THE WENDY’S COMPANY00000306971/3Large Accelerated Filer10-KJanuary 3, 20212020FYFALSEfalsetruefalse223,841,1053,782.500000306972019-12-302021-01-03iso4217:USD00000306972020-06-26xbrli:shares00000306972021-02-2300000306972021-01-0300000306972019-12-29iso4217:USDxbrli:shares0000030697us-gaap:ProductMember2019-12-302021-01-030000030697us-gaap:ProductMember2018-12-312019-12-290000030697us-gaap:ProductMember2018-01-012018-12-300000030697wen:FranchiseRoyaltyRevenueandFeesMember2019-12-302021-01-030000030697wen:FranchiseRoyaltyRevenueandFeesMember2018-12-312019-12-290000030697wen:FranchiseRoyaltyRevenueandFeesMember2018-01-012018-12-3000000306972018-12-312019-12-2900000306972018-01-012018-12-300000030697us-gaap:AdvertisingMember2019-12-302021-01-030000030697us-gaap:AdvertisingMember2018-12-312019-12-290000030697us-gaap:AdvertisingMember2018-01-012018-12-300000030697us-gaap:CommonStockMember2017-12-310000030697us-gaap:AdditionalPaidInCapitalMember2017-12-310000030697us-gaap:RetainedEarningsMember2017-12-310000030697us-gaap:TreasuryStockMember2017-12-310000030697us-gaap:AccumulatedOtherComprehensiveIncomeMember2017-12-3100000306972017-12-310000030697us-gaap:CommonStockMember2018-01-012018-12-300000030697us-gaap:AdditionalPaidInCapitalMember2018-01-012018-12-300000030697us-gaap:RetainedEarningsMember2018-01-012018-12-300000030697us-gaap:TreasuryStockMember2018-01-012018-12-300000030697us-gaap:AccumulatedOtherComprehensiveIncomeMember2018-01-012018-12-300000030697srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:RetainedEarningsMember2017-12-310000030697srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember2017-12-310000030697us-gaap:CommonStockMember2018-12-300000030697us-gaap:AdditionalPaidInCapitalMember2018-12-300000030697us-gaap:RetainedEarningsMember2018-12-300000030697us-gaap:TreasuryStockMember2018-12-300000030697us-gaap:AccumulatedOtherComprehensiveIncomeMember2018-12-3000000306972018-12-300000030697us-gaap:CommonStockMember2018-12-312019-12-290000030697us-gaap:AdditionalPaidInCapitalMember2018-12-312019-12-290000030697us-gaap:RetainedEarningsMember2018-12-312019-12-290000030697us-gaap:TreasuryStockMember2018-12-312019-12-290000030697us-gaap:AccumulatedOtherComprehensiveIncomeMember2018-12-312019-12-290000030697srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:RetainedEarningsMember2018-12-300000030697srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember2018-12-300000030697us-gaap:CommonStockMember2019-12-290000030697us-gaap:AdditionalPaidInCapitalMember2019-12-290000030697us-gaap:RetainedEarningsMember2019-12-290000030697us-gaap:TreasuryStockMember2019-12-290000030697us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-12-290000030697us-gaap:CommonStockMember2019-12-302021-01-030000030697us-gaap:AdditionalPaidInCapitalMember2019-12-302021-01-030000030697us-gaap:RetainedEarningsMember2019-12-302021-01-030000030697us-gaap:TreasuryStockMember2019-12-302021-01-030000030697us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-12-302021-01-030000030697us-gaap:CommonStockMember2021-01-030000030697us-gaap:AdditionalPaidInCapitalMember2021-01-030000030697us-gaap:RetainedEarningsMember2021-01-030000030697us-gaap:TreasuryStockMember2021-01-030000030697us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-01-030000030697wen:AdvertisingFundsRestrictedAssetsMember2021-01-030000030697wen:AdvertisingFundsRestrictedAssetsMember2019-12-290000030697wen:AdvertisingFundsRestrictedAssetsMember2018-12-30wen:countries0000030697wen:InternationalMember2021-01-03wen:number_of_restaurants0000030697us-gaap:EntityOperatedUnitsMember2021-01-030000030697us-gaap:FranchisedUnitsMember2021-01-030000030697us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2021-01-030000030697wen:OfficeAndRestaurantEquipmentMembersrt:MinimumMember2019-12-302021-01-030000030697srt:MaximumMemberwen:OfficeAndRestaurantEquipmentMember2019-12-302021-01-030000030697us-gaap:TransportationEquipmentMembersrt:MinimumMember2019-12-302021-01-030000030697us-gaap:TransportationEquipmentMembersrt:MaximumMember2019-12-302021-01-030000030697srt:MinimumMemberus-gaap:BuildingMember2019-12-302021-01-030000030697srt:MaximumMemberus-gaap:BuildingMember2019-12-302021-01-030000030697srt:MinimumMemberus-gaap:ComputerSoftwareIntangibleAssetMember2019-12-302021-01-030000030697srt:MaximumMemberus-gaap:ComputerSoftwareIntangibleAssetMember2019-12-302021-01-030000030697wen:ReacquiredRightsUnderFranchiseAgreementsMembersrt:MinimumMember2019-12-302021-01-030000030697srt:MaximumMemberwen:ReacquiredRightsUnderFranchiseAgreementsMember2019-12-302021-01-030000030697us-gaap:FranchiseRightsMember2019-12-302021-01-03xbrli:pure0000030697wen:TimwenMember2021-01-030000030697wen:BrazilJVMember2021-01-030000030697us-gaap:InsuranceClaimsMember2021-01-030000030697srt:MinimumMember2021-01-030000030697srt:MaximumMember2021-01-03wen:customerswen:distributors0000030697country:US2021-01-030000030697country:USwen:MainInLineDistributorRiskMember2019-12-302021-01-030000030697country:USwen:AdditionalInlineDistributorRiskMember2019-12-302021-01-03wen:states0000030697us-gaap:EntityOperatedUnitsMemberwen:InternationalMember2021-01-030000030697us-gaap:GeographicConcentrationRiskMemberwen:InternationalMember2019-12-302021-01-030000030697us-gaap:AccountingStandardsUpdate201602Member2018-12-310000030697us-gaap:AccountingStandardsUpdate201602Member2018-12-312019-12-290000030697us-gaap:AccountingStandardsUpdate201602Membersrt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:RetainedEarningsMember2018-12-310000030697wen:WendysU.S.Memberus-gaap:ProductMember2019-12-302021-01-030000030697wen:WendysInternationalMemberus-gaap:ProductMember2019-12-302021-01-030000030697wen:GlobalRealEstateDevelopmentMemberus-gaap:ProductMember2019-12-302021-01-030000030697wen:WendysU.S.Memberus-gaap:RoyaltyMember2019-12-302021-01-030000030697wen:WendysInternationalMemberus-gaap:RoyaltyMember2019-12-302021-01-030000030697wen:GlobalRealEstateDevelopmentMemberus-gaap:RoyaltyMember2019-12-302021-01-030000030697us-gaap:RoyaltyMember2019-12-302021-01-030000030697wen:WendysU.S.Memberus-gaap:FranchiseMember2019-12-302021-01-030000030697wen:WendysInternationalMemberus-gaap:FranchiseMember2019-12-302021-01-030000030697wen:GlobalRealEstateDevelopmentMemberus-gaap:FranchiseMember2019-12-302021-01-030000030697us-gaap:FranchiseMember2019-12-302021-01-030000030697wen:WendysU.S.Member2019-12-302021-01-030000030697wen:WendysInternationalMember2019-12-302021-01-030000030697wen:GlobalRealEstateDevelopmentMember2019-12-302021-01-030000030697us-gaap:AdvertisingMemberwen:WendysU.S.Member2019-12-302021-01-030000030697wen:WendysInternationalMemberus-gaap:AdvertisingMember2019-12-302021-01-030000030697wen:GlobalRealEstateDevelopmentMemberus-gaap:AdvertisingMember2019-12-302021-01-030000030697wen:WendysU.S.Memberus-gaap:ProductMember2018-12-312019-12-290000030697wen:WendysInternationalMemberus-gaap:ProductMember2018-12-312019-12-290000030697wen:GlobalRealEstateDevelopmentMemberus-gaap:ProductMember2018-12-312019-12-290000030697wen:WendysU.S.Memberus-gaap:RoyaltyMember2018-12-312019-12-290000030697wen:WendysInternationalMemberus-gaap:RoyaltyMember2018-12-312019-12-290000030697wen:GlobalRealEstateDevelopmentMemberus-gaap:RoyaltyMember2018-12-312019-12-290000030697us-gaap:RoyaltyMember2018-12-312019-12-290000030697wen:WendysU.S.Memberus-gaap:FranchiseMember2018-12-312019-12-290000030697wen:WendysInternationalMemberus-gaap:FranchiseMember2018-12-312019-12-290000030697wen:GlobalRealEstateDevelopmentMemberus-gaap:FranchiseMember2018-12-312019-12-290000030697us-gaap:FranchiseMember