exercisable for three (3) years thereafter (but in no event beyond the expiration of the Option Period. “Retirement Eligible” means the Optionee both (A) is at least fifty-five (55) years of age and (B) has at least ten (10) years of service (as determined based on the human resources and other records of the Company, as may be applicable) with the Company and its Subsidiaries;

(d)Unless otherwise provided by the Committee, in the event (i) the Optionee’s employment or service to the Company and its Subsidiaries are terminated by the Optionee upon the Optionee’s Retirement and (ii) the Optionee provided to the Company or its Subsidiaries at least six (6) months’ prior notice of such termination upon Retirement, each outstanding unvested Option granted to the Optionee shall immediately terminate and expire, and each outstanding vested Option shall remain exercisable for three (3) years thereafter (but in no event beyond the expiration of the Option Period). “Retirement” means termination of employment or service to the Company and its Subsidiaries upon or after becoming Retirement Eligible (and other than due to death or Disability); and

(e)Unless otherwise provided by the Committee, in the event of the termination of the Optionee’s employment or service for any other reason not stated above in Section 5(a), (b), (c) or (d), and after taking into account any accelerated vesting under Section 4 above, each outstanding unvested Option granted to the Optionee shall immediately terminate and expire, and each outstanding vested Option shall remain exercisable for ninety (90) days thereafter (but in no event beyond the expiration of the Option Period).

6.Options which have become exercisable may be exercised by the Optionee, subject to the provisions of the Plan and of this Agreement, as to all or part of the shares of Common Stock covered hereby, by the giving of written or electronic notice of such exercise to the Company at its principal business office (or telephonic instructions to the extent permitted by the Committee), accompanied by payment of the full purchase price for the shares being purchased. No shares of Common Stock shall be delivered pursuant to any exercise of an Option until payment in full of the Exercise Price therefor is received by the Company and the Optionee has paid to the Company an amount equal to any Federal, state, local and non-U.S. income and employment taxes required to be withheld. The Exercise Price shall be payable: (a) in cash, check, cash equivalent and/or shares of Common Stock valued at Fair Market Value at the time the Option is exercised (including, pursuant to procedures approved by the Committee, by means of attestation of ownership of a sufficient number of shares of Common Stock in lieu of actual delivery of such shares to the Company), provided that such shares of Common Stock are not subject to any pledge or other security interest; or (b) by such other method as the Committee may permit in its sole discretion, including without limitation: (i) in other property having a Fair Market Value on the date of exercise equal to the Exercise Price; (ii) if there is a public market for the shares of Common Stock at such time, by means of a broker-assisted “cashless

exercise” pursuant to which the Company is delivered (including telephonically to the extent permitted by the Committee) a copy of irrevocable instructions to a stockbroker to sell the shares of Common Stock otherwise deliverable upon the exercise of the Option and to deliver promptly to the Company an amount equal to the Exercise Price; or (iii) a “net exercise” procedure effected by withholding the minimum number

2

of shares of Common Stock otherwise deliverable in respect of an Option that are needed to pay the Exercise Price and all applicable required withholding taxes. Any fractional shares of Common Stock shall be settled in cash.

The Company shall cause certificates for the shares so purchased to be delivered to or be registered (and held in book entry form) in the name of the Optionee or the Optionee’s executors or administrators, against payment of the purchase price, as soon as practicable following the Company’s receipt of the notice of exercise.

7.Neither the Optionee nor the Optionee’s executors or administrators shall have any of the rights of a stockholder of the Company with respect to the shares subject to the Option until such Option is validly exercised.

8.The Option shall not be transferable by the Optionee other than to the Optionee’s executors or administrators by will or the laws of descent and distribution, and during the Optionee’s lifetime shall be exercisable only by the Optionee, except as may be otherwise permitted by the Committee in its sole discretion pursuant to the Plan.

9.In the event of the Optionee’s death, the Option shall thereafter be exercisable (to the extent otherwise exercisable hereunder) only by the Optionee’s executors or administrators.

10.The terms and conditions of the Option, including the number of shares and the class or series of capital stock that may be delivered upon exercise of the Option and the purchase price per share, are subject to adjustment as provided in the Plan, including, without limitation, under Section 12 of the Plan.

11.The Optionee agrees that the obligation of the Company to issue shares upon the exercise of the Option shall also be subject, as conditions precedent, to compliance with applicable provisions of the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, state securities or corporation laws, rules and regulations under any of the foregoing and applicable requirements of any securities exchange upon which the Company’s securities shall be listed.

12.Notwithstanding anything to the contrary contained herein, in the event of a material restatement of the Company’s issued financial statements, the Committee shall review the facts and circumstances underlying the restatement (including, without limitation, any potential wrongdoing by the Optionee and whether the restatement was the result of negligence or intentional or gross misconduct) and may, in its sole discretion, direct the Company to recover all or a portion of the Option or any gain realized on the vesting or exercise of the Option with respect to any fiscal year in which the Company’s financial results are negatively impacted by such restatement. If the Committee directs the Company to recover any such amount from the Optionee, then the Optionee agrees to and shall be required to repay any such amount to the Company within thirty (30) days after the Company demands repayment. In addition, if the Company is required by law to include an additional “clawback” or “forfeiture” provision to outstanding Awards, then such clawback or forfeiture provision shall also apply to this Award as if it had been included on the date of grant and the Company shall promptly notify the Optionee of such additional provision. In addition, if a court determines that the Optionee has engaged or is engaged in Detrimental Activities: (a) while employed by or providing services to the Company or its Subsidiaries, then the Company can cancel the Option; or (b) after the Optionee’s employment or service with the Company or its Subsidiaries has ceased, then the Optionee, within thirty (30) days after written demand by the Company, shall return the Option or any gain realized on the vesting or exercise of the Option.

3

13.The Option has been granted subject to the terms and conditions of the Plan, a copy of which has been provided to the Optionee and which the Optionee acknowledges having received and reviewed. Any conflict between this Agreement and the Plan shall be decided in favor of the provisions of the Plan. Any conflict between this Agreement and the terms of a written employment agreement for the Optionee that has been approved, ratified or confirmed by the Board of Directors of the Company or the Committee shall be decided in favor of the provisions of such employment agreement. Capitalized terms used but not defined in this Agreement shall have the meanings given to them in the Plan. This Agreement may not be amended, altered, suspended, discontinued, cancelled or terminated in any manner that would materially and adversely affect the rights of the Optionee except by a written agreement executed by the Optionee and the Company.

14.By accepting the Options evidenced by this Agreement, the Optionee hereby consents to the electronic delivery of prospectuses, annual reports and other information required to be delivered by Securities and Exchange Commission rules. This consent may be revoked in writing by the Optionee at any time upon three (3) business days’ notice to the Company, in which case subsequent prospectuses, annual reports and other information will be delivered in hard copy to the Optionee.

15.The Optionee shall be required to pay to the Company, and the Company shall have the right and is hereby authorized to withhold, from any cash, shares of Common Stock, other securities or other property deliverable under the Option or from any compensation or other amounts owing to the Optionee, the amount (in cash, Common Stock, other securities or other property) of any required withholding taxes in respect of the Option, and to take such other action as may be necessary in the opinion of the Committee or the Company to satisfy all obligations for the payment of such withholding and taxes. In addition, the Committee may, in its sole discretion, permit the Optionee to satisfy, in whole or in part, the foregoing withholding liability (but no more than the minimum required statutory withholding liability) by (a) the delivery of shares of Common Stock (which are not subject to any pledge or other security interest) owned by the Optionee having a Fair Market Value equal to such withholding liability or (b) having the Company withhold from the number of shares of Common Stock otherwise issuable or deliverable pursuant to the exercise or settlement of the Option a number of shares with a Fair Market Value equal to such withholding liability. The obligations of the Company under this Agreement will be conditional on such payment or arrangements, and the Company will, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to the Optionee.

16.Notices and communications under this Agreement must be in writing and either personally delivered or sent by registered or certified United States mail, return receipt requested, postage prepaid. Notices to the Company must be addressed to The Wendy’s Company, One Dave Thomas Boulevard, Dublin, Ohio 43017, Attention: Corporate Secretary, or any other address designated by the Company in a written notice to the Optionee. Notices to the Optionee will be directed to the address of the Optionee then currently on file with the Company, or at any other address given by the Optionee in a written notice to the Company.

17.If any provision of this Agreement could cause the application of an accelerated or additional tax under Section 409A of the Code upon the vesting or exercise of the Option (or any portion thereof), such provision shall be restructured, to the minimum extent possible, in a manner determined by the Company (and reasonably acceptable to the Optionee) that does not cause such an accelerated or additional tax.

18.This Agreement shall be governed by and construed in accordance with the internal laws of the State of Delaware applicable to contracts made and performed wholly within the State of Delaware, without giving effect to the conflict of laws provisions thereof.

4

19.This Agreement shall be valid, binding and effective upon the Company on the Date of Grant. However, the Options evidenced by this Agreement shall be forfeited by the Optionee and this Agreement shall have no force and effect if it is duly rejected. The Optionee may reject this Agreement and forfeit the Options by notifying the Company or its designee in the manner prescribed by the Company and communicated to the Optionee, provided that such rejection must be received by the Company or its designee no later than the earlier of (a) _________________, 20___ and (b) the date that is immediately prior to the date that the Options first vest pursuant to Section 4 above. If this Agreement is rejected on or prior to such date, the Options evidenced by this Agreement shall be forfeited, and neither the Optionee nor the Optionee’s heirs, executors, administrators and successors shall have any rights with respect thereto.

20.This grant does not constitute an employment contract. Nothing herein shall confer upon the Optionee the right to continue to serve as a director or officer to, or to continue as an employee or service provider of, the Company or any of its Affiliates for the length of the vesting schedule set forth in Section 4 above or for any portion thereof.

* * * * *

IN WITNESS WHEREOF, the Company has caused this Agreement to be signed by an officer duly authorized thereto as of _________________, 20___.

THE WENDY’S COMPANY

By: /s/ Scott Weisberg

Scott Weisberg

Chief People Officer

5

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER

OF THE WENDY’S COMPANY, PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, Todd A. Penegor, certify that:

1. I have reviewed this quarterly report on Form 10-Q of The Wendy’s Company;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 8, 2017

/s/ Todd A. Penegor          

Todd A. Penegor

President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF THE CHIEF FINANCIAL OFFICER

OF THE WENDY’S COMPANY, PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, Gunther Plosch, certify that:

1. I have reviewed this quarterly report on Form 10-Q of The Wendy’s Company;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 8, 2017

/s/ Gunther Plosch          

Gunther Plosch

Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATIONS OF THE CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, each of the undersigned officers of The Wendy’s Company, a Delaware corporation (the “Company”), does hereby certify, to the best of such officer’s knowledge, that in connection with the Quarterly Report on Form 10-Q of the Company for the quarter ended October 1, 2017 (the “Form 10-Q”):

1. the Form 10-Q fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 8, 2017

/s/ Todd A. Penegor             

Todd A. Penegor

President and Chief Executive Officer

Date: November 8, 2017

/s/ Gunther Plosch               

Gunther Plosch

Chief Financial Officer

XML

Document and Entity Information - shares	9 Months Ended
	Oct. 01, 2017	Nov. 02, 2017
Document and Entity Information [Abstract]
Entity Registrant Name	WENDY'S CO
Entity Central Index Key	0000030697
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Document Type	10-Q
Document Period End Date	Oct. 01, 2017
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q3
Amendment Flag	false
Entity Common Stock, Shares Outstanding		242,196,738

XML

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Oct. 01, 2017	Jan. 01, 2017
Current assets:
Cash and cash equivalents	$ 186,629	$ 198,240
Restricted cash	34,042	57,612
Accounts and notes receivable, net	115,390	98,825
Inventories	2,895	2,851
Prepaid expenses and other current assets	23,762	19,244
Advertising funds restricted assets	58,163	75,760
Total current assets	420,881	452,532
Properties	1,252,246	1,192,339
Goodwill	743,508	741,410
Other intangible assets	1,332,130	1,322,531
Investments	58,171	56,981
Net investment in direct financing leases	213,649	123,604
Other assets	69,688	49,917
Total assets	4,090,273	3,939,314
Current liabilities:
Current portion of long-term debt	29,359	24,652
Accounts payable	25,776	27,635
Accrued expenses and other current liabilities	121,124	102,034
Advertising funds restricted liabilities	58,163	75,760
Total current liabilities	234,422	230,081
Long-term debt	2,696,520	2,487,630
Deferred income taxes	419,293	446,513
Other liabilities	277,443	247,354
Total liabilities	3,627,678	3,411,578
Commitments and contingencies
Stockholders’ equity:
Common stock, $0.10 par value; 1,500,000 shares authorized; 470,424 shares issued; 242,565 and 246,574 shares outstanding, respectively	47,042	47,042
Additional paid-in capital	2,883,504	2,878,589
Accumulated deficit	(305,703)	(290,857)
Common stock held in treasury, at cost; 227,859 and 223,850 shares, respectively	(2,117,232)	(2,043,797)
Accumulated other comprehensive loss	(45,016)	(63,241)
Total stockholders’ equity	462,595	527,736
Total liabilities and stockholders’ equity	$ 4,090,273	$ 3,939,314

XML

Condensed Consolidated Balance Sheets Balance Sheet Parentheticals - $ / shares shares in Thousands	Oct. 01, 2017	Jan. 01, 2017
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	242,565	246,574
Treasury Stock, Shares	227,859	223,850

