Leases (Notes)

6 Months Ended

Jun. 28, 2020

Leases [Abstract]

Leases, Company as Lessee

Leases

Nature of Leases

The Company operates restaurants that are located on sites owned by us and sites leased by us from third parties. In addition, the Company owns sites and leases sites from third parties, which it leases and/or subleases to franchisees. At June 28, 2020, Wendy’s and its franchisees operated 6,806 Wendy’s restaurants. Of the 358 Company-operated Wendy’s restaurants, Wendy’s owned the land and building for 142 restaurants, owned the building and held long-term land leases for 146 restaurants and held leases covering the land and building for 70 restaurants. Wendy’s also owned 510 and leased 1,243 properties that were either leased or subleased principally to franchisees. The Company also leases restaurant, office and transportation equipment.

Company as Lessee

The components of lease cost are as follows:

	Three Months Ended				Six Months Ended
	June 28, 2020		June 30, 2019		June 28, 2020		June 30, 2019
Finance lease cost:
Amortization of finance lease assets	$	3,338	$	1,631	$	6,524	$	4,748
Interest on finance lease liabilities	10,160		9,939		20,218		16,692
	13,498		11,570		26,742		21,440
Operating lease cost	23,969		19,086		45,134		43,729
Variable lease cost (a)	13,848		15,371		28,218		29,475
Short-term lease cost	991		1,153		2,321		2,279
Total operating lease cost (b)	38,808		35,610		75,673		75,483
Total lease cost	$	52,306	$	47,180	$	102,415	$	96,923

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(a)Includes expenses for executory costs of $9,457 and $9,779 for the three months ended June 28, 2020 and June 30, 2019, respectively, and $19,200 and $19,303 for the six months ended June 28, 2020 and June 30, 2019, respectively, for which the Company is reimbursed by sublessees.

(b)Includes $31,263 and $28,022 for the three months ended June 28, 2020 and June 30, 2019, respectively, and $60,554 and $60,473 for the six months ended June 28, 2020 and June 30, 2019, respectively, recorded to “Franchise rental expense” for leased properties that are subsequently leased to franchisees. Also includes $6,831 and $7,007 for the three months ended June 28, 2020 and June 30, 2019, respectively, and $13,664 and $13,600 for the six months ended June 28, 2020 and June 30, 2019, respectively, recorded to “Cost of sales” for leases for Company-operated restaurants.

Leases, Company as Lessor

Company as Lessor

The components of lease income are as follows:

	Three Months Ended				Six Months Ended
	June 28, 2020		June 30, 2019		June 28, 2020		June 30, 2019
Sales-type and direct-financing leases:
Selling profit	$	569	$	37	$	1,197	$	1,971
Interest income	7,260		7,072		14,508		11,805
Operating lease income	$	43,052	$	43,959	$	87,004	$	89,164
Variable lease income	13,805		14,602		27,709		27,849
Franchise rental income (a)	$	56,857	$	58,561	$	114,713	$	117,013

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(a)Includes sublease income of $41,489 and $42,921 for the three months ended June 28, 2020 and June 30, 2019, respectively, and $83,531 and $85,942 for the six months ended June 28, 2020 and June 30, 2019, respectively. Sublease income includes lessees’ variable payments to the Company for executory costs of $9,450 and $9,779 for the three months ended June 28, 2020 and June 30, 2019, respectively, and $19,159 and $19,211 for the six months ended June 28, 2020 and June 30, 2019, respectively.