2018-12-312019-12-290000030697wen:WendysU.S.Member2018-12-312019-12-290000030697wen:WendysInternationalMember2018-12-312019-12-290000030697wen:GlobalRealEstateDevelopmentMember2018-12-312019-12-290000030697us-gaap:AdvertisingMemberwen:WendysU.S.Member2018-12-312019-12-290000030697wen:WendysInternationalMemberus-gaap:AdvertisingMember2018-12-312019-12-290000030697wen:GlobalRealEstateDevelopmentMemberus-gaap:AdvertisingMember2018-12-312019-12-290000030697wen:WendysU.S.Memberus-gaap:ProductMember2018-01-012018-12-300000030697wen:WendysInternationalMemberus-gaap:ProductMember2018-01-012018-12-300000030697wen:GlobalRealEstateDevelopmentMemberus-gaap:ProductMember2018-01-012018-12-300000030697wen:WendysU.S.Memberus-gaap:RoyaltyMember2018-01-012018-12-300000030697wen:WendysInternationalMemberus-gaap:RoyaltyMember2018-01-012018-12-300000030697wen:GlobalRealEstateDevelopmentMemberus-gaap:RoyaltyMember2018-01-012018-12-300000030697us-gaap:RoyaltyMember2018-01-012018-12-300000030697wen:WendysU.S.Memberus-gaap:FranchiseMember2018-01-012018-12-300000030697wen:WendysInternationalMemberus-gaap:FranchiseMember2018-01-012018-12-300000030697wen:GlobalRealEstateDevelopmentMemberus-gaap:FranchiseMember2018-01-012018-12-300000030697us-gaap:FranchiseMember2018-01-012018-12-300000030697wen:WendysU.S.Member2018-01-012018-12-300000030697wen:WendysInternationalMember2018-01-012018-12-300000030697wen:GlobalRealEstateDevelopmentMember2018-01-012018-12-300000030697us-gaap:AdvertisingMemberwen:WendysU.S.Member2018-01-012018-12-300000030697wen:WendysInternationalMemberus-gaap:AdvertisingMember2018-01-012018-12-300000030697wen:GlobalRealEstateDevelopmentMemberus-gaap:AdvertisingMember2018-01-012018-12-300000030697us-gaap:ShortTermContractWithCustomerMemberus-gaap:AccountsReceivableMember2021-01-030000030697us-gaap:ShortTermContractWithCustomerMemberus-gaap:AccountsReceivableMember2019-12-290000030697us-gaap:ShortTermContractWithCustomerMemberwen:AdvertisingFundsRestrictedAssetsMember2021-01-030000030697us-gaap:ShortTermContractWithCustomerMemberwen:AdvertisingFundsRestrictedAssetsMember2019-12-290000030697wen:A2021Member2021-01-030000030697wen:A2022Member2021-01-030000030697wen:A2023Member2021-01-030000030697wen:A2024Member2021-01-030000030697wen:A2025Member2021-01-030000030697wen:FiscalPeriodAfter2025Member2021-01-030000030697wen:SystemOptimizationMember2019-12-302021-01-0300000306972017-01-010000030697wen:SaleoffranchiseoperatedrestauranttofranchiseeMember2019-12-302021-01-030000030697wen:SaleoffranchiseoperatedrestauranttofranchiseeMember2018-12-312019-12-290000030697wen:SaleoffranchiseoperatedrestauranttofranchiseeMember2018-01-012018-12-300000030697wen:SaleofCompanyOperatedRestaurantstoFranchiseesMember2019-12-302021-01-030000030697wen:SaleofCompanyOperatedRestaurantstoFranchiseesMember2018-01-012018-12-300000030697wen:SaleofCompanyOperatedRestaurantstoFranchiseesMember2018-12-312019-12-290000030697wen:SaleofOtherAssetsMember2019-12-302021-01-030000030697wen:SaleofOtherAssetsMember2018-12-312019-12-290000030697wen:SaleofOtherAssetsMember2018-01-012018-12-300000030697wen:RestaurantAssetsHeldForSaleMember2021-01-030000030697wen:RestaurantAssetsHeldForSaleMember2019-12-290000030697wen:OtherAssetsHeldForSaleMember2021-01-030000030697wen:OtherAssetsHeldForSaleMember2019-12-290000030697us-gaap:SeriesOfIndividuallyImmaterialBusinessAcquisitionsMember2019-12-302021-01-030000030697us-gaap:SeriesOfIndividuallyImmaterialBusinessAcquisitionsMember2018-12-312019-12-290000030697us-gaap:SeriesOfIndividuallyImmaterialBusinessAcquisitionsMember2018-01-012018-12-300000030697us-gaap:SeriesOfIndividuallyImmaterialBusinessAcquisitionsMember2019-12-290000030697us-gaap:SeriesOfIndividuallyImmaterialBusinessAcquisitionsMember2018-12-300000030697us-gaap:SeriesOfIndividuallyImmaterialBusinessAcquisitionsMember2018-12-312019-03-310000030697wen:NPCFranchisedRestaurantsMember2021-01-03wen:numberOfMarkets00000306972020-11-180000030697us-gaap:SubsequentEventMember2021-01-070000030697wen:OperationsAndFieldRealignmentMember2019-12-302021-01-030000030697wen:OperationsAndFieldRealignmentMember2018-12-312019-12-290000030697wen:OperationsAndFieldRealignmentMember2018-01-012018-12-300000030697wen:ITRealignmentMember2019-12-302021-01-030000030697wen:ITRealignmentMember2018-12-312019-12-290000030697wen:ITRealignmentMember2018-01-012018-12-300000030697wen:GARealignmentMember2019-12-302021-01-030000030697wen:GARealignmentMember2018-12-312019-12-290000030697wen:GARealignmentMember2018-01-012018-12-300000030697wen:SystemOptimizationMember2019-12-302021-01-030000030697wen:SystemOptimizationMember2018-12-312019-12-290000030697wen:SystemOptimizationMember2018-01-012018-12-300000030697wen:OperationsAndFieldRealignmentMembersrt:MinimumMember2021-01-030000030697wen:OperationsAndFieldRealignmentMembersrt:MaximumMember2021-01-030000030697wen:OperationsAndFieldRealignmentMemberus-gaap:EmployeeSeveranceMember2019-12-302021-01-030000030697wen:OperationsAndFieldRealignmentMemberus-gaap:OtherRestructuringMember2019-12-302021-01-030000030697wen:OperationsAndFieldRealignmentMemberwen:ShareBasedCompensationExpenseMember2019-12-302021-01-030000030697wen:OperationsAndFieldRealignmentMemberus-gaap:AccruedLiabilitiesMember2021-01-030000030697wen:OperationsAndFieldRealignmentMemberus-gaap:OtherLiabilitiesMember2021-01-030000030697wen:OperationsAndFieldRealignmentMemberus-gaap:EmployeeSeveranceMember2019-12-290000030697wen:OperationsAndFieldRealignmentMemberus-gaap:EmployeeSeveranceMember2021-01-030000030697wen:OperationsAndFieldRealignmentMemberus-gaap:OtherRestructuringMember2019-12-290000030697wen:OperationsAndFieldRealignmentMemberus-gaap:OtherRestructuringMember2021-01-030000030697wen:OperationsAndFieldRealignmentMember2019-12-290000030697wen:OperationsAndFieldRealignmentMember2021-01-030000030697us-gaap:EmployeeSeveranceMemberwen:ITRealignmentMember2019-12-302021-01-030000030697us-gaap:EmployeeSeveranceMemberwen:ITRealignmentMember2018-12-312019-12-290000030697us-gaap:EmployeeSeveranceMemberwen:ITRealignmentMember2021-01-030000030697us-gaap:EmployeeRelocationMemberwen:ITRealignmentMember2019-12-302021-01-030000030697us-gaap:EmployeeRelocationMemberwen:ITRealignmentMember2018-12-312019-12-290000030697us-gaap:EmployeeRelocationMemberwen:ITRealignmentMember2021-01-030000030697us-gaap:OtherRestructuringMemberwen:ITRealignmentMember2019-12-302021-01-030000030697us-gaap:OtherRestructuringMemberwen:ITRealignmentMember2018-12-312019-12-290000030697us-gaap:OtherRestructuringMemberwen:ITRealignmentMember2021-01-030000030697wen:ITRealignmentMember2021-01-030000030697wen:ShareBasedCompensationExpenseMemberwen:ITRealignmentMember2019-12-302021-01-030000030697wen:ShareBasedCompensationExpenseMemberwen:ITRealignmentMember2018-12-312019-12-290000030697wen:ShareBasedCompensationExpenseMemberwen:ITRealignmentMember2021-01-030000030697us-gaap:AccruedLiabilitiesMemberwen:ITRealignmentMember2021-01-030000030697us-gaap:OtherLiabilitiesMemberwen:ITRealignmentMember2021-01-030000030697us-gaap:EmployeeSeveranceMemberwen:ITRealignmentMember2019-12-290000030697us-gaap:EmployeeRelocationMemberwen:ITRealignmentMember2019-12-290000030697us-gaap:OtherRestructuringMemberwen:ITRealignmentMember2019-12-290000030697wen:ITRealignmentMember2019-12-290000030697us-gaap:EmployeeSeveranceMemberwen:ITRealignmentMember2018-12-300000030697us-gaap:EmployeeRelocationMemberwen:ITRealignmentMember2018-12-300000030697us-gaap:OtherRestructuringMemberwen:ITRealignmentMember2018-12-300000030697wen:ITRealignmentMember2018-12-300000030697us-gaap:EmployeeSeveranceMemberwen:GARealignmentMember