XML

Condensed Consolidated Statements of Operations - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Oct. 01, 2017	Oct. 02, 2016	Oct. 01, 2017	Oct. 02, 2016
Revenues:
Sales	$ 158,843	$ 228,644	$ 467,914	$ 747,211
Franchise royalty revenue and fees	98,882	98,039	306,120	275,886
Franchise rental income	50,275	37,329	140,127	102,420
Revenues	308,000	364,012	914,161	1,125,517
Costs and expenses:
Cost of sales	132,387	186,546	385,154	603,836
Franchise rental expense	24,076	17,534	64,841	49,684
General and administrative	52,960	58,938	156,690	184,708
Depreciation and amortization	31,216	29,362	91,690	92,456
System optimization losses (gains), net	106	(37,756)	39,749	(48,106)
Reorganization and realignment costs	2,888	2,129	20,768	7,866
Impairment of long-lived assets	1,041	361	1,804	12,991
Other operating expense (income), net	1,669	810	5,294	(13,483)
Costs and expenses	246,343	257,924	765,990	889,952
Operating profit	61,657	106,088	148,171	235,565
Interest expense	(29,977)	(28,731)	(87,887)	(85,483)
Other (expense) income, net	(125)	498	3,108	1,036
Income before income taxes	31,555	77,855	63,392	151,118
Provision for income taxes	(17,298)	(28,965)	(28,639)	(50,385)
Net income	$ 14,257	$ 48,890	$ 34,753	$ 100,733
Earnings per share
Basic	$ 0.06	$ 0.19	$ 0.14	$ 0.38
Diluted	0.06	0.18	0.14	0.37
Dividends
Dividends per share	$ 0.07	$ 0.06	$ 0.21	$ 0.18

XML

Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Oct. 01, 2017	Oct. 02, 2016	Oct. 01, 2017	Oct. 02, 2016
Net income	$ 14,257	$ 48,890	$ 34,753	$ 100,733
Other comprehensive income (loss), net:
Foreign currency translation adjustment	8,787	(3,369)	16,797	10,887
Change in unrecognized pension loss, net of income tax (provision) benefit of $(60) and $34 for the nine months ended October 1, 2017 and October 2, 2016, respectively	0	0	96	(56)
Effect of cash flow hedges, net of income tax provision of $279 and $838 for both the three and nine months ended October 1, 2017 and October 2, 2016, respectively	444	444	1,332	1,332
Other comprehensive income (loss), net	9,231	(2,925)	18,225	12,163
Comprehensive income	$ 23,488	$ 45,965	$ 52,978	$ 112,896

XML

Condensed Consolidated Statements of Comprehensive Income (Parenthetical) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Oct. 01, 2017	Oct. 02, 2016	Oct. 01, 2017	Oct. 02, 2016
Change in unrecognized pension loss, net of income tax (provision) benefit of $(60) and $34 for the nine months ended October 1, 2017 and October 2, 2016, respectively	$ 0	$ 0	$ (60)	$ 34
Effect of cash flow hedges, net of income tax provision of $279 and $838 for both the three and nine months ended October 1, 2017 and October 2, 2016, respectively	$ 279	$ 279	$ 838	$ 838

XML

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	9 Months Ended
	Oct. 01, 2017	Oct. 02, 2016
Cash flows from operating activities:
Net income	$ 34,753	$ 100,733
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	91,690	94,056
Share-based compensation	16,356	14,260
Impairment of long-lived assets	1,804	12,991
Deferred income tax	945	(17,024)
Non-cash rental income, net	(8,348)	(5,138)
Net receipt of deferred vendor incentives	4,547	4,110
System optimization losses (gains), net	(39,749)	48,106
Gain on sale of investments, net	1,807	0
Distributions received from TimWen joint venture	5,524	8,451
Equity in earnings in joint ventures, net	(6,113)	(6,495)
Accretion of long-term debt	927	914
Amortization of deferred financing costs	5,954	5,668
Reclassification of unrealized losses on cash flow hedges	2,170	2,170
Other, net	2,395	4,229
Changes in operating assets and liabilities:
Restricted cash	233	181
Accounts and notes receivable, net	(14,193)	(29,118)
Inventories	(44)	126
Prepaid expenses and other current assets	(1,281)	(3,958)
Accounts payable	(1,557)	(6,412)
Accrued expenses and other current liabilities	3,039	5,677
Net cash provided by operating activities	176,743	137,315
Cash flows from investing activities:
Capital expenditures	(53,711)	(108,744)
Acquisitions	(86,788)	(2,209)
Dispositions	80,058	173,849
Proceeds from sale of investments	3,282	0
Payments for investments	(375)	(172)
Notes receivable, net	(4,174)	(2,282)
Changes in restricted cash	23,624	1,912
Other, net	0	103
Net cash (used in) provided by investing activities	(38,084)	62,457
Cash flows from financing activities:
Repayments of long-term debt	(20,291)	(18,678)
Deferred financing costs	(1,069)	(1,017)
Repurchases of common stock	(90,065)	(161,194)
Dividends	(51,464)	(47,793)
Proceeds from stock option exercises	10,419	10,623
Payments related to tax withholding for share-based compensation	(4,484)	(4,142)
Net cash used in financing activities	(156,954)	(222,201)
Net cash used in operations before effect of exchange rate changes on cash	(18,295)	(22,429)
Effect of exchange rate changes on cash	6,684	3,997
Net decrease in cash and cash equivalents	(11,611)	(18,432)
Cash and cash equivalents at beginning of period	198,240	327,216
Cash and cash equivalents at end of period	186,629	308,784
Cash paid for:
Interest	93,701	85,753
Income taxes, net of refunds	22,092	63,775
Supplemental non-cash investing and financing activities:
Capital expenditures included in accounts payable	9,621	20,108
Capitalized lease obligations	$ 239,721	$ 102,748

XML

Basis of Presentation

9 Months Ended

Oct. 01, 2017

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements (the “Financial Statements”) of The Wendy’s Company (“The Wendy’s Company” and, together with its subsidiaries, the “Company,” “we,” “us” or “our”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and, therefore, do not include all information and footnotes required by GAAP for complete financial statements. In our opinion, the Financial Statements contain all adjustments of a normal recurring nature necessary to present fairly our financial position as of October 1, 2017 and the results of our operations for the three and nine months ended October 1, 2017 and October 2, 2016 and cash flows for the nine months ended October 1, 2017 and October 2, 2016. The results of operations for the three and nine months ended October 1, 2017 are not necessarily indicative of the results to be expected for the full 2017 fiscal year. These Financial Statements should be read in conjunction with the audited consolidated financial statements for The Wendy’s Company and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended January 1, 2017 (the “Form 10-K”).

The principal subsidiary of the Company is Wendy’s International, LLC and its subsidiaries (“Wendy’s”). The Company manages and internally reports its business geographically. The operation and franchising of Wendy’s^® restaurants in North America (defined as the United States of America (“U.S.”) and Canada) comprises virtually all of our current operations and represents a single reportable segment. The revenues and operating results of Wendy’s restaurants outside of North America are not material.

We report on a fiscal year consisting of 52 or 53 weeks ending on the Sunday closest to or on December 31. All three- and nine-month periods presented herein contain 13 weeks and 39 weeks, respectively. All references to years and quarters relate to fiscal periods rather than calendar periods.

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

XML

System Optimization (Losses) Gains, Net

9 Months Ended

Oct. 01, 2017

Property, Plant and Equipment [Abstract]

System Optimization Gains, Net

System Optimization Losses (Gains), Net

In July 2013, the Company announced a system optimization initiative, as part of its brand transformation, which includes a shift from Company-operated restaurants to franchised restaurants over time, through acquisitions and dispositions, as well as facilitating franchisee-to-franchisee restaurant transfers. In February 2015, the Company announced plans to reduce its ongoing Company-operated restaurant ownership to approximately 5% of the total system, which the Company completed as of January 1, 2017. Wendy’s will continue to optimize its system by facilitating franchisee-to-franchisee restaurant transfers, 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 and drive new restaurant development and accelerate reimages in the Image Activation format.

During the nine months endedOctober 1, 2017, the Company recorded post-closing adjustments on sales of restaurants and completed the sale of other assets, resulting in net gains totaling $3,385. In addition, the Company facilitated the transfer of 270 restaurants between franchisees during the nine months endedOctober 1, 2017 (excluding the DavCo and NPC transactions discussed below).

DavCo and NPC Transactions

As part of our system optimization initiative, the Company acquired 140 Wendy’s restaurants on May 31, 2017 from DavCo Restaurants, LLC (“DavCo”) for total net cash consideration of $86,788, which were immediately sold to NPC International, Inc. (“NPC”), an existing franchisee of the Company, for cash proceeds of $70,688 (the “DavCo and NPC transactions”). As part of the transaction, NPC has agreed to remodel 90 acquired restaurants in the Image Activation format by the end of 2021 and build 15 new Wendy’s restaurants by the end of 2022. Prior to closing the DavCo transaction, seven DavCo restaurants were closed. The acquisition of Wendy’s restaurants from DavCo was not contingent on executing the sale agreement with NPC; as such, the Company accounted for the transactions as an acquisition and subsequent disposition of a business. The total consideration paid to DavCo was allocated to net tangible and identifiable intangible assets acquired based on their estimated fair values. As part of the transactions, the Company retained leases for purposes of subleasing such properties to NPC.

The following is a summary of the activity recorded as a result of the DavCo and NPC transactions:

	Nine Months Ended
	October 1, 2017
Acquisition (a)
Total consideration paid	$	86,788
Identifiable assets and liabilities assumed:
Net assets held for sale	70,688
Capital lease assets	49,360
Deferred taxes	27,639
Capital lease obligations	(97,046		)
Net unfavorable leases (b)	(22,330		)
Other liabilities (c)	(6,999		)
Total identifiable net assets	21,312
Goodwill (d)	$	65,476
Disposition
Proceeds	$	70,688
Net assets sold	(70,688		)
Goodwill (d)	(65,476		)
Net favorable leases (e)	24,034
Other (f)	(1,692		)
Loss on DavCo and NPC transactions	$	(43,134	)

_______________

(a) The fair values of the identifiable intangible assets and taxes related to the acquisition are provisional amounts as of October 1, 2017, pending final valuations and purchase accounting adjustments. The Company utilized management estimates and consultation with an independent third-party valuation firm to assist in the valuation process. For the three months endedOctober 1, 2017, the Company recorded adjustments to the fair value of deferred taxes and net unfavorable leases, resulting in a decrease in goodwill of $27.

(b) Includes favorable lease assets of $1,229 and unfavorable lease liabilities of $23,559.

(c) Includes a supplemental purchase price estimated at $6,344 to be paid to DavCo for the resolution of certain lease-related matters, which is included in “Accrued expenses and other current liabilities.”

(d) Includes tax deductible goodwill of $21,870.

(e) The Company recorded favorable lease assets of $30,068 and unfavorable lease liabilities of $6,034 as a result of subleasing land, buildings and leasehold improvements to NPC.

(f) Includes cash payments for selling and other costs associated with the transaction. For the three and nine months ended October 1, 2017, the Company recorded additional selling and other costs of $12.

Gains and losses recognized on dispositions are recorded to “System optimization losses (gains), net” in our condensed consolidated statements of operations. Costs related to our system optimization initiative were historically recorded to “Reorganization and realignment costs.” Costs incurred during 2017 in connection with the DavCo and NPC transactions continue to be recorded to “Reorganization and realignment costs.” All other costs incurred during 2017 related to facilitating franchisee-to-franchisee restaurant transfers are recorded to “Other operating expense (income), net.” See Note 4 for further information.

The following is a summary of the disposition activity recorded as a result of our system optimization initiative:

	Three Months Ended						Nine Months Ended
	October 1, 2017			October 2, 2016			October 1, 2017			October 2, 2016
Number of restaurants sold to franchisees	—			156			—			211
Proceeds from sales of restaurants	$	—		$	124,765		$	—		$	164,380
Net assets sold (a)	—			(58,227		)	—			(75,282		)
Goodwill related to sales of restaurants	—			(24,254		)	—			(30,630		)
Net unfavorable leases (b)	—			(6,225		)	—			(11,131		)
Other	—			(726		)	—			(1,521		)
	—			35,333			—			45,816
Post-closing adjustments on sales of restaurants (c)	418			(120		)	1,345			(1,710		)
Gain on sales of restaurants, net	418			35,213			1,345			44,106
(Loss) gain on sales of other assets, net (d)	(539		)	2,543			2,040			4,000
Gain (loss) on DavCo and NPC transactions	15			—			(43,134		)	—
System optimization (losses) gains, net	$	(106	)	$	37,756		$	(39,749	)	$	48,106

_______________

(a) Net assets sold consisted primarily of equipment.

(b) During the three and nine months endedOctober 2, 2016, the Company recorded favorable lease assets of $2,114 and $2,297, respectively, and unfavorable lease liabilities of $8,339 and $13,428, respectively, as a result of leasing and/or subleasing land, buildings and/or leasehold improvements to franchisees in connection with sales of restaurants.

(c) The three and nine months endedOctober 1, 2017 includes cash payments, net of proceeds received, of $333 and $33, respectively, related to post-closing reconciliations with franchisees. The nine months endedOctober 1, 2017 also includes the recognition of a deferred gain of $312 as a result of the resolution of certain contingencies related to the extension of lease terms for a Canadian restaurant.

(d) During the three and nine months endedOctober 1, 2017, the Company received cash proceeds of $2,411 and $9,403, respectively, primarily from the sale of surplus properties. The nine months endedOctober 1, 2017 also includes the recognition of a deferred gain of $375 related to the sale of a share in an aircraft. During the three and nine months endedOctober 2, 2016, the Company received cash proceeds of $4,006 and $9,469, respectively, primarily from the sale of surplus properties.

As of October 1, 2017 and January 1, 2017, the Company had assets held for sale of $2,509 and $4,800, respectively, primarily consisting of surplus properties. Assets held for sale are included in “Prepaid expenses and other current assets.”

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Acquisitions

9 Months Ended

Oct. 01, 2017

Business Combinations [Abstract]

Acquisitions

Acquisitions

The table below presents the allocation of the total purchase price to the fair value of assets acquired and liabilities assumed for acquisitions of franchised restaurants:

	Nine Months Ended
	October 1, 2017		October 2, 2016
Restaurants acquired from franchisees	—		2
Total consideration paid, net of cash received	$	—	$	2,209
Identifiable assets acquired and liabilities assumed:
Properties	—		2,218
Deferred taxes and other assets	—		9
Other liabilities	—		(18		)
Total identifiable net assets	—		2,209
Goodwill	$	—	$	—

On May 31, 2017, the Company also entered into the DavCo and NPC transactions. See Note 2 for further information.

