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		Total Incurred Since Inception
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 ended October 2, 2016, respectively, and $23,960 in aggregate since inception. The Company did not incur any expenses during the three and nine months ended October 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