2019-12-302021-01-030000030697us-gaap:EmployeeSeveranceMemberwen:GARealignmentMember2018-12-312019-12-290000030697us-gaap:EmployeeSeveranceMemberwen:GARealignmentMember2018-01-012018-12-300000030697us-gaap:EmployeeSeveranceMemberwen:GARealignmentMember2021-01-030000030697wen:GARealignmentMemberus-gaap:EmployeeRelocationMember2019-12-302021-01-030000030697wen:GARealignmentMemberus-gaap:EmployeeRelocationMember2018-12-312019-12-290000030697wen:GARealignmentMemberus-gaap:EmployeeRelocationMember2018-01-012018-12-300000030697wen:GARealignmentMemberus-gaap:EmployeeRelocationMember2021-01-030000030697us-gaap:OtherRestructuringMemberwen:GARealignmentMember2019-12-302021-01-030000030697us-gaap:OtherRestructuringMemberwen:GARealignmentMember2018-12-312019-12-290000030697us-gaap:OtherRestructuringMemberwen:GARealignmentMember2018-01-012018-12-300000030697us-gaap:OtherRestructuringMemberwen:GARealignmentMember2021-01-030000030697wen:GARealignmentMember2021-01-030000030697wen:ShareBasedCompensationExpenseMemberwen:GARealignmentMember2019-12-302021-01-030000030697wen:ShareBasedCompensationExpenseMemberwen:GARealignmentMember2018-12-312019-12-290000030697wen:ShareBasedCompensationExpenseMemberwen:GARealignmentMember2018-01-012018-12-300000030697wen:ShareBasedCompensationExpenseMemberwen:GARealignmentMember2021-01-030000030697wen:TerminationofdefinedbenefitplansMemberwen:GARealignmentMember2019-12-302021-01-030000030697wen:TerminationofdefinedbenefitplansMemberwen:GARealignmentMember2018-12-312019-12-290000030697wen:TerminationofdefinedbenefitplansMemberwen:GARealignmentMember2018-01-012018-12-300000030697wen:TerminationofdefinedbenefitplansMemberwen:GARealignmentMember2021-01-03wen:Pension_Plans0000030697us-gaap:PensionPlansDefinedBenefitMember2018-12-300000030697wen:GARealignmentMemberus-gaap:AccruedLiabilitiesMember2019-12-290000030697wen:GARealignmentMemberus-gaap:OtherLiabilitiesMember2019-12-290000030697us-gaap:EmployeeSeveranceMemberwen:GARealignmentMember2019-12-290000030697wen:GARealignmentMemberus-gaap:EmployeeRelocationMember2019-12-290000030697us-gaap:OtherRestructuringMemberwen:GARealignmentMember2019-12-290000030697wen:GARealignmentMember2019-12-290000030697us-gaap:EmployeeSeveranceMemberwen:GARealignmentMember2018-12-300000030697wen:GARealignmentMemberus-gaap:EmployeeRelocationMember2018-12-300000030697us-gaap:OtherRestructuringMemberwen:GARealignmentMember2018-12-300000030697wen:GARealignmentMember2018-12-300000030697wen:SystemOptimizationMember2021-01-030000030697wen:SystemOptimizationMemberus-gaap:EmployeeSeveranceMember2019-12-302021-01-030000030697wen:SystemOptimizationMemberus-gaap:EmployeeSeveranceMember2018-12-312019-12-290000030697wen:SystemOptimizationMemberus-gaap:EmployeeSeveranceMember2018-01-012018-12-300000030697wen:SystemOptimizationMemberus-gaap:EmployeeSeveranceMember2021-01-030000030697wen:ConsultingAndProfessionalFeesMemberwen:SystemOptimizationMember2019-12-302021-01-030000030697wen:ConsultingAndProfessionalFeesMemberwen:SystemOptimizationMember2018-12-312019-12-290000030697wen:ConsultingAndProfessionalFeesMemberwen:SystemOptimizationMember2018-01-012018-12-300000030697wen:ConsultingAndProfessionalFeesMemberwen:SystemOptimizationMember2021-01-030000030697wen:SystemOptimizationMemberus-gaap:OtherRestructuringMember2019-12-302021-01-030000030697wen:SystemOptimizationMemberus-gaap:OtherRestructuringMember2018-12-312019-12-290000030697wen:SystemOptimizationMemberus-gaap:OtherRestructuringMember2018-01-012018-12-300000030697wen:SystemOptimizationMemberus-gaap:OtherRestructuringMember2021-01-030000030697wen:AcceleratedDepreciationExpenseMemberwen:SystemOptimizationMember2019-12-302021-01-030000030697wen:AcceleratedDepreciationExpenseMemberwen:SystemOptimizationMember2018-12-312019-12-290000030697wen:AcceleratedDepreciationExpenseMemberwen:SystemOptimizationMember2018-01-012018-12-300000030697wen:AcceleratedDepreciationExpenseMemberwen:SystemOptimizationMember2021-01-030000030697wen:SystemOptimizationMemberwen:ShareBasedCompensationExpenseMember2019-12-302021-01-030000030697wen:SystemOptimizationMemberwen:ShareBasedCompensationExpenseMember2018-12-312019-12-290000030697wen:SystemOptimizationMemberwen:ShareBasedCompensationExpenseMember2018-01-012018-12-300000030697wen:SystemOptimizationMemberwen:ShareBasedCompensationExpenseMember2021-01-030000030697wen:ConsultingAndProfessionalFeesMemberwen:SystemOptimizationMember2019-12-290000030697wen:SystemOptimizationMemberus-gaap:OtherRestructuringMember2019-12-290000030697wen:SystemOptimizationMember2019-12-290000030697wen:AccountsHeldByTrusteeForTheSecuritizedFinancingFacilityMemberwen:RestrictedCashMember2021-01-030000030697wen:AccountsHeldByTrusteeForTheSecuritizedFinancingFacilityMemberwen:RestrictedCashMember2019-12-290000030697wen:RestrictedCashMemberwen:OtherRestrictedCashEquivalentsMember2021-01-030000030697wen:RestrictedCashMemberwen:OtherRestrictedCashEquivalentsMember2019-12-290000030697wen:RestrictedCashMember2021-01-030000030697wen:RestrictedCashMember2019-12-290000030697wen:AccountsandNotesReceivableNetMember2021-01-030000030697wen:AccountsandNotesReceivableNetMember2019-12-290000030697wen:RentReceivableMember2019-12-302021-01-030000030697wen:U.S.franchiseeMember2019-12-290000030697wen:IndiaFranchiseeMember2021-01-030000030697wen:IndiaFranchiseeMember2019-12-290000030697wen:IndonesiaFranchiseeMember2021-01-030000030697wen:IndonesiaFranchiseeMember2019-12-290000030697wen:BrazilJVMember2021-01-030000030697wen:BrazilJVMember2019-12-290000030697wen:BrazilJVMember2019-12-290000030697wen:BrazilJVMember2015-03-302015-06-280000030697wen:BrazilJVMember2015-06-280000030697wen:BrazilJVMember2019-12-302021-01-030000030697wen:BrazilJVMember2018-12-312019-12-290000030697wen:BrazilJVMember2018-01-012018-12-300000030697wen:BrazilJVMembersrt:MinimumMember2019-12-302021-01-030000030697wen:BrazilJVMembersrt:MaximumMember2019-12-302021-01-030000030697wen:TimwenMember2019-12-290000030697wen:TimWenandBrazilJVMember2019-12-290000030697wen:TimWenandBrazilJVMember2018-12-300000030697wen:TimWenandBrazilJVMember2017-12-310000030697wen:TimWenandBrazilJVMember2019-12-302021-01-030000030697wen:TimWenandBrazilJVMember2018-12-312019-12-290000030697wen:TimWenandBrazilJVMember2018-01-012018-12-300000030697wen:TimWenandBrazilJVMember2021-01-030000030697wen:TimwenMember2018-01-012018-12-300000030697wen:TimwenMember2018-12-312019-12-290000030697wen:TimwenMember2019-12-302021-01-030000030697wen:ArbysRestaurantGroupIncMember2012-01-010000030697wen:ArbysRestaurantGroupIncMember2013-12-290000030697wen:InspireBrandsIncMember2018-02-280000030697wen:InspireBrandsIncMember2018-08-312018-08-310000030697wen:InspireBrandsIncMember2018-10-012018-12-300000030697wen:OtherinvestmentsinequitysecuritiesMember2019-10-312019-10-310000030697wen:OtherinvestmentsinequitysecuritiesMemberus-gaap:InvestmentIncomeMember2019-10-312019-10-310000030697wen:OtherinvestmentsinequitysecuritiesMemberus-gaap:GeneralAndAdministrativeExpenseMember2019-10-312019-10-310000030697us-gaap:LandMember2021-01-030000030697us-gaap:LandMember2019-12-290000030697us-gaap:BuildingAndBuildingImprovementsMember2021-01-030000030697us-gaap:BuildingAndBuildingImprovementsMember2019-12-290000030697us-gaap:LeaseholdImprovementsMember2021-01-030000030697us-gaap:LeaseholdImprovementsMember2019-12-290000030697wen:OfficeRestaurantAndTransportationEquipmentMember2021-01-030000030697wen:OfficeRestaurantAndTransportationEquipmentMember2019-12-290000030697wen:PropertyPlantandEquipmentMemberMember2019-12-302021-01-030000030697wen:PropertyPlantandEquipmentMemberMember2018-12-312