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Reorganization and Realignment Costs

9 Months Ended

Oct. 01, 2017

Restructuring and Related Activities [Abstract]

Restructuring and Related Activities Disclosure [Text Block]

Reorganization and Realignment Costs

The following is a summary of the initiatives included in “Reorganization and realignment costs:”

	Three Months Ended				Nine Months Ended
	October 1, 2017		October 2, 2016		October 1, 2017		October 2, 2016
System optimization initiative	$	232	$	2,091	$	867	$	6,895
G&A realignment - November 2014 plan	—		38		—		971
G&A realignment - May 2017 plan	2,656		—		19,901		—
Reorganization and realignment costs	$	2,888	$	2,129	$	20,768	$	7,866

System Optimization Initiative

The Company has recognized costs related to its system optimization initiative, which includes a shift from Company-operated restaurants to franchised restaurants over time, through acquisitions and dispositions, as well as facilitating franchisee-to-franchisee restaurant transfers. The Company does not expect to incur additional costs during the remainder of 2017 in connection with the DavCo and NPC transactions. All other costs incurred during 2017 related to facilitating franchisee-to-franchisee restaurant transfers are recorded to “Other operating expense (income), net.”

The following is a summary of the costs recorded as a result of our system optimization initiative:

	Three Months Ended				Nine Months Ended				Total Incurred Since Inception
	October 1, 2017		October 2, 2016		October 1, 2017		October 2, 2016
Severance and related employee costs	$	—	$	28	$	3	$	46	$	18,237
Professional fees	232		1,991		794		5,137		17,404
Other (a)	—		72		70		112		5,813
	232		2,091		867		5,295		41,454
Accelerated depreciation and amortization (b)	—		—		—		1,600		25,398
Share-based compensation (c)	—		—		—		—		5,013
Total system optimization initiative	$	232	$	2,091	$	867	$	6,895	$	71,865

_______________

(a) The nine months ended October 2, 2016 includes a reversal of an accrual of $50 as a result of a change in estimate.

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

(c) 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 tables below present a rollforward of our accrual for our system optimization initiative, which is included in “Accrued expenses and other current liabilities.”

	Balance January 1, 2017		Charges		Payments			Balance October 1, 2017
Severance and related employee costs	$	—	$	3	$	(3	)	$	—
Professional fees	101		794		(885		)	10
Other	—		70		(70		)	—
	$	101	$	867	$	(958	)	$	10

	Balance January 3, 2016		Charges		Payments			Balance October 2, 2016
Severance and related employee costs	$	77	$	46	$	(123	)	$	—
Professional fees	708		5,137		(5,740		)	105
Other	90		112		(202		)	—
	$	875	$	5,295	$	(6,065	)	$	105

General and Administrative (“G&A”) Realignment

November 2014 Plan

In November 2014, the Company initiated a plan to reduce its G&A expenses.  The plan included a realignment and reinvestment of resources to focus primarily on accelerated restaurant development and consumer-facing restaurant technology to drive long-term growth.  The Company achieved the majority of the expense reductions through the realignment of its U.S. field operations and savings at its Restaurant Support Center in Dublin, Ohio, which was substantially completed by the end of the second quarter of 2015.  The Company recognized costs totaling $38 and $971 during the three and nine months endedOctober 2, 2016, respectively, and $23,960 in aggregate since inception.  The Company did not incur any expenses during the three and nine months endedOctober 1, 2017 and does not expect to incur additional costs related to the plan.

May 2017 Plan

In May 2017, the Company initiated a new plan to further reduce its G&A expenses. The Company expects to incur total costs aggregating approximately $28,000 to $33,000 related to the plan. The Company recognized costs totaling $2,656 and $19,901 during the three and nine months ended October 1, 2017, respectively, which primarily included severance and related employee costs and share-based compensation. The Company expects to incur additional costs aggregating approximately $8,000 to $13,000, comprised of (1) severance and related employee costs of approximately $3,000, (2) recruitment and relocation costs of approximately $4,000, (3) third-party and other costs of approximately $1,000 and (4) share-based compensation of approximately $3,000. The Company expects costs to be recognized during the remainder of 2017 and continue into 2019, with approximately two-thirds to be recognized during 2017.

The following is a summary of the activity recorded as a result of the May 2017 plan:

	Three Months Ended		Nine Months Ended
	October 1, 2017		October 1, 2017
Severance and related employee costs	$	1,210	$	14,436
Recruitment and relocation costs	145		145
Third-party and other costs	496		821
	1,851		15,402
Share-based compensation (a)	805		4,499
Total G&A realignment - May 2017 plan	$	2,656	$	19,901

_______________

(a) Primarily represents incremental share-based compensation resulting from the modification of stock options in connection with the termination of employees under our May 2017 plan. The three and nine months ended October 1, 2017 includes incremental share-based compensation of $652 related to the modification of stock options granted during August 2017.

As of October 1, 2017, the accruals for our May 2017 plan are included in “Accrued expenses and other current liabilities” and “Other liabilities” and totaled $7,766 and $5,429, respectively. The table below presents a rollforward of our accruals for the May 2017 plan.

	Balance January 1, 2017		Charges		Payments			Balance October 1, 2017
Severance and related employee costs	$	—	$	14,436	$	(1,350	)	$	13,086
Recruitment and relocation costs	—		145		(36		)	109
Third-party and other costs	—		821		(821		)	—
	$	—	$	15,402	$	(2,207	)	$	13,195

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Investments

9 Months Ended

Oct. 01, 2017

Equity Method Investments and Joint Ventures [Abstract]

Investments

Investments

Equity Investments

Wendy’s 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, a wholly-owned subsidiary of Wendy’s has a 20% share in a joint venture for the operation of Wendy’s restaurants in Brazil (the “Brazil JV”). The Company has significant influence over these investees. Such investments 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 expense (income), net.”

During the three months ended October 1, 2017, a wholly-owned subsidiary of Wendy’s agreed to lend the Brazil JV an aggregate amount up to, but not to exceed, $4,800, which is in addition to $8,000 previously loaned. During the three months ended October 1, 2017, $1,500 was loaned to the Brazil JV under this agreement. 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 are due October 20, 2020 and bear interest at 6.5% per year.

Presented below is activity related to our investment in TimWen and the Brazil JV included in our condensed consolidated financial statements:

	Nine Months Ended
	October 1, 2017			October 2, 2016
Balance at beginning of period	$	54,545		$	55,541
Investment	375			172
Equity in earnings for the period	7,844			8,207
Amortization of purchase price adjustments (a)	(1,731		)	(1,712		)
	6,113			6,495
Distributions received (b)	(8,128		)	(8,451		)
Foreign currency translation adjustment included in “Other comprehensive income, net”	4,304			3,204
Balance at end of period	$	57,209		$	56,961

_______________

(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.

(b) The nine months ended October 1, 2017 includes a distribution receivable from TimWen of $2,604, which is included in “Accounts and notes receivable, net.”

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Fair Value Measurements

9 Months Ended

Oct. 01, 2017

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Valuation techniques under the accounting guidance related to fair value measurements are based on observable and unobservable inputs. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect our market assumptions. These inputs are classified into the following hierarchy:

• Level 1 Inputs - Quoted prices for identical assets or liabilities in active markets.

• Level 2 Inputs - Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

• Level 3 Inputs - Pricing inputs are unobservable for the assets or liabilities and include situations where there is little, if any, market activity for the assets or liabilities. The inputs into the determination of fair value require significant management judgment or estimation.

Financial Instruments

The following table presents the carrying amounts and estimated fair values of the Company’s financial instruments:

	October 1, 2017				January 1, 2017
	Carrying Amount		Fair Value		Carrying Amount		Fair Value		Fair Value Measurements
Financial assets
Cash equivalents	$	337	$	337	$	5,335	$	5,335	Level 1
Non-current cost method investments (a)	962		325,869		2,436		326,283		Level 3
Financial liabilities
Series 2015-1 Class A-2-I Notes (b)	857,500		863,417		864,063		857,349		Level 2
Series 2015-1 Class A-2-II Notes (b)	882,000		900,169		888,750		880,005		Level 2
Series 2015-1 Class A-2-III Notes (b)	490,000		504,112		493,750		474,543		Level 2
7% debentures, due in 2025 (b)	89,204		106,000		88,277		99,750		Level 2
Guarantees of franchisee loan obligations (c)	224		224		280		280		Level 3

_______________

(a) The fair value of our indirect investment in Arby’s Restaurant Group, Inc. (“Arby’s”) is based on applying a multiple to Arby’s adjusted earnings before income taxes, depreciation and amortization per its current unaudited financial information. The carrying value of our indirect investment in Arby’s was reduced to zero during 2013 in connection with the receipt of a dividend. The fair values of our remaining investments are not significant and are based on our review of information provided by the investment managers or investees which was based on (1) valuations performed by the investment managers or investees, (2) quoted market or broker/dealer prices for similar investments and (3) quoted market or broker/dealer prices adjusted by the investment managers for legal or contractual restrictions, risk of nonperformance or lack of marketability, depending upon the underlying investments.

(b) The fair values were based on quoted market prices in markets that are not considered active markets.

(c) Wendy’s has provided loan guarantees to various lenders on behalf of franchisees entering into debt arrangements for new restaurant development and equipment financing. In addition, during 2012, Wendy’s provided a guarantee to a lender for a franchisee in connection with the refinancing of the franchisee’s debt. We have accrued a liability for the fair value of these guarantees, the calculation of which was based upon a weighted average risk percentage established at inception and adjusted for a history of defaults.

The carrying amounts of cash, accounts payable and accrued expenses approximated fair value due to the short-term nature of those items. The carrying amounts of accounts and notes receivable, net (both current and non-current) approximated fair value due to the effect of the related allowance for doubtful accounts. Our cash and cash equivalents and guarantees are the only financial assets and liabilities measured and recorded at fair value on a recurring basis.

Derivative Instruments

The Company’s primary objective for entering into interest rate swap agreements was to manage its exposure to changes in interest rates, as well as to maintain an appropriate mix of fixed and variable rate debt.

Our derivative instruments for 2015 included seven forward-starting interest rate swaps designated as cash flow hedges to change the floating rate interest payments for $350,000 and $100,000 in borrowings associated with the Term A and Term B Loans, respectively, under the Company’s prior credit agreement, to fixed rate interest payments beginning June 30, 2015 and maturing on December 31, 2017. In May 2015, the Company terminated these interest rate swaps and paid $7,275, which was recorded against the derivative liability. The unrealized loss on the cash flow hedges at termination of $7,275 is being reclassified on a straight-line basis from “Accumulated other comprehensive loss” to “Interest expense” beginning June 30, 2015 (the original effective date of the interest rate swaps) through December 31, 2017 (the original maturity date of the interest rate swaps). Reclassifications of unrealized losses on cash flow hedges from “Accumulated other comprehensive loss” to “Interest expense” were $723 and $2,170 for both the three and nine months ended October 1, 2017 and October 2, 2016, respectively.

Non-Recurring Fair Value Measurements

Assets and liabilities remeasured to fair value on a non-recurring basis resulted in impairment that we have recorded to “Impairment of long-lived assets” in our condensed consolidated statements of operations.

Total impairment losses may reflect the impact of remeasuring long-lived assets held and used (including land, buildings, leasehold improvements and favorable lease assets) to fair value as a result of (1) the Company’s decision to lease and/or sublease the land and/or buildings to franchisees in connection with the sale or anticipated sale of restaurants and (2) declines in operating performance at Company-operated restaurants. The fair value of long-lived assets held and used presented in the tables below represents the remaining carrying value and was estimated based on either discounted cash flows of future anticipated lease and sublease income or current market values.

Total impairment losses may also include the impact of remeasuring long-lived assets held for sale, which primarily include surplus properties. The fair value of long-lived assets held for sale presented in the tables below represents the remaining carrying value and was estimated based on current market values. See Note 7 for further information on impairment of our long-lived assets.

			Fair Value Measurements
	October 1, 2017		Level 1		Level 2		Level 3
Held and used	$	915	$	—	$	—	$	915
Held for sale	1,290		—		—		1,290
Total	$	2,205	$	—	$	—	$	2,205

			Fair Value Measurements
	January 1, 2017		Level 1		Level 2		Level 3
Held and used	$	5,462	$	—	$	—	$	5,462
Held for sale	1,552		—		—		1,552
Total	$	7,014	$	—	$	—	$	7,014

Total impairment losses for the three and nine months ended October 1, 2017 included remeasuring long-lived assets held and used of $928 and $1,146, respectively, and remeasuring long-lived assets held for sale of $113 and $658, respectively. Total impairment losses for the three and nine months ended October 2, 2016 included remeasuring long-lived assets held and used of $242 and $12,768, respectively, and remeasuring long-lived assets held for sale of $119 and $223, respectively.

In addition, the Company measured assets acquired and liabilities assumed at fair value as part of the DavCo and NPC transactions during the three and nine months ended October 1, 2017. See Note 2 for further information.

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Impairment of Long-Lived Assets

9 Months Ended

Oct. 01, 2017

Asset Impairment Charges [Abstract]

Impairment of Long-Lived Assets

Impairment of Long-Lived Assets

During the three and nine months endedOctober 1, 2017 and October 2, 2016, the Company recorded impairment charges on long-lived assets as a result of (1) the Company’s decision to lease and/or sublease properties to franchisees in connection with the sale or anticipated sale of Company-operated restaurants, (2) closing Company-operated restaurants and classifying such surplus properties as held for sale and (3) the deterioration in operating performance of certain Company-operated restaurants and charges for capital improvements in previously impaired restaurants that did not subsequently recover. The Company may recognize additional impairment charges resulting from leasing or subleasing additional properties to franchisees in connection with sales of Company-operated restaurants to franchisees.

The following is a summary of impairment losses recorded, which represent the excess of the carrying amount over the fair value of the affected assets and are included in “Impairment of long-lived assets.”

	Three Months Ended				Nine Months Ended
	October 1, 2017		October 2, 2016		October 1, 2017		October 2, 2016
Restaurants leased or subleased to franchisees	$	95	$	163	$	95	$	12,654
Surplus properties	113		119		658		223
Company-operated restaurants	833		79		1,051		114
	$	1,041	$	361	$	1,804	$	12,991

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Income Taxes

9 Months Ended

Oct. 01, 2017

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The Company’s effective tax rate for the three months endedOctober 1, 2017 and October 2, 2016 was 54.8% and 37.2%, respectively. The Company’s effective tax rate varies from the U.S. federal statutory rate of 35% due to the effect of (1) the system optimization initiative provision of $5,019 and $2,332 in the third quarter of 2017 and 2016, respectively, reflecting goodwill adjustments, changes to valuation allowances on state net operating loss carryforwards and state deferred taxes, (2) state income taxes net of federal benefits, including non-recurring changes to state deferred taxes, (3) the adoption of an amendment issued by the Financial Accounting Standards Board (“FASB”), which requires that excess tax benefits and tax deficiencies related to share-based payments be recognized in net income and (4) the rate differential between foreign and domestic taxes.