019-12-290000030697wen:PropertyPlantandEquipmentMemberMember2018-01-012018-12-300000030697wen:WendysU.S.Member2018-12-300000030697wen:WendysInternationalMember2018-12-300000030697wen:GlobalRealEstateDevelopmentMember2018-12-300000030697wen:WendysU.S.Member2019-12-290000030697wen:WendysInternationalMember2019-12-290000030697wen:GlobalRealEstateDevelopmentMember2019-12-290000030697wen:WendysU.S.Member2021-01-030000030697wen:WendysInternationalMember2021-01-030000030697wen:GlobalRealEstateDevelopmentMember2021-01-030000030697us-gaap:TrademarksMember2021-01-030000030697us-gaap:TrademarksMember2019-12-290000030697us-gaap:FranchiseRightsMember2021-01-030000030697us-gaap:FranchiseRightsMember2019-12-290000030697us-gaap:LeasesAcquiredInPlaceMarketAdjustmentMember2021-01-030000030697us-gaap:LeasesAcquiredInPlaceMarketAdjustmentMember2019-12-290000030697wen:ReacquiredRightsUnderFranchiseAgreementsMember2021-01-030000030697wen:ReacquiredRightsUnderFranchiseAgreementsMember2019-12-290000030697us-gaap:ComputerSoftwareIntangibleAssetMember2021-01-030000030697us-gaap:ComputerSoftwareIntangibleAssetMember2019-12-290000030697wen:FinancialInstitutionsCaseMember2019-12-290000030697wen:FinancialInstitutionsCaseMember2020-01-312020-01-310000030697wen:Series20191ClassA2INotesMember2019-12-290000030697wen:Series20191ClassA2INotesMember2021-01-030000030697wen:Series20191ClassA2IINotesMember2021-01-030000030697wen:Series20191ClassA2IINotesMember2019-12-290000030697wen:Series20181ClassA2INotesMember2019-12-290000030697wen:Series20181ClassA2INotesMember2021-01-030000030697wen:Series20181ClassA2IINotesMember2021-01-030000030697wen:Series20181ClassA2IINotesMember2019-12-290000030697wen:Series20151ClassA2IIINotesMember2021-01-030000030697wen:Series20151ClassA2IIINotesMember2019-12-290000030697wen:CanadianRevolvingCreditFacilityMember2021-01-030000030697wen:CanadianRevolvingCreditFacilityMember2019-12-290000030697wen:A7DebenturesMember2019-12-290000030697wen:A7DebenturesMember2021-01-030000030697wen:Series20191ClassA1NotesMemberus-gaap:LineOfCreditMember2021-01-030000030697wen:Series20191ClassA1NotesMemberus-gaap:LineOfCreditMember2020-07-302020-07-300000030697wen:Series20191ClassA1NotesMemberus-gaap:LineOfCreditMember2020-03-292020-03-290000030697us-gaap:LineOfCreditMemberwen:Series20201ClassA1NotesMember2021-01-030000030697wen:Series20191ClassA1NotesMemberus-gaap:LineOfCreditMembersrt:MinimumMember2019-12-302021-01-030000030697wen:Series20191ClassA1NotesMembersrt:MaximumMemberus-gaap:LineOfCreditMember2019-12-302021-01-030000030697us-gaap:LineOfCreditMemberwen:Series20201ClassA1NotesMember2019-12-302021-01-030000030697wen:Series20191ClassA1NotesMemberus-gaap:LetterOfCreditMember2021-01-030000030697wen:RestrictedCashHeldForPrincipalInterestAndFeesMemberwen:RestrictedCashMember2021-01-030000030697wen:RestrictedCashHeldForPrincipalInterestAndFeesMemberwen:RestrictedCashMember2019-12-290000030697wen:Series20191SeniorNotesMember2019-04-012019-06-300000030697wen:Series20181SeniorNotesMember2018-01-012018-04-010000030697wen:Series20201ClassA1NotesMember2021-01-030000030697wen:Series20191SeniorNotesMember2019-12-290000030697wen:Series20181SeniorNotesMember2018-12-300000030697wen:PremiumMemberwen:A7DebenturesMember2019-12-290000030697wen:TransactionFeesMemberwen:A7DebenturesMember2019-12-290000030697wen:A7DebenturesMember2019-09-302019-12-29iso4217:CAD0000030697us-gaap:LineOfCreditMemberwen:CanadianSubsidiaryMember2021-01-030000030697us-gaap:LineOfCreditMemberwen:CanadianSubsidiaryMember2020-03-292020-03-290000030697us-gaap:LineOfCreditMemberwen:CanadianSubsidiaryMember2020-11-012020-11-010000030697us-gaap:LineOfCreditMemberwen:CanadianSubsidiaryMember2021-01-032021-01-030000030697us-gaap:LineOfCreditMemberus-gaap:SubsequentEventMemberwen:CanadianSubsidiaryMember2021-02-282021-02-280000030697wen:WendysU.S.AdvertisingFundMemberus-gaap:LineOfCreditMember2021-01-030000030697wen:WendysU.S.AdvertisingFundMemberus-gaap:LineOfCreditMember2019-12-302021-01-030000030697wen:WendysU.S.AdvertisingFundMemberus-gaap:LineOfCreditMember2020-02-292020-02-290000030697wen:WendysU.S.AdvertisingFundMemberus-gaap:LineOfCreditMember2020-03-292020-03-290000030697wen:WendysU.S.AdvertisingFundMemberus-gaap:LineOfCreditMember2020-09-272020-09-270000030697us-gaap:CorporateDebtSecuritiesMember2019-12-302021-01-030000030697us-gaap:CorporateDebtSecuritiesMember2018-12-312019-12-290000030697us-gaap:CorporateDebtSecuritiesMember2018-01-012018-12-300000030697us-gaap:CashAndCashEquivalentsMember2021-01-030000030697us-gaap:OtherAssetsMember2021-01-030000030697wen:AccountsAndNotesReceivableMember2021-01-030000030697us-gaap:InventoriesMember2021-01-030000030697us-gaap:PropertyPlantAndEquipmentMember2021-01-030000030697us-gaap:OtherIntangibleAssetsMember2021-01-030000030697us-gaap:CarryingReportedAmountFairValueDisclosureMember2021-01-030000030697us-gaap:FairValueInputsLevel1Memberus-gaap:EstimateOfFairValueFairValueDisclosureMember2021-01-030000030697us-gaap:CarryingReportedAmountFairValueDisclosureMember2019-12-290000030697us-gaap:FairValueInputsLevel1Memberus-gaap:EstimateOfFairValueFairValueDisclosureMember2019-12-290000030697us-gaap:EstimateOfFairValueFairValueDisclosureMemberus-gaap:FairValueInputsLevel3Member2021-01-030000030697us-gaap:EstimateOfFairValueFairValueDisclosureMemberus-gaap:FairValueInputsLevel3Member2019-12-290000030697us-gaap:CarryingReportedAmountFairValueDisclosureMemberwen:Series20191ClassA2INotesMember2021-01-030000030697us-gaap:EstimateOfFairValueFairValueDisclosureMemberwen:Series20191ClassA2INotesMemberus-gaap:FairValueInputsLevel2Member2021-01-030000030697us-gaap:CarryingReportedAmountFairValueDisclosureMemberwen:Series20191ClassA2INotesMember2019-12-290000030697us-gaap:EstimateOfFairValueFairValueDisclosureMemberwen:Series20191ClassA2INotesMemberus-gaap:FairValueInputsLevel2Member2019-12-290000030697us-gaap:CarryingReportedAmountFairValueDisclosureMemberwen:Series20191ClassA2IINotesMember2021-01-030000030697wen:Series20191ClassA2IINotesMemberus-gaap:EstimateOfFairValueFairValueDisclosureMemberus-gaap:FairValueInputsLevel2Member2021-01-030000030697us-gaap:CarryingReportedAmountFairValueDisclosureMemberwen:Series20191ClassA2IINotesMember2019-12-290000030697wen:Series20191ClassA2IINotesMemberus-gaap:EstimateOfFairValueFairValueDisclosureMemberus-gaap:FairValueInputsLevel2Member2019-12-290000030697us-gaap:CarryingReportedAmountFairValueDisclosureMemberwen:Series20181ClassA2INotesMember2021-01-030000030697wen:Series20181ClassA2INotesMemberus-gaap:EstimateOfFairValueFairValueDisclosureMemberus-gaap:FairValueInputsLevel2Member2021-01-030000030697us-gaap:CarryingReportedAmountFairValueDisclosureMemberwen:Series20181ClassA2INotesMember2019-12-290000030697wen:Series20181ClassA2INotesMemberus-gaap:EstimateOfFairValueFairValueDisclosureMemberus-gaap:FairValueInputsLevel2Member2019-12-290000030697wen:Series20181ClassA2IINotesMemberus-gaap:CarryingReportedAmountFairValueDisclosureMember2021-01-030000030697wen:Series20181ClassA2IINotesMemberus-gaap:EstimateOfFairValueFairValueDisclosureMemberus-gaap:FairValueInputsLevel2Member2021-01-030000030697wen:Series20181ClassA2IINotesMemberus-gaap:CarryingReportedAmountFairValueDisclosureMember2019-12-290000030697wen:Series20181ClassA2IINotesMemberus-gaap:EstimateOfFairValueFairValueDisclosureMemberus-gaap:FairValueInputsLevel2Member2019-12-290000030697us-gaap:CarryingReportedAmountFairValueDisclosureMemberwen:Series20151ClassA2IIINotesMember2021-01-030000030697wen:Series20151ClassA2IIINotesMemberus-gaap:EstimateOfFairValueFairValueDisclosureMemberus-gaap:FairValueInputsLevel2Member2021-01-030000030697us-gaap:CarryingReportedAmountFairValueDisclosureMemberwen:Series20151ClassA2IIINotesMember2019-12-290000030697wen:Series20151ClassA2IIINotesMemberus-gaap:EstimateOfFairValueFairValueDisclosureMemberus-gaap:FairValueInputsLevel2Member2019-12-290000030697us-gaap:CarryingReportedAmountFairValueDisclosureMemberwen:CanadianRevolvingCreditFacilityMember2021-01-030000030697us-gaap:EstimateOfFairValueFairValueDisclosureMemberus-gaap:FairValueInputsLevel2Memberwen:CanadianRevolvingCreditFacilityMember2021-01-030000030697us-gaap:CarryingReportedAmountFairValueDisclosureMemberwen:CanadianRevolvingCreditFacilityMember2019-12-290000030697us-gaap:EstimateOfFairValueFairValueDisclosureMemberus-gaap:FairValueInputsLevel2Memberwen:CanadianRevolvingCreditFacilityMember2019-12-290000030697us-gaap:CarryingReportedAmountFairValueDisclosureMemberwen:A7DebenturesMember2021-01-030000030697us-gaap:EstimateOfFairValueFairValueDisclosureMemberus-gaap:FairValueInputsLevel2Memberwen:A7DebenturesMember2021-01-030000030697us-gaap:CarryingReportedAmountFairValueDisclosureMemberwen:A7DebenturesMember2019-12-290000030697us-gaap:EstimateOfFairValueFairValueDisclosureMemberus-gaap:FairValueInputsLevel2Memberwen:A7DebenturesMember2019-12-290000030697us-gaap:FairValueMeasurementsNonrecurringMember2021-01-030000030697us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsNonrecurringMember2021-01-030000030697us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsNonrecurringMember2021-01-030000030697us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsNonrecurringMember2021-01-030000030697us-gaap:FairValueMeasurementsNonrecurringMember2019-12-290000030697us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsNonrecurringMember2019-12-290000030697us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsNonrecurringMember2019-12-290000030697us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsNonrecurringMember2019-12-290000030697us-gaap:DomesticCountryMember2021-01-030000030697us-gaap:StateAndLocalJurisdictionMember2021-01-030000030697us-gaap:ForeignCountryMember2021-01-0300000306972017-01-022017-12-310000030697wen:TaxActMember2018-01-012018-12-300000030697us-gaap:TreasuryStockMember2019-12-290000030697us-gaap:TreasuryStockMember2018-12-300000030697us-gaap:TreasuryStockMember2017-12-310000030697us-gaap:TreasuryStockMember2019-12-302021-01-030000030697us-gaap:TreasuryStockMember2018-12-312019-12-290000030697us-gaap:TreasuryStockMember2018-01-012018-12-300000030697us-gaap:TreasuryStockMember2021-01-030000030697wen:February2020ShareRepurchaseProgramMember2020-02-290000030697wen:February2020ShareRepurchaseProgramMember2019-12-302021-01-030000030697wen:February2020ShareRepurchaseProgramMember2021-01-030000030697wen:February2020ShareRepurchaseProgramMemberus-gaap:SubsequentEventMember2021-01-042021-02-230000030697wen:February2019ShareRepurchaseProgramMember2019-02-280000030697wen:A2019AcceleratedShareRepurchaseProgramMember2019-11-300000030697wen:A2019AcceleratedShareRepurchaseProgramMember2019-11-302019-11-300000030697wen:A2019AcceleratedShareRepurchaseProgramMember2020-02-292020-02-290000030697wen:A2019AcceleratedShareRepurchaseProgramMember2019-10-312020-02-290000030697wen:February2019ShareRepurchaseProgramMember2019-12-302021-01-030000030697wen:November2018andFebruary2019ShareRepurchaseProgramsMember2018-12-312019-12-290000030697wen:November2018andFebruary2019ShareRepurchaseProgramsMember2019-12-290000030697wen:February2018ShareRepurchaseProgramMember2018-02-280000030697wen:November2018ShareRepurchaseProgramMember2018-11-300000030697wen:A2018AcceleratedShareRepurchaseProgramMember2018-11-300000030697wen:A2018AcceleratedShareRepurchaseProgramMember2018-11-302018-11-300000030697wen:A2018AcceleratedShareRepurchaseProgramMember2018-12-302018-12-300000030697wen:FebruaryandNovember2018ShareRepurchaseProgramsMember2018-01-012018-12-300000030697wen:FebruaryandNovember2018ShareRepurchaseProgramsMember2018-12-300000030697wen:February2017ShareRepurchaseProgramMember2017-02-280000030697wen:February2017ShareRepurchaseProgramMember2018-01-012018-12-300000030697us-gaap:AccumulatedTranslationAdjustmentMember2017-12-310000030697us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2017-12-310000030697us-gaap:AccumulatedTranslationAdjustmentMember2018-01-012018-12-300000030697us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2018-01-012018-12-300000030697us-gaap:AccumulatedTranslationAdjustmentMember2018-12-300000030697us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2018-12-300000030697us-gaap:AccumulatedTranslationAdjustmentMember2018-12-312019-12-290000030697us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2018-12-312019-12-290000030697us-gaap:AccumulatedTranslationAdjustmentMember2019-12-290000030697us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2019-12-290000030697us-gaap:AccumulatedTranslationAdjustmentMember2019-12-302021-01-030000030697us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2019-12-302021-01-030000030697us-gaap:AccumulatedTranslationAdjustmentMember2021-01-030000030697us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2021-01-030000030697wen:A2020PlanMember2021-01-030000030697us-gaap:EmployeeStockOptionMember2019-12-302021-01-030000030697us-gaap:EmployeeStockOptionMember2019-12-290000030697us-gaap:EmployeeStockOptionMember2021-01-030000030697us-gaap:EmployeeStockOptionMember2018-12-312019-12-290000030697us-gaap:EmployeeStockOptionMember2018-01-012018-12-300000030697srt:MinimumMemberus-gaap:RestrictedStockMember2019-12-302021-01-030000030697srt:MaximumMemberus-gaap:RestrictedStockMember2019-12-302021-01-030000030697us-gaap:RestrictedStockMember2019-12-290000030697us-gaap:RestrictedStockMember2019-12-302021-01-030000030697us-gaap:RestrictedStockMember2021-01-030000030697us-gaap:RestrictedStockMember2018-12-312019-12-290000030697us-gaap:RestrictedStockMember2018-01-012018-12-300000030697wen:MarketConditionPerformanceAwardMember2019-12-302021-01-030000030697wen:MarketConditionPerformanceAwardMember2018-12-312019-12-290000030697wen:MarketConditionPerformanceAwardMember2018-01-012018-12-300000030697wen:PerformanceConditionAwardMember2019-12-290000030697wen:MarketConditionPerformanceAwardMember2019-12-290000030697wen:PerformanceConditionAwardMember2019-12-302021-01-030000030697wen:PerformanceConditionAwardMember2021-01-030000030697wen:MarketConditionPerformanceAwardMember2021-01-030000030697wen:PerformanceConditionAwardMember2018-12-312019-12-290000030697wen:PerformanceConditionAwardMember2018-01-012018-12-30wen:employees0000030697wen:ReorganizationandrealignmentMember2019-12-302021-01-030000030697wen:ReorganizationandrealignmentMember2018-12-312019-12-290000030697wen:ReorganizationandrealignmentMember2018-01-012018-12-300000030697wen:ModifiedAwardsMember2019-12-302021-01-030000030697wen:ModifiedAwardsMember2018-12-312019-12-290000030697wen:ModifiedAwardsMember2018-01-012018-12-300000030697wen:PropertiesandOtherIntangibleAssetsOperatingRestaurantsMember2019-12-302021-01-030000030697wen:PropertiesandOtherIntangibleAssetsOperatingRestaurantsMember2018-12-312019-12-290000030697wen:PropertiesandOtherIntangibleAssetsOperatingRestaurantsMember2018-01-012018-12-300000030697wen:PropertiesandOtherIntangibleAssetsFranchiseeLeasedSubleasedAssetsMember2019-12-302021-01-030000030697wen:PropertiesandOtherIntangibleAssetsFranchiseeLeasedSubleasedAssetsMember2018-12-312019-12-290000030697wen:PropertiesandOtherIntangibleAssetsFranchiseeLeasedSubleasedAssetsMember2018-01-012018-12-300000030697wen:SurplusPropertiesMember2019-12-302021-01-