The Company’s effective tax rate for the nine months ended October 1, 2017 and October 2, 2016 was 45.2% and 33.3%, respectively. The Company’s effective tax rate varies from the U.S. federal statutory rate of 35% due to the effect of (1) the system optimization initiative, reflecting goodwill adjustments, changes to valuation allowances on state net operating loss carryforwards and state deferred taxes (including corrections to prior years identified and recorded in the first nine months of 2017 and 2016, which resulted in a benefit of $2,248 and $7,113, respectively), (2) the adoption of an amendment issued by the FASB, which requires that excess tax benefits and tax deficiencies related to share-based payments be recognized in net income, which resulted in a benefit of $5,205 during the nine months ended October 1, 2017, (3) state income taxes net of federal benefits, including non-recurring changes to state deferred taxes, and (4) the rate differential between foreign and domestic taxes.

During the next twelve months, we believe that it is reasonably possible the Company will reduce its unrecognized tax benefits by up to $7,030, primarily due to expected settlements with taxing authorities.

The current portion of refundable income taxes was $16,165 and $18,111 as of October 1, 2017 and January 1, 2017, respectively, and is included in “Accounts and notes receivable, net” in the condensed consolidated balance sheets.  Long-term refundable income taxes are included in “Other assets” and amounted to $960 and $239 as of October 1, 2017 and January 1, 2017, respectively.

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Net Income Per Share

9 Months Ended

Oct. 01, 2017

Earnings Per Share [Abstract]

Net Income Per Share

Net Income Per Share

Basic net income per share 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 net income per share were as follows:

	Three Months Ended		Nine Months Ended
	October 1, 2017	October 2, 2016	October 1, 2017	October 2, 2016
Common stock:
Weighted average basic shares outstanding	243,354	260,976	245,073	265,702
Dilutive effect of stock options and restricted shares	8,383	3,832	8,103	4,239
Weighted average diluted shares outstanding	251,737	264,808	253,176	269,941

Diluted net income per share for the three and nine months ended October 1, 2017 and October 2, 2016 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 1,617 and 618 for the three and nine months ended October 1, 2017, respectively, and 2,233 and 2,072 for the three and nine months ended October 2, 2016, respectively, from our diluted net income per share calculation as they would have had anti-dilutive effects.

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Stockholders' Equity

9 Months Ended

Oct. 01, 2017

Equity [Abstract]

Stockholders' Equity

Stockholders’ Equity

Stockholders’ Equity

The following is a summary of the changes in stockholders’ equity:

	Nine Months Ended
	October 1, 2017			October 2, 2016
Balance at beginning of period	$	527,736		$	752,914
Comprehensive income	52,978			112,896
Cash dividends	(51,464		)	(47,793		)
Repurchases of common stock	(90,964		)	(162,492		)
Share-based compensation	16,356			14,260
Exercises of stock options	10,194			10,600
Vesting of restricted shares	(4,260		)	(3,853		)
Cumulative effect of change in accounting principle (a)	1,880			—
Tax benefit from share-based compensation	—			1,898
Other	139			145
Balance at end of period	$	462,595		$	678,575

_______________

(a) During the nine months ended October 1, 2017, the Company recognized a tax benefit as a reduction to the Company’s deferred tax liability with an equal offsetting increase to “Accumulated deficit.” The adjustment was recognized as a result of adoption of an amendment to the accounting for employee share-based payment transactions. See Note 15 for further information.

Repurchases of Common Stock

In February 2017, our Board of Directors authorized a repurchase program for up to $150,000 of our common stock through March 4, 2018, when and if market conditions warrant and to the extent legally permissible. During the nine months ended October 1, 2017, the Company repurchased 6,131 shares with an aggregate purchase price of $90,876, of which $899 was accrued at October 1, 2017 and excluding commissions of $88. As of October 1, 2017, the Company had $59,124 of availability remaining under its February 2017 authorization. Subsequent to October 1, 2017 through November 2, 2017, the Company repurchased 428 shares with an aggregate purchase price of $6,628, excluding commissions of $6.

On June 1, 2015, our Board of Directors authorized a repurchase program for up to $1,400,000 of our common stock through January 1, 2017, when and if market conditions warranted and to the extent legally permissible. During the nine months ended October 2, 2016, the Company repurchased 16,034 shares with an aggregate purchase price of $162,252, of which $2,998 was accrued at October 2, 2016 and excluding commissions of $240.

Accumulated Other Comprehensive Loss

The following table provides a rollforward of the components of accumulated other comprehensive loss, net of tax as applicable:

	Foreign Currency Translation			Cash Flow Hedges (a)			Pension			Total
Balance at January 1, 2017	$	(60,299	)	$	(1,797	)	$	(1,145	)	$	(63,241	)
Current-period other comprehensive income	16,797			1,332			96			18,225
Balance at October 1, 2017	$	(43,502	)	$	(465	)	$	(1,049	)	$	(45,016	)
Balance at January 3, 2016	$	(66,163	)	$	(3,571	)	$	(1,089	)	$	(70,823	)
Current-period other comprehensive income (loss)	10,887			1,332			(56		)	12,163
Balance at October 2, 2016	$	(55,276	)	$	(2,239	)	$	(1,145	)	$	(58,660	)

_______________

(a) Current-period other comprehensive income (loss) includes the reclassification of unrealized losses on cash flow hedges from “Accumulated other comprehensive loss” to our condensed consolidated statements of operations of $444 and $1,332 for both the three and nine months ended October 1, 2017 and October 2, 2016, respectively. The reclassification of unrealized losses on cash flow hedges consists of $723 and $2,170 for both the three and nine months ended October 1, 2017 and October 2, 2016, respectively, recorded to “Interest expense,” net of the related income tax benefit of $279 and $838 for both the three and nine months ended October 1, 2017 and October 2, 2016, respectively, recorded to “Provision for income taxes.” See Note 6 for further information.

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Leases (Notes)

9 Months Ended

Oct. 01, 2017

Leases [Abstract]

Leases of Lessee Disclosure

Leases

At October 1, 2017, Wendy’s and its franchisees operated 6,586 Wendy’s restaurants. Of the 333 Company-operated Wendy’s restaurants, Wendy’s owned the land and building for 146 restaurants, owned the building and held long-term land leases for 137 restaurants and held leases covering land and building for 50 restaurants. Wendy’s also owned 521 and leased 1,270 properties that were either leased or subleased principally to franchisees.

Rental expense for operating leases consists of the following components:

	Three Months Ended				Nine Months Ended
	October 1, 2017		October 2, 2016		October 1, 2017		October 2, 2016
Rental expense:
Minimum rentals	$	23,997	$	19,137	$	66,701	$	59,139
Contingent rentals	5,395		5,254		14,405		13,786
Total rental expense (a)	$	29,392	$	24,391	$	81,106	$	72,925

_______________

(a) Amounts exclude sublease income of $35,022 and $92,434 recognized during the three and nine months endedOctober 1, 2017, respectively, and $25,127 and $68,400 recognized during the three and nine months endedOctober 2, 2016, respectively.

Rental income for operating leases and subleases consists of the following components:

	Three Months Ended				Nine Months Ended
	October 1, 2017		October 2, 2016		October 1, 2017		October 2, 2016
Rental income:
Minimum rentals	$	44,682	$	31,902	$	124,847	$	87,409
Contingent rentals	5,593		5,427		15,280		15,011
Total rental income	$	50,275	$	37,329	$	140,127	$	102,420

The following table illustrates the Company’s future minimum rental payments and rental receipts for non-cancelable leases and subleases, including rental receipts for direct financing leases as of October 1, 2017. Rental receipts below are presented separately for owned properties and for leased properties based on the classification of the underlying lease.

	Rental Payments					Rental Receipts
Fiscal Year	Capital Leases			Operating Leases		Capital Leases		Operating Leases		Owned Properties
2017 (a)	$	11,989		$	24,894	$	15,868	$	18,782	$	13,436
2018	43,406			93,431		60,844		75,167		53,896
2019	42,717			93,272		61,368		75,267		54,866
2020	43,660			92,434		62,469		74,983		55,489
2021	45,249			91,892		64,260		74,672		57,102
Thereafter	748,736			1,188,165		1,045,693		973,428		1,008,243
Total minimum payments	$	935,757		$	1,584,088	$	1,310,502	$	1,292,299	$	1,243,032
Less interest	(499,703		)
Present value of minimum capital lease payments (b)	$	436,054

_______________

(a) Represents future minimum rental payments and rental receipts for non-cancelable leases and subleases for the remainder of our 2017 fiscal year.

(b) The present value of minimum capital lease payments of $6,608 and $429,446 are included in “Current portion of long-term debt” and “Long-term debt,” respectively.

Properties owned by the Company and leased to franchisees and other third parties under operating leases include:

	October 1, 2017			January 1, 2017
Land	$	271,840		$	271,160
Buildings and improvements	312,796			312,067
Restaurant equipment	1,491			1,507
	586,127			584,734
Accumulated depreciation and amortization	(122,970		)	(110,166		)
	$	463,157		$	474,568

Our net investment in direct financing leases is as follows:

	October 1, 2017			January 1, 2017
Future minimum rental receipts	$	630,352		$	401,452
Unearned interest income	(416,221		)	(277,747		)
Net investment in direct financing leases	214,131			123,705
Net current investment in direct financing leases (a)	(482		)	(101		)
Net non-current investment in direct financing leases (b)	$	213,649		$	123,604

_______________

(a) Included in “Accounts and notes receivable, net.”

(b) Included in “Net investment in direct financing leases.”

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Transactions with Related Parties

9 Months Ended

Oct. 01, 2017

Related Party Transactions [Abstract]

Transactions with Related Parties

Transactions with Related Parties

Except as described below, the Company did not have any significant changes in or transactions with its related parties during the current fiscal period since those reported in the Form 10-K.

TimWen Lease and Management Fee Payments

A wholly-owned subsidiary of Wendy’s leases restaurant facilities from TimWen for the operation of Wendy’s/Tim Hortons combo units in Canada. During the nine months ended October 1, 2017 and October 2, 2016, Wendy’s paid TimWen $9,362 and $8,926, respectively, under these lease agreements. In addition, TimWen paid Wendy’s a management fee under the TimWen joint venture agreement of $158 and $156 during the nine months ended October 1, 2017 and October 2, 2016, respectively, which has been included as a reduction to “General and administrative.”

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Guarantees and Other Commitments and Contingencies

9 Months Ended

Oct. 01, 2017

Commitments and Contingencies Disclosure [Abstract]

Guarantees and Other Commitments and Contingencies

Guarantees and Other Commitments and Contingencies

The Company did not have any significant changes in guarantees and other commitments and contingencies during the current fiscal period since those reported in the Form 10-K. Refer to the Form 10-K for further information regarding the Company’s additional commitments and obligations.

Franchisee Image Activation Incentive Programs

In order to promote Image Activation new restaurant development, Wendy’s has an incentive program for franchisees that provides for reductions in royalty and national advertising payments for up to the first two years of operation for qualifying new restaurants opened by December 31, 2020, with the value of the incentives declining in the later years of the program. Wendy’s also has incentive programs for 2017 available to franchisees that commence Image Activation restaurant remodels by December 15, 2017. The remodel incentive programs provide for reductions in royalty payments for one year after the completion of construction.

Lease Guarantees

Wendy’s has guaranteed the performance of certain leases and other obligations, primarily from former Company-operated restaurant locations now operated by franchisees, amounting to $56,299 as of October 1, 2017. These leases extend through 2056. We have not received any notice of default related to these leases as of October 1, 2017. In the event of default by a franchise owner, Wendy’s generally retains the right to acquire possession of the related restaurant locations.

Wendy’s is contingently liable for certain other leases which have been assigned to unrelated third parties who have indemnified Wendy’s against future liabilities amounting to $637 as of October 1, 2017. These leases expire on various dates through 2021.

Letters of Credit

As of October 1, 2017, the Company had outstanding letters of credit with various parties totaling $32,575, of which $3,205 were cash collateralized. The outstanding letters of credit include amounts outstanding against the securitized financing facility. The related cash collateral is classified as “Restricted cash” in the condensed consolidated balance sheets. We do not expect any material loss to result from these letters of credit.

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Legal and Environmental Matters

9 Months Ended

Oct. 01, 2017

Loss Contingency [Abstract]

Legal and Environmental Matters

Legal and Environmental Matters

We are involved in litigation and claims incidental to our current and prior businesses. We provide accruals for such litigation and claims when payment is probable and reasonably estimable. As of October 1, 2017, the Company had accruals for all of its legal and environmental matters aggregating $1,639. We cannot estimate the aggregate possible range of loss due to most proceedings, including those described below, being in preliminary stages, with various motions either yet to be submitted or pending, discovery yet to occur and significant factual matters unresolved. In addition, most cases seek an indeterminate amount of damages and many involve multiple parties. Predicting the outcomes of settlement discussions or judicial or arbitral decisions is thus inherently difficult. Based on currently available information, including legal defenses available to us, and given the aforementioned accruals and our insurance coverage, we do not believe that the outcome of these legal and environmental matters will have a material effect on our consolidated financial position or results of operations.

We previously described certain legal proceedings under Note 14 to our Condensed Consolidated Financial Statements in our Quarterly Report on Form 10-Q for the second quarter of 2017, as filed with the SEC on August 9, 2017. Except as set forth below, there were no material developments in those legal proceedings during the third quarter of 2017.

As previously reported, the Company has been named as a defendant in putative class action lawsuits alleging, among other things, that the Company failed to safeguard customer credit card information and failed to provide notice that credit card information had been compromised.  Jonathan Torres and other consumers filed an action in the U.S. District Court for the Middle District of Florida (the “Torres case”). The operative complaint seeks to certify a nationwide class of consumers, or in the alternative, statewide classes of consumers for Florida, New York, New Jersey, Texas, and Tennessee, as well as statewide classes of consumers under those states’ consumer protection and unfair trade practices laws. On October 27, 2017, the Company moved to dismiss the operative complaint. The Company’s motion is pending before the court.