030000030697wen:SurplusPropertiesMember2018-12-312019-12-290000030697wen:SurplusPropertiesMember2018-01-012018-12-300000030697us-gaap:PensionPlansDefinedBenefitMember2019-12-302021-01-030000030697wen:ArbysRestaurantGroupIncMemberus-gaap:PensionPlansDefinedBenefitMember2011-07-022011-07-310000030697wen:TerminationofdefinedbenefitplansMemberwen:GARealignmentMay2017PlanMember2018-01-012018-12-300000030697us-gaap:SupplementalEmployeeRetirementPlanDefinedBenefitMember2021-01-030000030697us-gaap:SupplementalEmployeeRetirementPlanDefinedBenefitMember2019-12-290000030697us-gaap:EntityOperatedUnitsMemberwen:LandAndBuildingCompanyOwnedMember2021-01-030000030697us-gaap:EntityOperatedUnitsMemberwen:BuildingCompanyOwnedLandLeasedMember2021-01-030000030697us-gaap:EntityOperatedUnitsMemberwen:LandAndBuildingLeasedMember2021-01-030000030697us-gaap:FranchisedUnitsMemberwen:LandAndBuildingCompanyOwnedMember2021-01-030000030697us-gaap:FranchisedUnitsMemberwen:LandAndBuildingLeasedMember2021-01-030000030697wen:ExecutoryCostsPaidByLesseeMember2019-12-302021-01-030000030697wen:ExecutoryCostsPaidByLesseeMember2018-12-312019-12-290000030697wen:FranchiseRentalExpenseMember2019-12-302021-01-030000030697wen:FranchiseRentalExpenseMember2018-12-312019-12-290000030697us-gaap:CostOfSalesMember2019-12-302021-01-030000030697us-gaap:CostOfSalesMember2018-12-312019-12-290000030697wen:AccruedExpensesAndOtherCurrentLiabilitiesMember2021-01-030000030697wen:CurrentportionoffinanceleaseliabilitiesMember2021-01-030000030697wen:LongtermfinanceleaseliabilitiesMember2021-01-030000030697wen:CurrentportionofoperatingleaseliabilitiesMember2021-01-030000030697wen:LongtermoperatingleaseliabilitiesMember2021-01-030000030697wen:ExecutoryCostsPaidToLessorMember2019-12-302021-01-030000030697wen:ExecutoryCostsPaidToLessorMember2018-12-312019-12-290000030697wen:SubleasedtoOthersSalestypeandDirectFinancingMember2021-01-030000030697wen:AssetsLeasedtoOthersSalesTypeAndDirectFinancingMember2021-01-030000030697wen:SubleasedtoOthersOperatingMember2021-01-030000030697us-gaap:AssetsLeasedToOthersMember2021-01-030000030697wen:NetInvestmentInSalestypeAndDirectFinancingLeasesMember2021-01-030000030697us-gaap:AssetsLeasedToOthersMember2019-12-290000030697srt:MaximumMemberwen:NewBuildIncentiveProgramMember2019-12-302021-01-030000030697srt:MaximumMemberwen:A2021NewBuildIncentiveProgramMember2019-12-302021-01-030000030697srt:MinimumMemberwen:RemodelIncentiveProgramMember2019-12-302021-01-030000030697srt:MaximumMemberwen:RemodelIncentiveProgramMember2019-12-302021-01-030000030697us-gaap:PropertyLeaseGuaranteeMember2021-01-030000030697wen:BeverageAgreementMember2019-12-302021-01-030000030697wen:BeverageAgreementMember2018-12-312019-12-290000030697wen:BeverageAgreementMember2018-01-012018-12-300000030697wen:BeverageAgreementMember2021-01-030000030697us-gaap:AccountsPayableMemberwen:BeverageAgreementMember2021-01-030000030697wen:ITServicesAgreementMember2019-12-302021-01-030000030697wen:ITServicesAgreementMember2018-12-312019-12-290000030697wen:ITServicesAgreementMember2021-01-030000030697wen:ITServicesAgreementMemberus-gaap:AccruedLiabilitiesMember2021-01-03wen:Broadcasters0000030697wen:MarketingAgreementMember2018-12-312019-12-290000030697wen:MarketingAgreementMember2018-01-012018-12-300000030697wen:MarketingAgreementMember2019-12-302021-01-030000030697wen:MarketingAgreementMember2021-01-030000030697wen:PatronageDividendsDomainus-gaap:CostOfSalesMemberwen:QsccMember2019-12-302021-01-030000030697wen:PatronageDividendsDomainus-gaap:CostOfSalesMemberwen:QsccMember2018-12-312019-12-290000030697wen:PatronageDividendsDomainus-gaap:CostOfSalesMemberwen:QsccMember2018-01-012018-12-300000030697wen:QsccMemberwen:FranchiserentalincomeMemberwen:LeaseIncomeDomain2019-12-302021-01-030000030697wen:QsccMemberwen:FranchiserentalincomeMemberwen:LeaseIncomeDomain2018-12-312019-12-290000030697wen:QsccMemberwen:FranchiserentalincomeMemberwen:LeaseIncomeDomain2018-01-012018-12-300000030697wen:TimwenMember2019-12-302021-01-030000030697wen:TimwenMember2018-12-312019-12-290000030697wen:TimwenMember2018-01-012018-12-300000030697wen:YellowCabMemberwen:RoyaltyAdvertisingFundLeaseAndOtherIncomeMember2020-09-282021-01-030000030697wen:YellowCabMemberwen:RoyaltyAdvertisingFundLeaseAndOtherIncomeMember2018-12-312019-12-290000030697wen:YellowCabMemberwen:RoyaltyAdvertisingFundLeaseAndOtherIncomeMember2018-01-012018-12-30utr:sqft0000030697wen:QsccMember2017-01-010000030697wen:QsccMember2018-11-300000030697wen:TimwenMemberus-gaap:CostOfSalesMemberwen:FranchiseRentalExpenseMember2019-12-302021-01-030000030697wen:TimwenMemberus-gaap:CostOfSalesMemberwen:FranchiseRentalExpenseMember2018-12-312019-12-290000030697wen:TimwenMemberus-gaap:CostOfSalesMemberwen:FranchiseRentalExpenseMember2018-01-012018-12-300000030697us-gaap:GeneralAndAdministrativeExpenseMemberwen:TimwenMemberwen:ManagementFeesMember2019-12-302021-01-030000030697us-gaap:GeneralAndAdministrativeExpenseMemberwen:TimwenMemberwen:ManagementFeesMember2018-12-312019-12-290000030697us-gaap:GeneralAndAdministrativeExpenseMemberwen:TimwenMemberwen:ManagementFeesMember2018-01-012018-12-300000030697us-gaap:FranchisedUnitsMemberwen:YellowCabMember2021-01-030000030697wen:YellowCabMemberwen:RoyaltyAdvertisingFundLeaseAndOtherIncomeMemberus-gaap:AccountsReceivableMember2021-01-030000030697us-gaap:FranchisedUnitsMemberwen:YellowCabMemberus-gaap:SubsequentEventMember2021-01-072021-01-07wen:Civil_complaintswen:Defendants00000306972021-01-032021-01-030000030697wen:RestrictedAssetsandLiabilitiesMember2019-12-302021-01-030000030697wen:RestrictedAssetsandLiabilitiesMember2021-01-030000030697wen:RestrictedAssetsandLiabilitiesMember2019-12-290000030697us-gaap:CostOfSalesMember2018-01-012018-12-300000030697country:US2019-12-302021-01-030000030697us-gaap:NonUsMember2019-12-302021-01-030000030697us-gaap:NonUsMember2021-01-030000030697country:US2018-12-312019-12-290000030697us-gaap:NonUsMember2018-12-312019-12-290000030697country:US2019-12-290000030697us-gaap:NonUsMember2019-12-290000030697country:US2018-01-012018-12-300000030697us-gaap:NonUsMember2018-01-012018-12-300000030697country:US2018-12-300000030697us-gaap:NonUsMember2018-12-300000030697us-gaap:OperatingSegmentsMemberwen:WendysU.S.Member2019-12-302021-01-030000030697us-gaap:OperatingSegmentsMemberwen:WendysU.S.Member2018-12-312019-12-290000030697us-gaap:OperatingSegmentsMemberwen:WendysU.S.Member2018-01-012018-12-300000030697us-gaap:OperatingSegmentsMemberwen:WendysInternationalMember2019-12-302021-01-030000030697us-gaap:OperatingSegmentsMemberwen:WendysInternationalMember2018-12-312019-12-290000030697us-gaap:OperatingSegmentsMemberwen:WendysInternationalMember2018-01-012018-12-300000030697us-gaap:OperatingSegmentsMemberwen:GlobalRealEstateDevelopmentMember2019-12-302021-01-030000030697us-gaap:OperatingSegmentsMemberwen:GlobalRealEstateDevelopmentMember2018-12-312019-12-290000030697us-gaap:OperatingSegmentsMemberwen:GlobalRealEstateDevelopmentMember2018-01-012018-12-300000030697us-gaap:OperatingSegmentsMember2019-12-302021-01-030000030697us-gaap:OperatingSegmentsMember2018-12-312019-12-290000030697us-gaap:OperatingSegmentsMember2018-01-012018-12-300000030697us-gaap:CorporateAndOtherMember2019-12-302021-01-030000030697us-gaap:CorporateAndOtherMember2018-12-312019-12-290000030697us-gaap:CorporateAndOtherMember2018-01-012018-12-3000000306972019-12-302020-03-2900000306972020-03-302020-06-2800000306972020-06-292020-09-2700000306972020-09-282021-01-0300000306972018-12-312019-03-3100000306972019-04-012019-06-3000000306972019-07-012019-09-2900000306972019-09-302019-12-29

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED January 3, 2021
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 registrant 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. 43017
Dublin,Ohio(Zip Code)
(Address of principal executive offices) 
Registrant’s telephone number, including area code: (614) 764-3100
---------------------------------
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $.10 par valueWENThe Nasdaq Stock Market LLC
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes No

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 No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes 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
Accelerated filer
Non-accelerated filer
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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No

The aggregate market value of common equity held by non-affiliates of The Wendy’s Company as of June 26, 2020 was approximately $3,782.5 million. As of February 23, 2021, there were 223,841,105 shares of The Wendy’s Company common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE
The information required by Part III of this Form 10-K, to the extent not set forth herein, is incorporated herein by reference from The Wendy’s Company’s definitive proxy statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A not later than 120 days after January 3, 2021.




THE WENDY’S COMPANY AND SUBSIDIARIES
FORM 10-K TABLE OF CONTENTS

 Page
PART I
Item 1.Business
Item 1A. Risk Factors
Item 1B.Unresolved Staff Comments
Item 2.Properties
Item 3. Legal Proceedings
Item 4. Mine Safety Disclosures
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Item 6.Selected Financial Data
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A.Quantitative and Qualitative Disclosures About Market Risk
Item 8.Financial Statements and Supplementary Data
Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A.Controls and Procedures
Item 9B.Other Information
PART III
Item 10.Directors, Executive Officers and Corporate Governance
Item 11.Executive Compensation
Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13.Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accountant Fees and Services
PART IV
Item 15.Exhibits and Financial Statement Schedules
Item 16. Form 10-K Summary



PART I

Special Note Regarding Forward-Looking Statements and Projections

This Annual Report on Form 10-K and oral statements made from time to time by representatives of the Company may contain or incorporate by reference certain statements that are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Reform Act”). Generally, forward-looking statements include the words “may,” “believes,” “plans,” “expects,” “anticipates,” “intends,” “estimate,” “goal,” “upcoming,” “outlook,” “guidance” or the negation thereof, or similar expressions. In addition, all statements that address future operating, financial or business performance, strategies or initiatives, future efficiencies or savings, anticipated costs or charges, future capitalization, anticipated impacts of recent or pending investments or transactions and statements expressing general views about future results or brand health are forward-looking statements within the meaning of the Reform Act. 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. For all of our forward-looking statements, we claim the protection of the safe harbor for forward-looking statements contained in the Reform Act. Our actual results, performance and achievements may differ materially from any future results, performance or achievements expressed or implied by our forward-looking statements. Many important factors could affect our future results and cause those results to differ materially from those expressed in or implied by our forward-looking statements. Such factors include, but are not limited to, the following:

the disruption to our business from the novel coronavirus (COVID-19) pandemic and the impact of the pandemic on our results of operations, financial condition and prospects;

the impact of competition or poor customer experiences at Wendy’s restaurants;

economic disruptions, including in regions with a high concentration of Wendy’s restaurants;

changes in discretionary consumer spending and consumer tastes and preferences;

impacts to our corporate reputation or the value and perception of our brand;

the effectiveness of our marketing and advertising programs and new product development;

our ability to manage the accelerated impact of social media;

our ability to protect our intellectual property;

food safety events or health concerns involving our products;

our ability to achieve our growth strategy through new restaurant development and our Image Activation program;

our ability to effectively manage the acquisition and disposition of restaurants or successfully implement other strategic initiatives;

risks associated with leasing and owning significant amounts of real estate, including environmental matters;

our ability to achieve and maintain market share in the breakfast daypart;

risks associated with our international operations, including our ability to execute our international growth strategy;

changes in commodity and other operating costs;

shortages or interruptions in the supply or distribution of our products and other risks associated with our independent supply chain purchasing co-op;

the impact of increased labor costs or labor shortages;

the continued succession and retention of key personnel and the effectiveness of our leadership structure;

4


risks associated with our digital commerce strategy, platforms and technologies, including our ability to adapt to changes in industry trends and consumer preferences;

our dependence on computer systems and information technology, including risks associated with the failure, misuse, interruption or breach of our systems or technology or other cyber incidents or deficiencies;

risks associated with our securitized financing facility and other debt agreements, including compliance with operational and financial covenants, restrictions on our ability to raise additional capital, the impact of our overall debt levels and our ability to generate sufficient cash flow to meet our debt service obligations and operate our business;

risks associated with our capital allocation policy, including the amount and timing of equity and debt repurchases and dividend payments;

risks associated with complaints and litigation, compliance with legal and regulatory requirements and an increased focus on environmental, social and governance issues;

risks associated with the availability and cost of insurance, changes in accounting standards, the recognition of impairment or other charges, the impact of realignment and reorganization initiatives, changes in tax rates or tax laws and fluctuations in foreign currency exchange rates;

conditions beyond our control, such as adverse weather conditions, natural disasters, hostilities, social unrest, health epidemics or pandemics or other catastrophic events; and

other risks and uncertainties referred to in this Annual Report on 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 Securities and Exchange Commission.