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New Accounting Standards

9 Months Ended

Oct. 01, 2017

New Accounting Pronouncements and Changes in Accounting Principles [Abstract]

New Accounting Standards

New Accounting Standards

New Accounting Standards

In May 2017, the FASB issued new guidance on the scope of modification accounting for share-based payment arrangements. The new guidance will provide relief to entities that make non-substantive changes to their share-based payment arrangements. The Company does not expect the amendment, which requires prospective adoption and is effective commencing with our 2018 fiscal year, to have a material impact on our consolidated financial statements.

In March 2017, the FASB issued new guidance on the presentation of net periodic benefit costs that requires entities to disaggregate the current service cost component from the other components of net benefit cost in the income statement. The Company does not expect the amendment, which requires retrospective adoption and is effective commencing with our 2018 fiscal year, to have a material impact on our consolidated financial statements.

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 with lease terms of more than 12 months. The amendment requires the recognition and measurement of leases at the beginning of the earliest period presented using a modified retrospective approach.  We are currently evaluating the impact of the adoption of this guidance on our consolidated financial statements and plan to reflect adoption when effective in the first quarter of our 2019 fiscal year. As shown in Note 11, there are $1,584,088 in future minimum rental payments for operating leases that are not currently on our balance sheet; therefore, we expect this will have a material impact on our balance sheet and related disclosures.

In May 2014, the FASB issued amended guidance for revenue recognition. The new guidance outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. Additionally, the guidance requires improved disclosure to help users of financial statements better understand the nature, amount, timing, and uncertainty of revenue that is recognized. The new guidance supersedes most current revenue recognition guidance, including industry-specific guidance, and is effective commencing with our 2018 fiscal year. The guidance allows for either a full retrospective or modified retrospective transition method. We currently expect to apply the modified retrospective method upon adoption. This guidance will not impact our recognition of revenue from Company-operated restaurant sales or our recognition of continuing royalty revenues from franchisees, which are based on a percentage of franchise sales. Under current guidance, we recognize initial fees from franchisees when we have performed all material obligations and services, which generally occurs when the franchised restaurant opens. Additionally, under current guidance, our advertising fund contributions from franchisees and the related advertising expenditures are reported on a net basis in our consolidated balance sheet as “Advertising funds restricted assets” and “Advertising funds restricted liabilities.” Under the new guidance, we anticipate recognizing the initial fees from franchisees over the life of the related franchise agreements and we expect to consolidate the operations and cash flow results of our national advertising funds, both of which will have a material impact on our consolidated financial statements.

New Accounting Standards Adopted

In March 2016, the FASB issued an amendment related to equity method accounting, which eliminates the requirement to retrospectively apply the equity method to an investment that subsequently qualifies for such accounting as a result of an increase in level of ownership interest or degree of influence. The Company adopted this amendment, prospectively, during the first quarter of 2017. The adoption of this guidance did not impact our consolidated financial statements.

In March 2016, the FASB issued an amendment that clarifies the steps for assessing triggering events of embedded contingent put and call options within debt instruments. The Company adopted this amendment during the first quarter of 2017. The adoption of this guidance did not impact our consolidated financial statements.

In March 2016, the FASB issued an amendment that modifies several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures and statutory withholding requirements, as well as statement of cash flows presentation. The transition requirement is generally modified retrospective, with the exception of recognition of excess tax benefits and tax deficiencies that requires prospective adoption. The Company adopted this amendment during the first quarter of 2017. The cash flows used in financing activities related to the excess tax benefits from share-based compensation arrangements, which amounted to $2,376 during the nine months ended October 2, 2016, was reclassified retrospectively to cash flows provided by operating activities. Additionally, during the nine months ended October 2, 2016, $4,142 was paid to taxing authorities for withheld shares on share-based compensation arrangement activities, which was reclassified retrospectively from cash flows provided by operating activities to cash flows used in financing activities. Upon adopting the amendment in the first quarter of 2017, the Company recognized $1,880 in unrecognized tax benefits for deductions in excess of cumulative compensation costs relating to the exercise of stock options and vesting of restricted stock. This tax benefit was recognized as a reduction to the Company’s deferred tax liability with an equal offsetting increase to “Accumulated deficit.” The Company will continue to estimate forfeitures each period.

In July 2015, the FASB issued an amendment that requires entities to measure inventory at the lower of cost and net realizable value, rather than the lower of cost or market, with market value represented by replacement cost, net realizable value or net realizable value less a normal profit margin. The Company adopted this amendment during the first quarter of 2017. The adoption of this guidance did not impact our consolidated financial statements.

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System Optimization (Losses) Gains, Net (Tables)

9 Months Ended

Oct. 01, 2017

Property, Plant and Equipment

Summary of DavCo and NPC Transactions

The following is a summary of the activity recorded as a result of the DavCo and NPC transactions:

	Nine Months Ended
	October 1, 2017
Acquisition (a)
Total consideration paid	$	86,788
Identifiable assets and liabilities assumed:
Net assets held for sale	70,688
Capital lease assets	49,360
Deferred taxes	27,639
Capital lease obligations	(97,046		)
Net unfavorable leases (b)	(22,330		)
Other liabilities (c)	(6,999		)
Total identifiable net assets	21,312
Goodwill (d)	$	65,476
Disposition
Proceeds	$	70,688
Net assets sold	(70,688		)
Goodwill (d)	(65,476		)
Net favorable leases (e)	24,034
Other (f)	(1,692		)
Loss on DavCo and NPC transactions	$	(43,134	)

_______________

(a) The fair values of the identifiable intangible assets and taxes related to the acquisition are provisional amounts as of October 1, 2017, pending final valuations and purchase accounting adjustments. The Company utilized management estimates and consultation with an independent third-party valuation firm to assist in the valuation process. For the three months endedOctober 1, 2017, the Company recorded adjustments to the fair value of deferred taxes and net unfavorable leases, resulting in a decrease in goodwill of $27.

(b) Includes favorable lease assets of $1,229 and unfavorable lease liabilities of $23,559.

(c) Includes a supplemental purchase price estimated at $6,344 to be paid to DavCo for the resolution of certain lease-related matters, which is included in “Accrued expenses and other current liabilities.”

(d) Includes tax deductible goodwill of $21,870.

(e) The Company recorded favorable lease assets of $30,068 and unfavorable lease liabilities of $6,034 as a result of subleasing land, buildings and leasehold improvements to NPC.

(f) Includes cash payments for selling and other costs associated with the transaction. For the three and nine months ended October 1, 2017, the Company recorded additional selling and other costs of $12.

Summary of Disposition Activity

The following is a summary of the disposition activity recorded as a result of our system optimization initiative:

	Three Months Ended						Nine Months Ended
	October 1, 2017			October 2, 2016			October 1, 2017			October 2, 2016
Number of restaurants sold to franchisees	—			156			—			211
Proceeds from sales of restaurants	$	—		$	124,765		$	—		$	164,380
Net assets sold (a)	—			(58,227		)	—			(75,282		)
Goodwill related to sales of restaurants	—			(24,254		)	—			(30,630		)
Net unfavorable leases (b)	—			(6,225		)	—			(11,131		)
Other	—			(726		)	—			(1,521		)
	—			35,333			—			45,816
Post-closing adjustments on sales of restaurants (c)	418			(120		)	1,345			(1,710		)
Gain on sales of restaurants, net	418			35,213			1,345			44,106
(Loss) gain on sales of other assets, net (d)	(539		)	2,543			2,040			4,000
Gain (loss) on DavCo and NPC transactions	15			—			(43,134		)	—
System optimization (losses) gains, net	$	(106	)	$	37,756		$	(39,749	)	$	48,106

_______________

(a) Net assets sold consisted primarily of equipment.

(b) During the three and nine months endedOctober 2, 2016, the Company recorded favorable lease assets of $2,114 and $2,297, respectively, and unfavorable lease liabilities of $8,339 and $13,428, respectively, as a result of leasing and/or subleasing land, buildings and/or leasehold improvements to franchisees in connection with sales of restaurants.

(c) The three and nine months endedOctober 1, 2017 includes cash payments, net of proceeds received, of $333 and $33, respectively, related to post-closing reconciliations with franchisees. The nine months endedOctober 1, 2017 also includes the recognition of a deferred gain of $312 as a result of the resolution of certain contingencies related to the extension of lease terms for a Canadian restaurant.

(d) During the three and nine months endedOctober 1, 2017, the Company received cash proceeds of $2,411 and $9,403, respectively, primarily from the sale of surplus properties. The nine months endedOctober 1, 2017 also includes the recognition of a deferred gain of $375 related to the sale of a share in an aircraft. During the three and nine months endedOctober 2, 2016, the Company received cash proceeds of $4,006 and $9,469, respectively, primarily from the sale of surplus properties.

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Acquisitions (Tables)

9 Months Ended

Oct. 01, 2017

Business Combinations [Abstract]

Schedule of Business Acquisitions, by Acquisition [Table Text Block]

The table below presents the allocation of the total purchase price to the fair value of assets acquired and liabilities assumed for acquisitions of franchised restaurants:

	Nine Months Ended
	October 1, 2017		October 2, 2016
Restaurants acquired from franchisees	—		2
Total consideration paid, net of cash received	$	—	$	2,209
Identifiable assets acquired and liabilities assumed:
Properties	—		2,218
Deferred taxes and other assets	—		9
Other liabilities	—		(18		)
Total identifiable net assets	—		2,209
Goodwill	$	—	$	—

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Reorganization and Realignment Costs (Tables)

9 Months Ended

Oct. 01, 2017

Restructuring Cost and Reserve

Restructuring and Related Costs

The following is a summary of the initiatives included in “Reorganization and realignment costs:”

	Three Months Ended				Nine Months Ended
	October 1, 2017		October 2, 2016		October 1, 2017		October 2, 2016
System optimization initiative	$	232	$	2,091	$	867	$	6,895
G&A realignment - November 2014 plan	—		38		—		971
G&A realignment - May 2017 plan	2,656		—		19,901		—
Reorganization and realignment costs	$	2,888	$	2,129	$	20,768	$	7,866

System Optimization

Restructuring Cost and Reserve

Restructuring and Related Costs

The following is a summary of the costs recorded as a result of our system optimization initiative:

	Three Months Ended				Nine Months Ended				Total Incurred Since Inception
	October 1, 2017		October 2, 2016		October 1, 2017		October 2, 2016
Severance and related employee costs	$	—	$	28	$	3	$	46	$	18,237
Professional fees	232		1,991		794		5,137		17,404
Other (a)	—		72		70		112		5,813
	232		2,091		867		5,295		41,454
Accelerated depreciation and amortization (b)	—		—		—		1,600		25,398
Share-based compensation (c)	—		—		—		—		5,013
Total system optimization initiative	$	232	$	2,091	$	867	$	6,895	$	71,865

_______________

(a) The nine months ended October 2, 2016 includes a reversal of an accrual of $50 as a result of a change in estimate.

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

(c) 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.

Schedule of Restructuring Reserve by Type of Cost

The tables below present a rollforward of our accrual for our system optimization initiative, which is included in “Accrued expenses and other current liabilities.”

	Balance January 1, 2017		Charges		Payments			Balance October 1, 2017
Severance and related employee costs	$	—	$	3	$	(3	)	$	—
Professional fees	101		794		(885		)	10
Other	—		70		(70		)	—
	$	101	$	867	$	(958	)	$	10

	Balance January 3, 2016		Charges		Payments			Balance October 2, 2016
Severance and related employee costs	$	77	$	46	$	(123	)	$	—
Professional fees	708		5,137		(5,740		)	105
Other	90		112		(202		)	—
	$	875	$	5,295	$	(6,065	)	$	105

G&A Realignment – May 2017 Plan

Restructuring Cost and Reserve

Restructuring and Related Costs

The following is a summary of the activity recorded as a result of the May 2017 plan:

	Three Months Ended		Nine Months Ended
	October 1, 2017		October 1, 2017
Severance and related employee costs	$	1,210	$	14,436
Recruitment and relocation costs	145		145
Third-party and other costs	496		821
	1,851		15,402
Share-based compensation (a)	805		4,499
Total G&A realignment - May 2017 plan	$	2,656	$	19,901

_______________

(a) Primarily represents incremental share-based compensation resulting from the modification of stock options in connection with the termination of employees under our May 2017 plan. The three and nine months ended October 1, 2017 includes incremental share-based compensation of $652 related to the modification of stock options granted during August 2017.

Schedule of Restructuring Reserve by Type of Cost

As of October 1, 2017, the accruals for our May 2017 plan are included in “Accrued expenses and other current liabilities” and “Other liabilities” and totaled $7,766 and $5,429, respectively. The table below presents a rollforward of our accruals for the May 2017 plan.

	Balance January 1, 2017		Charges		Payments			Balance October 1, 2017
Severance and related employee costs	$	—	$	14,436	$	(1,350	)	$	13,086
Recruitment and relocation costs	—		145		(36		)	109
Third-party and other costs	—		821		(821		)	—
	$	—	$	15,402	$	(2,207	)	$	13,195

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Investments (Tables)

9 Months Ended

Oct. 01, 2017

Equity Method Investments and Joint Ventures [Abstract]

Schedule of Equity Method Investments [Table Text Block]

Presented below is activity related to our investment in TimWen and the Brazil JV included in our condensed consolidated financial statements:

	Nine Months Ended
	October 1, 2017			October 2, 2016
Balance at beginning of period	$	54,545		$	55,541
Investment	375			172
Equity in earnings for the period	7,844			8,207
Amortization of purchase price adjustments (a)	(1,731		)	(1,712		)
	6,113			6,495
Distributions received (b)	(8,128		)	(8,451		)
Foreign currency translation adjustment included in “Other comprehensive income, net”	4,304			3,204
Balance at end of period	$	57,209		$	56,961

_______________

(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.

(b) The nine months ended October 1, 2017 includes a distribution receivable from TimWen of $2,604, which is included in “Accounts and notes receivable, net.”

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Fair Value Measurements (Tables)

9 Months Ended

Oct. 01, 2017

Fair Value Disclosures [Abstract]

Fair Value, by Balance Sheet Grouping [Table Text Block]

The following table presents the carrying amounts and estimated fair values of the Company’s financial instruments:

	October 1, 2017				January 1, 2017
	Carrying Amount		Fair Value		Carrying Amount		Fair Value		Fair Value Measurements
Financial assets
Cash equivalents	$	337	$	337	$	5,335	$	5,335	Level 1
Non-current cost method investments (a)	962		325,869		2,436		326,283		Level 3
Financial liabilities
Series 2015-1 Class A-2-I Notes (b)	857,500		863,417		864,063		857,349		Level 2
Series 2015-1 Class A-2-II Notes (b)	882,000		900,169		888,750		880,005		Level 2
Series 2015-1 Class A-2-III Notes (b)	490,000		504,112		493,750		474,543		Level 2
7% debentures, due in 2025 (b)	89,204		106,000		88,277		99,750		Level 2
Guarantees of franchisee loan obligations (c)	224		224		280		280		Level 3

_______________

(a) The fair value of our indirect investment in Arby’s Restaurant Group, Inc. (“Arby’s”) is based on applying a multiple to Arby’s adjusted earnings before income taxes, depreciation and amortization per its current unaudited financial information. The carrying value of our indirect investment in Arby’s was reduced to zero during 2013 in connection with the receipt of a dividend. The fair values of our remaining investments are not significant and are based on our review of information provided by the investment managers or investees which was based on (1) valuations performed by the investment managers or investees, (2) quoted market or broker/dealer prices for similar investments and (3) quoted market or broker/dealer prices adjusted by the investment managers for legal or contractual restrictions, risk of nonperformance or lack of marketability, depending upon the underlying investments.

(b) The fair values were based on quoted market prices in markets that are not considered active markets.

(c) Wendy’s has provided loan guarantees to various lenders on behalf of franchisees entering into debt arrangements for new restaurant development and equipment financing. In addition, during 2012, Wendy’s provided a guarantee to a lender for a franchisee in connection with the refinancing of the franchisee’s debt. We have accrued a liability for the fair value of these guarantees, the calculation of which was based upon a weighted average risk percentage established at inception and adjusted for a history of defaults.

Fair Value, Nonrecurring [Table Text Block]

			Fair Value Measurements
	October 1, 2017		Level 1		Level 2		Level 3
Held and used	$	915	$	—	$	—	$	915
Held for sale	1,290		—		—		1,290
Total	$	2,205	$	—	$	—	$	2,205

			Fair Value Measurements
	January 1, 2017		Level 1		Level 2		Level 3
Held and used	$	5,462	$	—	$	—	$	5,462
Held for sale	1,552		—		—		1,552
Total	$	7,014	$	—	$	—	$	7,014

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Impairment of Long-Lived Assets (Tables)

9 Months Ended

Oct. 01, 2017

Asset Impairment Charges [Abstract]

Impairment of Long-Lived Assets by Type

The following is a summary of impairment losses recorded, which represent the excess of the carrying amount over the fair value of the affected assets and are included in “Impairment of long-lived assets.”

	Three Months Ended				Nine Months Ended
	October 1, 2017		October 2, 2016		October 1, 2017		October 2, 2016
Restaurants leased or subleased to franchisees	$	95	$	163	$	95	$	12,654
Surplus properties	113		119		658		223
Company-operated restaurants	833		79		1,051		114
	$	1,041	$	361	$	1,804	$	12,991

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Net Income Per Share (Tables)

9 Months Ended

Oct. 01, 2017

Earnings Per Share [Abstract]

Weighted average number of shares used to calculate basic and diluted net income per share

The weighted average number of shares used to calculate basic and diluted net income per share were as follows:

	Three Months Ended		Nine Months Ended
	October 1, 2017	October 2, 2016	October 1, 2017	October 2, 2016
Common stock:
Weighted average basic shares outstanding	243,354	260,976	245,073	265,702
Dilutive effect of stock options and restricted shares	8,383	3,832	8,103	4,239
Weighted average diluted shares outstanding	251,737	264,808	253,176	269,941

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Stockholders' Equity (Tables)

9 Months Ended

Oct. 01, 2017

Equity [Abstract]

Summary of Stockholders' Equity

The following is a summary of the changes in stockholders’ equity:

	Nine Months Ended
	October 1, 2017			October 2, 2016
Balance at beginning of period	$	527,736		$	752,914
Comprehensive income	52,978			112,896
Cash dividends	(51,464		)	(47,793		)
Repurchases of common stock	(90,964		)	(162,492		)
Share-based compensation	16,356			14,260
Exercises of stock options	10,194			10,600
Vesting of restricted shares	(4,260		)	(3,853		)
Cumulative effect of change in accounting principle (a)	1,880			—
Tax benefit from share-based compensation	—			1,898
Other	139			145
Balance at end of period	$	462,595		$	678,575

_______________

(a) During the nine months ended October 1, 2017, the Company recognized a tax benefit as a reduction to the Company’s deferred tax liability with an equal offsetting increase to “Accumulated deficit.” The adjustment was recognized as a result of adoption of an amendment to the accounting for employee share-based payment transactions. See Note 15 for further information.

Schedule of Accumulated Other Comprehensive Loss [Table Text Block]

The following table provides a rollforward of the components of accumulated other comprehensive loss, net of tax as applicable:

	Foreign Currency Translation			Cash Flow Hedges (a)			Pension			Total
Balance at January 1, 2017	$	(60,299	)	$	(1,797	)	$	(1,145	)	$	(63,241	)
Current-period other comprehensive income	16,797			1,332			96			18,225
Balance at October 1, 2017	$	(43,502	)	$	(465	)	$	(1,049	)	$	(45,016	)
Balance at January 3, 2016	$	(66,163	)	$	(3,571	)	$	(1,089	)	$	(70,823	)
Current-period other comprehensive income (loss)	10,887			1,332			(56		)	12,163
Balance at October 2, 2016	$	(55,276	)	$	(2,239	)	$	(1,145	)	$	(58,660	)

_______________

(a) Current-period other comprehensive income (loss) includes the reclassification of unrealized losses on cash flow hedges from “Accumulated other comprehensive loss” to our condensed consolidated statements of operations of $444 and $1,332 for both the three and nine months ended October 1, 2017 and October 2, 2016, respectively. The reclassification of unrealized losses on cash flow hedges consists of $723 and $2,170 for both the three and nine months ended October 1, 2017 and October 2, 2016, respectively, recorded to “Interest expense,” net of the related income tax benefit of $279 and $838 for both the three and nine months ended October 1, 2017 and October 2, 2016, respectively, recorded to “Provision for income taxes.” See Note 6 for further information.

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Leases (Tables)

9 Months Ended

Oct. 01, 2017

Leases [Abstract]

Schedule of Rent Expense

Rental expense for operating leases consists of the following components:

	Three Months Ended				Nine Months Ended
	October 1, 2017		October 2, 2016		October 1, 2017		October 2, 2016
Rental expense:
Minimum rentals	$	23,997	$	19,137	$	66,701	$	59,139
Contingent rentals	5,395		5,254		14,405		13,786
Total rental expense (a)	$	29,392	$	24,391	$	81,106	$	72,925

_______________

(a) Amounts exclude sublease income of $35,022 and $92,434 recognized during the three and nine months endedOctober 1, 2017, respectively, and $25,127 and $68,400 recognized during the three and nine months endedOctober 2, 2016, respectively.

Schedule of Rent Income

Rental income for operating leases and subleases consists of the following components:

	Three Months Ended				Nine Months Ended
	October 1, 2017		October 2, 2016		October 1, 2017		October 2, 2016
Rental income:
Minimum rentals	$	44,682	$	31,902	$	124,847	$	87,409
Contingent rentals	5,593		5,427		15,280		15,011
Total rental income	$	50,275	$	37,329	$	140,127	$	102,420

Schedule of Future Minimum Rental Payments for Operating Leases

The following table illustrates the Company’s future minimum rental payments and rental receipts for non-cancelable leases and subleases, including rental receipts for direct financing leases as of October 1, 2017. Rental receipts below are presented separately for owned properties and for leased properties based on the classification of the underlying lease.

	Rental Payments					Rental Receipts
Fiscal Year	Capital Leases			Operating Leases		Capital Leases		Operating Leases		Owned Properties
2017 (a)	$	11,989		$	24,894	$	15,868	$	18,782	$	13,436
2018	43,406			93,431		60,844		75,167		53,896
2019	42,717			93,272		61,368		75,267		54,866
2020	43,660			92,434		62,469		74,983		55,489
2021	45,249			91,892		64,260		74,672		57,102
Thereafter	748,736			1,188,165		1,045,693		973,428		1,008,243
Total minimum payments	$	935,757		$	1,584,088	$	1,310,502	$	1,292,299	$	1,243,032
Less interest	(499,703		)
Present value of minimum capital lease payments (b)	$	436,054

_______________

(a) Represents future minimum rental payments and rental receipts for non-cancelable leases and subleases for the remainder of our 2017 fiscal year.

(b) The present value of minimum capital lease payments of $6,608 and $429,446 are included in “Current portion of long-term debt” and “Long-term debt,” respectively.

Schedule of Property Subject to or Available for Operating Lease

Properties owned by the Company and leased to franchisees and other third parties under operating leases include:

	October 1, 2017			January 1, 2017
Land	$	271,840		$	271,160
Buildings and improvements	312,796			312,067
Restaurant equipment	1,491			1,507
	586,127			584,734
Accumulated depreciation and amortization	(122,970		)	(110,166		)
	$	463,157		$	474,568

Schedule of Capital Leased Assets

Our net investment in direct financing leases is as follows:

	October 1, 2017			January 1, 2017
Future minimum rental receipts	$	630,352		$	401,452
Unearned interest income	(416,221		)	(277,747		)
Net investment in direct financing leases	214,131			123,705
Net current investment in direct financing leases (a)	(482		)	(101		)
Net non-current investment in direct financing leases (b)	$	213,649		$	123,604

_______________

(a) Included in “Accounts and notes receivable, net.”

(b) Included in “Net investment in direct financing leases.”

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System Optimization (Losses) Gains, Net Davco and NPC Transactions (Details) $ in Thousands		3 Months Ended		9 Months Ended
	May 31, 2017 Restaurant	Oct. 01, 2017 USD ($)	Oct. 02, 2016 USD ($)	Oct. 01, 2017 USD ($)	Oct. 02, 2016 USD ($)	Jan. 01, 2017 USD ($)
Property, Plant and Equipment
Goodwill		$ 743,508		$ 743,508		$ 741,410
Proceeds from sales of restaurants				80,058	$ 173,849
System optimization (losses) gains, net		(106)	$ 37,756	(39,749)	48,106
NPC Disposition
Property, Plant and Equipment
Number of restaurants sold to franchisees | Restaurant	140
Proceeds from sales of restaurants				70,688
Net assets sold				(70,688)
Goodwill				(65,476)
Net favorable leases				24,034
Other				1,692
Favorable lease assets				30,068
Unfavorable lease liabilities				6,034
Number of sold restaurants to be remodeled by the end of 2021 | Restaurant	90
Number of new restaurants to be built by the end of 2022 | Restaurant	15
Post-closing adjustments on sales of restaurants		12
DavCo and NPC Transactions
Property, Plant and Equipment
System optimization (losses) gains, net		15	$ 0	(43,134)	$ 0
DavCo Acquisition
Property, Plant and Equipment
Restaurants acquired from franchisees | Restaurant	140
Total consideration paid				86,788
Net assets held for sale		70,688		70,688
Capital lease assets		49,360		49,360
Deferred taxes		27,639		27,639
Capital lease obligations		(97,046)		(97,046)
Net unfavorable leases		(22,330)		(22,330)
Other liabilities		(6,999)		(6,999)
Total identifiable net assets		21,312		21,312
Goodwill		65,476		65,476
Goodwill		(27)
Favorable lease assets				1,229
Unfavorable lease liabilities				23,559
Supplemental deferred purchase price				6,344
Tax deductible goodwill		$ 21,870		$ 21,870
Number of restaurants closed before acquisition | Restaurant	7

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System Optimization (Losses) Gains, Net Summary of Disposition Activity (Details) $ in Thousands	3 Months Ended		9 Months Ended
	Oct. 01, 2017 USD ($) Restaurant	Oct. 02, 2016 USD ($) Restaurant	Oct. 01, 2017 USD ($) Restaurant	Oct. 02, 2016 USD ($) Restaurant	Feb. 28, 2015
Property, Plant and Equipment
Future company-owned restaurant ownership percentage					5.00%
Gain on Sale of Restaurants
Proceeds from sales of restaurants			$ 80,058	$ 173,849
System optimization (losses) gains, net	$ (106)	$ 37,756	(39,749)	$ 48,106
Sale of Company-operated restaurants to franchisees and sale of other assets
Gain on Sale of Restaurants
System optimization (losses) gains, net			$ 3,385
Sale of franchise-operated restaurant to franchisee
Property, Plant and Equipment
Number of restaurants sold to franchisees | Restaurant			270
Sale of company-operated restaurants to franchisees
Property, Plant and Equipment
Number of restaurants sold to franchisees | Restaurant	0	156	0	211
Gain on Sale of Restaurants
Proceeds from sales of restaurants	$ 0	$ 124,765	$ 0	$ 164,380
Net assets sold	0	(58,227)	0	(75,282)
Goodwill related to sales of restaurants	0	(24,254)	0	(30,630)
Net unfavorable leases	0	(6,225)	0	(11,131)
Other	0	(726)	0	(1,521)
Loss on disposition of assets before post closing purchase price adjustments	0	35,333	0	45,816
Post-closing adjustments on sales of restaurants	418	(120)	1,345	(1,710)
System optimization (losses) gains, net	418	35,213	1,345	44,106
Favorable lease assets		2,114		2,297
Unfavorable lease liabilities		8,339		13,428
Cash payments from post closing adjustments, net of proceeds	333		33
Recognition of deferred gain on sale of property			312
Sale of Other Assets
Gain on Sale of Restaurants
Proceeds from sales of restaurants	2,411	4,006	9,403	9,469
System optimization (losses) gains, net	(539)	2,543	2,040	4,000
Recognition of deferred gain on sale of property			375
DavCo and NPC Transactions
Gain on Sale of Restaurants
System optimization (losses) gains, net	$ 15	$ 0	$ (43,134)	$ 0

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System Optimization (Losses) Gains, Net Assets Held for Sale (Details) - USD ($) $ in Thousands	Oct. 01, 2017	Jan. 01, 2017
Property, Plant and Equipment [Abstract]
Assets held for sale	$ 2,509	$ 4,800

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Acquisitions (Details) $ in Thousands	9 Months Ended
	Oct. 01, 2017 USD ($) Restaurant	Oct. 02, 2016 USD ($) Restaurant	Jan. 01, 2017 USD ($)
Identifiable assets acquired and liabilities assumed:
Goodwill	$ 743,508		$ 741,410
Acquisitions
Business Acquisition
Restaurants acquired from franchisees | Restaurant	0	2
Total consideration paid, net of cash received	$ 0	$ 2,209
Identifiable assets acquired and liabilities assumed:
Properties	0	2,218
Deferred taxes and other assets	0	9
Other liabilities	0	(18)
Total identifiable net assets	0	2,209
Goodwill	$ 0	$ 0

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Reorganization and Realignment Costs Summary (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Oct. 01, 2017	Oct. 02, 2016	Oct. 01, 2017	Oct. 02, 2016
Restructuring Cost and Reserve
Reorganization and realignment costs	$ 2,888	$ 2,129	$ 20,768	$ 7,866
System Optimization
Restructuring Cost and Reserve
Reorganization and realignment costs	232	2,091	867	6,895
G&A Realignment – November 2014 Plan
Restructuring Cost and Reserve
Reorganization and realignment costs	0	38	0	971
G&A Realignment – May 2017 Plan
Restructuring Cost and Reserve
Reorganization and realignment costs	$ 2,656	$ 0	$ 19,901	$ 0

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Reorganization and Realignment Costs System Optimization Costs (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Oct. 01, 2017	Oct. 02, 2016	Oct. 01, 2017	Oct. 02, 2016
Restructuring Cost and Reserve
Restructuring Charges	$ 2,888	$ 2,129	$ 20,768	$ 7,866
System Optimization
Restructuring Cost and Reserve
Restructuring and Related Cost, Incurred Cost	232	2,091	867	5,295
Restructuring Charges	232	2,091	867	6,895
Restructuring and Related Cost, Cost Incurred to Date	41,454		41,454
Restructuring Charges, Incurred to Date	71,865		71,865
System Optimization | Severance and related employee costs
Restructuring Cost and Reserve
Restructuring and Related Cost, Incurred Cost	0	28	3	46
Restructuring and Related Cost, Cost Incurred to Date	18,237		18,237
System Optimization | Professional fees
Restructuring Cost and Reserve
Restructuring and Related Cost, Incurred Cost	232	1,991	794	5,137
Restructuring and Related Cost, Cost Incurred to Date	17,404		17,404
System Optimization | Other
Restructuring Cost and Reserve
Restructuring and Related Cost, Incurred Cost	0	72	70	112
Restructuring and Related Cost, Cost Incurred to Date	5,813		5,813
Restructuring Reserve, Accrual Adjustment				50
System Optimization | Accelerated depreciation and amortization
Restructuring Cost and Reserve
Restructuring Charges	0	0	0	1,600
Restructuring Charges, Incurred to Date	25,398		25,398
System Optimization | Share based compensation
Restructuring Cost and Reserve
Restructuring Charges	0	$ 0	0	$ 0
Restructuring Charges, Incurred to Date	$ 5,013		$ 5,013

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Reorganization and Realignment Costs System Optimization Accrual Rollforward (Details) - System Optimization - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Oct. 01, 2017	Oct. 02, 2016	Oct. 01, 2017	Oct. 02, 2016
Restructuring Reserve [Roll Forward]
Beginning balance			$ 101	$ 875
Charges	$ 232	$ 2,091	867	5,295
Payments for Restructuring			(958)	(6,065)
Ending balance	10	105	10	105
Severance and related employee costs
Restructuring Reserve [Roll Forward]
Beginning balance			0	77
Charges	0	28	3	46
Payments for Restructuring			(3)	(123)
Ending balance	0	0	0	0
Professional fees
Restructuring Reserve [Roll Forward]
Beginning balance			101	708
Charges	232	1,991	794	5,137
Payments for Restructuring			(885)	(5,740)
Ending balance	10	105	10	105
Other
Restructuring Reserve [Roll Forward]
Beginning balance			0	90
Charges	0	72	70	112
Payments for Restructuring			(70)	(202)
Ending balance	$ 0	$ 0	$ 0	$ 0

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Reorganization and Realignment Costs G&A Realignment - November 2014 Plan (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Oct. 01, 2017	Oct. 02, 2016	Oct. 01, 2017	Oct. 02, 2016
Restructuring Cost and Reserve
Restructuring Charges	$ 2,888	$ 2,129	$ 20,768	$ 7,866
G&A Realignment – November 2014 Plan
Restructuring Cost and Reserve
Restructuring Charges	0	$ 38	0	$ 971
Restructuring Charges, Incurred to Date	$ 23,960		$ 23,960

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Reorganization and Realignment Costs G&A Realignment - May 2017 Plan (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Oct. 01, 2017	Oct. 02, 2016	Oct. 01, 2017	Oct. 02, 2016
Restructuring Cost and Reserve
Restructuring Charges	$ 2,888	$ 2,129	$ 20,768	$ 7,866
G&A Realignment – May 2017 Plan
Restructuring Cost and Reserve
Restructuring and Related Cost, Incurred Cost	1,851		15,402
Restructuring Charges	$ 2,656	$ 0	$ 19,901	$ 0
Expected costs incurred by the end of 2017	66.67%		66.67%
G&A Realignment – May 2017 Plan | Severance and related employee costs
Restructuring Cost and Reserve
Restructuring and Related Cost, Expected Cost Remaining	$ 3,000		$ 3,000
Restructuring and Related Cost, Incurred Cost	1,210		14,436
G&A Realignment – May 2017 Plan | Recruitment and relocation costs
Restructuring Cost and Reserve
Restructuring and Related Cost, Expected Cost Remaining	4,000		4,000
Restructuring and Related Cost, Incurred Cost	145		145
G&A Realignment – May 2017 Plan | Third-party and other costs
Restructuring Cost and Reserve
Restructuring and Related Cost, Expected Cost Remaining	1,000		1,000
Restructuring and Related Cost, Incurred Cost	496		821
G&A Realignment – May 2017 Plan | Share based compensation
Restructuring Cost and Reserve
Restructuring and Related Cost, Expected Cost Remaining	3,000		3,000
Restructuring Charges	805		4,499
G&A Realignment – May 2017 Plan | Share-based compensation expense newly granted
Restructuring Cost and Reserve
Restructuring Charges	652		652
G&A Realignment – May 2017 Plan | Minimum
Restructuring Cost and Reserve
Restructuring and Related Cost, Expected Cost	28,000		28,000
Restructuring and Related Cost, Expected Cost Remaining	8,000		8,000
G&A Realignment – May 2017 Plan | Maximum
Restructuring Cost and Reserve
Restructuring and Related Cost, Expected Cost	33,000		33,000
Restructuring and Related Cost, Expected Cost Remaining	$ 13,000		$ 13,000

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Reorganization and Realignment Costs G&A Realignment - May 2017 Plan Accrual Rollforward (Details) - G&A Realignment – May 2017 Plan - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
	Oct. 01, 2017	Oct. 01, 2017
Restructuring Cost and Reserve
Beginning balance		$ 0
Charges	$ 1,851	15,402
Payments for Restructuring		(2,207)
Ending balance	13,195	13,195
Severance and related employee costs
Restructuring Cost and Reserve
Beginning balance		0
Charges	1,210	14,436
Payments for Restructuring		(1,350)
Ending balance	13,086	13,086
Recruitment and relocation costs
Restructuring Cost and Reserve
Beginning balance		0
Charges	145	145
Payments for Restructuring		(36)
Ending balance	109	109
Third-party and other costs
Restructuring Cost and Reserve
Beginning balance		0
Charges	496	821
Payments for Restructuring		(821)
Ending balance	0	0
Accrued expenses and other current liabilities
Restructuring Cost and Reserve
Ending balance	7,766	7,766
Other Liabilities
Restructuring Cost and Reserve
Ending balance	$ 5,429	$ 5,429

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Investments (Details) $ in Thousands	3 Months Ended		9 Months Ended
	Oct. 01, 2017 USD ($) years	Oct. 02, 2016 USD ($) years	Oct. 01, 2017 USD ($) years	Oct. 02, 2016 USD ($) years	Jun. 28, 2015 USD ($)
Schedule of Equity Method Investments
Equity in earnings for the period, net of amortization of purchase price adjustments			$ 6,113	$ 6,495
Distributions received			(5,524)	(8,451)
Foreign currency translation adjustment included in “Other comprehensive income, net”	$ 8,787	$ (3,369)	$ 16,797	$ 10,887
TimWen
Schedule of Equity Method Investments
Equity Method Investment, Ownership Percentage	50.00%		50.00%
Equity Method Investment, Purchase Price Adjustment, Amortization Period | years	21	21	21	21
Distribution Receivable	$ 2,604		$ 2,604
Brazil JV
Schedule of Equity Method Investments
Equity Method Investment, Ownership Percentage	20.00%		20.00%
Loan agreement, Maximum loan amount	$ 4,800		$ 4,800		$ 8,000
Amount drawn on loan agreement	1,500
Note receivable, interest rate			6.50%
TimWen and Brazil JV
Schedule of Equity Method Investments
Balance at beginning of period			$ 54,545	$ 55,541
Investment			375	172
Equity in earnings for the period			7,844	8,207
Amortization of Purchase Price Adjustment			(1,731)	(1,712)
Equity in earnings for the period, net of amortization of purchase price adjustments			6,113	6,495
Distributions received			(8,128)	(8,451)
Foreign currency translation adjustment included in “Other comprehensive income, net”			4,304	3,204
Balance at end of period	$ 57,209	$ 56,961	$ 57,209	$ 56,961

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Fair Value Measurements Financial Instruments (Details) - USD ($) $ in Thousands	Oct. 01, 2017	Jan. 01, 2017	Dec. 29, 2013
Reported Value Measurement [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash equivalents	$ 337	$ 5,335
Non-current cost method investments	962	2,436
Guarantees of franchisee loan obligations	224	280
Reported Value Measurement [Member] | Series 2015-1 Class A-2-I Notes [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Debt instrument	857,500	864,063
Reported Value Measurement [Member] | Series 2015-1 Class A-2-II Notes [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Debt instrument	882,000	888,750
Reported Value Measurement [Member] | Series 2015-1 Class A-2-III Notes [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Debt instrument	490,000	493,750
Reported Value Measurement [Member] | 7% Debentures [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Debt instrument	89,204	88,277
Reported Value Measurement [Member] | Arby's Restaurant Group, Inc [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Non-current cost method investments			$ 0
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 1 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash equivalents	337	5,335
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 3 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Non-current cost method investments	325,869	326,283
Guarantees of franchisee loan obligations	224	280
Estimate of Fair Value Measurement [Member] | Series 2015-1 Class A-2-I Notes [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Debt instrument	863,417	857,349
Estimate of Fair Value Measurement [Member] | Series 2015-1 Class A-2-II Notes [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Debt instrument	900,169	880,005
Estimate of Fair Value Measurement [Member] | Series 2015-1 Class A-2-III Notes [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Debt instrument	504,112	474,543
Estimate of Fair Value Measurement [Member] | 7% Debentures [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Debt instrument	$ 106,000	$ 99,750

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Fair Value Measurements Derivative Instruments (Details) $ in Thousands	1 Months Ended	3 Months Ended		9 Months Ended
	May 31, 2015 USD ($)	Oct. 01, 2017 USD ($)	Oct. 02, 2016 USD ($)	Oct. 01, 2017 USD ($)	Oct. 02, 2016 USD ($)	Sep. 27, 2015 USD ($) cash_flow_hedge
Derivatives, Fair Value [Line Items]
Number of interest rate derivatives held | cash_flow_hedge						7
Unrealized Gain (Loss) on Cash Flow Hedging Instruments	$ (7,275)
Interest Rate Swap [Member]
Derivatives, Fair Value [Line Items]
Payments for termination of cash flow hedges	$ 7,275
Cash Flow Hedging [Member] | Term A Loan, 2018 [Member] | Interest Rate Swap [Member]
Derivatives, Fair Value [Line Items]
Derivative Liability, Notional Amount						$ 350,000
Cash Flow Hedging [Member] | Term B Loan, 2019 [Member] | Interest Rate Swap [Member]
Derivatives, Fair Value [Line Items]
Derivative Liability, Notional Amount						$ 100,000
Interest Expense [Member]
Derivatives, Fair Value [Line Items]
Other Comprehensive Income (Loss), Reclassification Adjustment from AOCI on Derivatives, Before Tax		$ (723)	$ (723)	$ (2,170)	$ (2,170)

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Fair Value Measurements Non-Recurring Fair Value Measurements (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Oct. 01, 2017	Oct. 02, 2016	Oct. 01, 2017	Oct. 02, 2016	Jan. 01, 2017
Fair Value, Assets and Liabilities Measured on Nonrecurring Basis [Line Items]
Impairment of Long-Lived Assets Held-for-use	$ 928	$ 242	$ 1,146	$ 12,768
Impairment of Long-Lived Assets to be Disposed of	113	$ 119	658	$ 223
Fair Value, Measurements, Nonrecurring [Member]
Fair Value, Assets and Liabilities Measured on Nonrecurring Basis [Line Items]
Assets Held and Used, Long Lived, Fair Value Disclosure	915		915		$ 5,462
Assets Held-for-sale, Long Lived, Fair Value Disclosure	1,290		1,290		1,552
Total	2,205		2,205		7,014
Fair Value, Measurements, Nonrecurring [Member] | Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Nonrecurring Basis [Line Items]
Assets Held and Used, Long Lived, Fair Value Disclosure	0		0		0
Assets Held-for-sale, Long Lived, Fair Value Disclosure	0		0		0
Total	0		0		0
Fair Value, Measurements, Nonrecurring [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Nonrecurring Basis [Line Items]
Assets Held and Used, Long Lived, Fair Value Disclosure	0		0		0
Assets Held-for-sale, Long Lived, Fair Value Disclosure	0		0		0
Total	0		0		0
Fair Value, Measurements, Nonrecurring [Member] | Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Nonrecurring Basis [Line Items]
Assets Held and Used, Long Lived, Fair Value Disclosure	915		915		5,462
Assets Held-for-sale, Long Lived, Fair Value Disclosure	1,290		1,290		1,552
Total	$ 2,205		$ 2,205		$ 7,014

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Impairment of Long-Lived Assets (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Oct. 01, 2017	Oct. 02, 2016	Oct. 01, 2017	Oct. 02, 2016
Impaired Long-Lived Assets Held and Used
Impairment of long-lived assets	$ 1,041	$ 361	$ 1,804	$ 12,991
Restaurants leased or subleased to franchisees
Impaired Long-Lived Assets Held and Used
Impairment of long-lived assets	95	163	95	12,654
Company-operated restaurants
Impaired Long-Lived Assets Held and Used
Impairment of long-lived assets	833	79	1,051	114
Surplus properties
Impaired Long-Lived Assets Held and Used
Impairment of long-lived assets	$ 113	$ 119	$ 658	$ 223

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Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Oct. 01, 2017	Oct. 02, 2016	Oct. 01, 2017	Oct. 02, 2016	Jan. 01, 2017
Provision for income taxes	$ (17,298)	$ (28,965)	$ (28,639)	$ (50,385)
Effective Income Tax Rate	54.80%	37.20%	45.20%	33.30%
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent	35.00%	35.00%	35.00%	35.00%
Quantifying Misstatement in Current Year Financial Statements, Amount			$ 2,248	$ 7,113
Effective Income Tax Rate Reconciliation, Share based Compensation, Excess Tax Benefit, Amount			5,205
Decrease in Unrecognized Tax Benefits is Reasonably Possible	$ 7,030		7,030
Accounts and notes receivable, net
Income Taxes Receivable	16,165		16,165		$ 18,111
Other Assets
Income Taxes Receivable	960		$ 960		$ 239
System Optimization
Provision for income taxes	$ (5,019)	$ (2,332)

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Net Income Per Share (Details) - shares shares in Thousands	3 Months Ended		9 Months Ended
	Oct. 01, 2017	Oct. 02, 2016	Oct. 01, 2017	Oct. 02, 2016
Common Stock:
Weighted average basic shares outstanding	243,354	260,976	245,073	265,702
Dilutive effect of stock options and restricted shares	8,383	3,832	8,103	4,239
Weighted average diluted shares outstanding	251,737	264,808	253,176	269,941
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	1,617	2,233	618	2,072

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Stockholders' Equity Rollforward (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Oct. 01, 2017	Oct. 02, 2016	Oct. 01, 2017	Oct. 02, 2016	Jan. 02, 2017
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Balance at beginning of period			$ 527,736	$ 752,914
Comprehensive income	$ 23,488	$ 45,965	52,978	112,896
Cash dividends			(51,464)	(47,793)
Repurchases of common stock			(90,964)	(162,492)
Share-based compensation			16,356	14,260
Exercises of stock options			10,194	10,600
Vesting of restricted shares			(4,260)	(3,853)
Cumulative Effect of New Accounting Principle in Period of Adoption		0		0	$ 1,880
Tax benefit from share-based compensation			0	1,898
Other			139	145
Balance at end of period	$ 462,595	$ 678,575	$ 462,595	$ 678,575

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Stockholders' Equity Repurchases of Common Stock (Details) - USD ($) shares in Thousands, $ in Thousands	1 Months Ended	9 Months Ended
	Nov. 02, 2017	Oct. 01, 2017	Oct. 02, 2016	Feb. 22, 2017	Jun. 01, 2015
$150,000 Share Repurchase Program [Member]
Equity, Class of Treasury Stock [Line Items]
Stock Repurchase Program, Authorized Amount				$ 150,000
Treasury Stock, Shares, Acquired		6,131
Treasury Stock, Value, Acquired, Cost Method, excluding Commissions		$ 90,876
Stock Repurchase Program, Repurchase Accrual		899
Stock Repurchase Program, Cost Incurred		88
Stock Repurchase Program, Remaining Authorized Repurchase Amount		$ 59,124
$1.4 Billion Repurchase Program [Member]
Equity, Class of Treasury Stock [Line Items]
Stock Repurchase Program, Authorized Amount					$ 1,400,000
Treasury Stock, Shares, Acquired			16,034
Treasury Stock, Value, Acquired, Cost Method, excluding Commissions			$ 162,252
Stock Repurchase Program, Repurchase Accrual			2,998
Stock Repurchase Program, Cost Incurred			$ 240
Subsequent Event [Member]
Equity, Class of Treasury Stock [Line Items]
Treasury Stock, Shares, Acquired	428
Treasury Stock, Value, Acquired, Cost Method, excluding Commissions	$ 6,628
Stock Repurchase Program, Cost Incurred	$ 6

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Stockholders' Equity Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Oct. 01, 2017	Oct. 02, 2016	Oct. 01, 2017	Oct. 02, 2016
Accumulated Other Comprehensive Loss, Net of Tax [Roll Forward]
Balance, beginning of year			$ (63,241)	$ (70,823)
Current-period other comprehensive income (loss)	$ 9,231	$ (2,925)	18,225	12,163
Balance, end of the period	(45,016)	(58,660)	(45,016)	(58,660)
Other Comprehensive Income (Loss), Reclassification Adjustment from AOCI on Derivatives, Net of Tax	444	444	1,332	1,332
Interest Expense [Member]
Accumulated Other Comprehensive Loss, Net of Tax [Roll Forward]
Other Comprehensive Income (Loss), Reclassification Adjustment from AOCI on Derivatives, Before Tax	723	723	2,170	2,170
Provision for income taxes [Member]
Accumulated Other Comprehensive Loss, Net of Tax [Roll Forward]
Other Comprehensive Income (Loss), Reclassification Adjustment from AOCI on Derivatives, Tax	(279)	(279)	(838)	(838)
Foreign Currency Translation
Accumulated Other Comprehensive Loss, Net of Tax [Roll Forward]
Balance, beginning of year			(60,299)	(66,163)
Current-period other comprehensive income (loss)			16,797	10,887
Balance, end of the period	(43,502)	(55,276)	(43,502)	(55,276)
Cash Flow Hedges
Accumulated Other Comprehensive Loss, Net of Tax [Roll Forward]
Balance, beginning of year			(1,797)	(3,571)
Current-period other comprehensive income (loss)			1,332	1,332
Balance, end of the period	(465)	(2,239)	(465)	(2,239)
Pension
Accumulated Other Comprehensive Loss, Net of Tax [Roll Forward]
Balance, beginning of year			(1,145)	(1,089)
Current-period other comprehensive income (loss)			96	(56)
Balance, end of the period	$ (1,049)	$ (1,145)	$ (1,049)	$ (1,145)

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Leases Lease Disclosure (Details)	Oct. 01, 2017 Property Restaurant
Property Subject to or Available for Operating Lease
Number of Restaurants | Restaurant	6,586
Entity Operated Units
Property Subject to or Available for Operating Lease
Number of Restaurants | Restaurant	333
Lessee Disclosure | Land and Building
Property Subject to or Available for Operating Lease
Property Subject to or Available for Operating Lease, Number of Units	146
Lessee Disclosure | Land and Building | Property Subject to Operating Lease
Property Subject to or Available for Operating Lease
Property Subject to or Available for Operating Lease, Number of Units	50
Lessee Disclosure | Land | Property Subject to Operating Lease
Property Subject to or Available for Operating Lease
Property Subject to or Available for Operating Lease, Number of Units	137
Lessor Disclosure | Property Subject to Operating Lease
Property Subject to or Available for Operating Lease
Property Subject to or Available for Operating Lease, Number of Units	1,270
Lessor Disclosure | Assets Leased to Others | Property Subject to Operating Lease
Property Subject to or Available for Operating Lease
Property Subject to or Available for Operating Lease, Number of Units	521

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Leases Operating Lease Rent Expense and Rent Income (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Oct. 01, 2017	Oct. 02, 2016	Oct. 01, 2017	Oct. 02, 2016
Operating Leased Assets
Rental expense, Minimum rentals	$ 23,997	$ 19,137	$ 66,701	$ 59,139
Rental expense, Contingent rentals	5,395	5,254	14,405	13,786
Total rental expense	29,392	24,391	81,106	72,925
Sublease income	(35,022)	(25,127)	(92,434)	(68,400)
Rental income, Minimum rentals	44,682	31,902	124,847	87,409
Rental income, Contingent rentals	5,593	5,427	15,280	15,011
Total rental income	$ 50,275	$ 37,329	$ 140,127	$ 102,420

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Leases Future Minimum Rent (Details) $ in Thousands	Oct. 01, 2017 USD ($)
Operating Leased Assets
Rental payments, Capital leases, 2017	$ 11,989
Rental payments, Capital leases, 2018	43,406
Rental payments, Capital leases, 2019	42,717
Rental payments, Capital leases, 2020	43,660
Rental payments, Capital leases, 2021	45,249
Rental payments, Capital leases, Thereafter	748,736
Rental payments, Capital leases, Total minimum payments	935,757
Less interest	(499,703)
Present value of minimum capital lease payments	436,054
Rental payments, Operating leases, 2017	24,894
Rental payments, Operating leases, 2018	93,431
Rental payments, Operating leases, 2019	93,272
Rental payments, Operating leases, 2020	92,434
Rental payments, Operating leases, 2021	91,892
Rental payments, Operating leases, Thereafter	1,188,165
Rental payments, Operating leases, Total minimum payments	1,584,088
Rental receipts, Capital leases, 2017	15,868
Rental receipts, Capital leases, 2018	60,844
Rental receipts, Capital leases, 2019	61,368
Rental receipts, Capital leases, 2020	62,469
Rental receipts, Capital leases, 2021	64,260
Rental receipts, Capital leases, Thereafter	1,045,693
Rental receipts, Capital leases, Total minimum payments	1,310,502
Rental receipts, Operating leases, 2017	18,782
Rental receipts, Operating leases, 2018	75,167
Rental receipts, Operating leases, 2019	75,267
Rental receipts, Operating leases, 2020	74,983
Rental receipts, Operating leases, 2021	74,672
Rental receipts, Operating leases, Thereafter	973,428
Rental receipts, Operating leases, Total minimum payments	1,292,299
Rental receipts, Owned properties, 2017	13,436
Rental receipts, Owned properties, 2018	53,896
Rental receipts, Owned properties, 2019	54,866
Rental receipts, Owned properties, 2020	55,489
Rental receipts, Owned properties, 2021	57,102
Rental receipts, Owned properties, Thereafter	1,008,243
Rental receipts, Owned properties, Total minimum payments	1,243,032
Current portion of long-term debt
Operating Leased Assets
Capital Lease Obligations, Current	6,608
Long-term Debt
Operating Leased Assets
Capital Lease Obligations, Noncurrent	$ 429,446

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Leases Properties Leased to Third Parties (Details) - Property Subject to Operating Lease - USD ($) $ in Thousands	Oct. 01, 2017	Jan. 01, 2017
Property Subject to or Available for Operating Lease
Property Leased to Others	$ 586,127	$ 584,734
Property Leased to Others, Accumulated Depreciation	122,970	110,166
Property Leased to Others, Net	463,157	474,568
Land
Property Subject to or Available for Operating Lease
Property Leased to Others	271,840	271,160
Buildings and improvements
Property Subject to or Available for Operating Lease
Property Leased to Others	312,796	312,067
Restaurant equipment
Property Subject to or Available for Operating Lease
Property Leased to Others	$ 1,491	$ 1,507

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Leases Net Investment in Direct Financing Leases (Details) - USD ($) $ in Thousands	Oct. 01, 2017	Jan. 01, 2017
Capital Leased Assets
Future minimum rental receipts	$ 630,352	$ 401,452
Unearned income	(416,221)	(277,747)
Net investment in direct financing leases	214,131	123,705
Net current investment in direct financing leases	(482)	(101)
Net non-current investment in direct financing leases	$ 213,649	$ 123,604

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Transactions with Related Parties (Details) - TimWen - USD ($) $ in Thousands	9 Months Ended
	Oct. 01, 2017	Oct. 02, 2016
Related Party Transaction [Line Items]
Related Party Transaction, Expenses from Transactions with Related Party	$ 9,362	$ 8,926
General and Administrative Expense [Member]
Related Party Transaction [Line Items]
Related Party Transaction, Other Revenues from Transactions with Related Party	$ 158	$ 156

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Guarantees and Other Commitments and Contingencies Franchisee Image Activation Incentive Programs (Details) - Maximum	9 Months Ended
	Oct. 01, 2017
Guarantor Obligations [Line Items]
Years of reduction in royalty payment attributable to new builds	2 years
Years of reduction in royalty payment attributable to incentive program	1 year

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Guarantees and Other Commitments and Contingencies Lease Guarantees (Details) $ in Thousands	Oct. 01, 2017 USD ($)
Property Lease Guarantee [Member]
Guarantor Obligations [Line Items]
Guarantor Obligations, Maximum Exposure, Undiscounted	$ 56,299
Indirect Guarantee of Indebtedness [Member]
Guarantor Obligations [Line Items]
Guarantor Obligations, Maximum Exposure, Undiscounted	$ 637

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Guarantees and Other Commitments and Contingencies Letters of Credit (Details) $ in Thousands	Oct. 01, 2017 USD ($)
Guarantor Obligations [Line Items]
Letters of Credit Outstanding, Amount	$ 32,575
Collateral Supporting Letters of Credit [Member]
Guarantor Obligations [Line Items]
Letters of Credit Outstanding, Amount	$ 3,205

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Legal and Environmental Matters (Details) $ in Thousands	Oct. 01, 2017 USD ($)
Loss Contingency [Abstract]
Accruals for legal and environmental matters	$ 1,639

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New Accounting Standards New Accounting Standards (Details) - USD ($) $ in Thousands	9 Months Ended
	Oct. 01, 2017	Oct. 02, 2016	Jan. 02, 2017
New Accounting Standards [Abstract]
Operating Leases, Future Minimum Payments Due	$ 1,584,088
Excess Tax Benefit from Share-based Compensation, Financing Activities		$ 2,376
Payments related to tax withholding for share-based compensation	$ 4,484	4,142
Cumulative Effect of New Accounting Principle in Period of Adoption		$ 0	$ 1,880