In addition to the factors described above, there are risks associated with our predominantly franchised business model that could impact our results, performance and achievements. Such risks include our ability to identify, attract and retain experienced and qualified franchisees and effectively manage the transfer of restaurants between and among franchisees, the business and financial health of franchisees, the ability of franchisees to meet their royalty, advertising, development, reimaging and other commitments, participation by franchisees in brand strategies and the fact that franchisees are independent third parties that own, operate and are responsible for overseeing the operations of their restaurants. Our predominantly franchised business model may also impact the ability of the Wendy’s system to effectively respond and adapt to market changes. Many of these risks have been or in the future may be heightened due to the business disruption and impact from the COVID-19 pandemic.

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 above. 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 Annual Report on Form 10-K as a result of new information, future events or developments, except as required by federal securities laws, although we may do so from time to time. We do not endorse any projections regarding future performance that may be made by third parties.

Explanatory Note

The Wendy’s Company (“The Wendy’s Company”) is the parent company of its 100% owned subsidiary holding company, Wendy’s Restaurants, LLC (“Wendy’s Restaurants”). Wendy’s Restaurants is the parent company of Wendy’s International, LLC (formerly known as Wendy’s International, Inc.). Wendy’s International, LLC is the indirect parent company of (1) Quality Is Our Recipe, LLC (“Quality”), which is the owner and franchisor of the Wendy’s® restaurant system in the United States and all international jurisdictions except for Canada, and (2) Wendy’s Restaurants of Canada Inc., which is the owner and franchisor of the Wendy’s restaurant system in Canada. As used in this report, unless the context requires otherwise, the term “Company” refers to The Wendy’s Company and its direct and indirect subsidiaries, and “Wendy’s” refers to Quality when the context relates to ownership of or franchising the Wendy’s restaurant system and to Wendy’s International, LLC when the context refers to the Wendy’s brand. References in this Annual Report on Form 10-K (the “Form 10-K”) to restaurants that we “own” or that are “Company-operated” include owned and leased restaurants.

5


Item 1. Business.

Company Overview

Wendy’s is primarily engaged in the business of operating, developing and franchising a system of distinctive quick-service restaurants serving high quality food. Wendy’s opened its first restaurant in Columbus, Ohio in 1969. Today, Wendy’s is the #2 quick-service restaurant company in the hamburger sandwich segment in the United States (the “U.S.”) based on traffic share*, and the third largest globally with 6,828 restaurants in the United States and 30 foreign countries and U.S. territories as of January 3, 2021. (*Based on The NPD Group CREST® data for the twelve months ended December 2020.)

At January 3, 2021, there were 5,881 Wendy’s restaurants in operation in the United States. Of these restaurants, 361 were operated by the Company and 5,520 were operated by a total of 228 franchisees. In addition, at January 3, 2021, there were 947 Wendy’s restaurants in operation in 30 foreign countries and U.S. territories, all of which were franchised.

The Company’s principal executive offices are located at One Dave Thomas Blvd., Dublin, Ohio 43017, and its telephone number is (614) 764-3100.

Corporate History

The Wendy’s Company’s corporate predecessor was incorporated in Ohio in 1929 and was reincorporated in Delaware in June 1994. Effective September 29, 2008, in conjunction with the Wendy’s Merger (as defined below), the Company’s corporate name was changed from Triarc Companies, Inc. to Wendy’s/Arby’s Group, Inc. (“Wendy’s/Arby’s”). Effective July 5, 2011, in connection with the Company’s sale of Arby’s Restaurant Group, Inc. (“Arby’s”), the Company’s corporate name was changed to The Wendy’s Company.

Merger with Wendy’s

On September 29, 2008, Triarc Companies, Inc. and Wendy’s International, Inc. completed their merger (the “Wendy’s Merger”) in an all-stock transaction in which Wendy’s shareholders received 4.25 shares of Wendy’s/Arby’s Class A common stock for each Wendy’s common share owned. In the Wendy’s Merger, approximately 377,000,000 shares of Wendy’s/Arby’s Class A common stock were issued to Wendy’s shareholders. In addition, effective on the date of the Wendy’s Merger, Wendy’s/Arby’s Class B common stock was converted into Class A common stock. In connection with the May 28, 2009 amendment and restatement of Wendy’s/Arby’s Certificate of Incorporation, Wendy’s/Arby’s Class A common stock was redesignated as “Common Stock.”

Sale of Arby’s

On July 4, 2011, the Company completed the sale of 100% of the common stock of Arby’s to ARG IH Corporation (“ARG”), a wholly-owned subsidiary of ARG Holding Corporation (“ARG Parent”), for $130.0 million in cash (subject to customary purchase price adjustments) and 18.5% of the common stock of ARG Parent (through which the Company indirectly retained an 18.5% interest in Arby’s). Our 18.5% equity interest was diluted to 12.3% on February 5, 2018, when a subsidiary of ARG Parent acquired Buffalo Wild Wings, Inc. As a result, our diluted ownership interest included both the Arby’s® and Buffalo Wild Wings® brands under the newly formed combined company, Inspire Brands, Inc. (“Inspire Brands”). On August 16, 2018, the Company sold its remaining 12.3% ownership interest to Inspire Brands for $450.0 million. (Arby’s is a registered trademark of Arby’s IP Holder, LLC and Buffalo Wild Wings is a registered trademark of Buffalo Wild Wings, Inc.)

Fiscal Year

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

6


Business Strategy

Wendy’s long-term growth opportunities include investing in accelerated global growth through (1) building our breakfast daypart, (2) continued implementation of consumer-facing digital platforms and technologies and (3) expanding the Company’s footprint through targeted U.S. expansion and accelerated international expansion through same-restaurant sales growth and new restaurant development. Wendy’s vision is to become the world’s most thriving and beloved restaurant brand.

Business Segments

The Company is comprised of the following segments: (1) Wendy’s U.S., (2) Wendy’s International and (3) Global Real Estate & Development. Wendy’s U.S. includes the operation and franchising of Wendy’s restaurants in the U.S. and derives its revenues from sales at Company-operated restaurants and royalties, fees and advertising fund collections from franchised restaurants. Wendy’s International includes the franchising of Wendy’s restaurants in countries and territories other than the U.S. and derives its revenues from royalties, fees and advertising fund collections from franchised restaurants. Global Real Estate & Development includes real estate activity for owned sites and sites leased from third parties, which are leased and/or subleased to franchisees, and also includes our share of the income of our Canadian restaurant real estate joint venture (“TimWen”). In addition, Global Real Estate & Development earns fees from facilitating franchisee-to-franchisee restaurant transfers (“Franchise Flips”) and providing other development-related services to franchisees. See Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in Item 7 herein and Note 26 of the Financial Statements and Supplementary Data contained in Item 8 herein for segment financial information.

The Wendy’s Restaurant System

The revenues from our restaurant business are derived from two principal sources: (1) sales at Company-operated restaurants and (2) franchise-related revenues, including royalties, national advertising funds contributions, rents and franchise fees received from Wendy’s franchised restaurants. Company-operated restaurants comprised approximately 5% of the total Wendy’s system as of January 3, 2021.

Restaurant Openings and Closings

During 2020, Wendy’s opened seven new Company-operated restaurants and closed two generally underperforming Company-operated restaurants. During 2020, Wendy’s franchisees opened 140 new restaurants and closed 105 generally underperforming restaurants.

The following table sets forth the number of Wendy’s restaurants in operation at the beginning and end of each fiscal year from 2018 to 2020:
202020192018
Restaurants open at beginning of period6,788 6,711 6,634 
Restaurants opened during period147 182 159 
Restaurants closed during period(107)(105)(82)
Restaurants open at end of period6,828 6,788 6,711 

Restaurant Operations

Each Wendy’s restaurant offers an extensive menu specializing in hamburger sandwiches and featuring filet of chicken breast sandwiches, which are prepared to order with the customer’s choice of condiments. Wendy’s menu also includes chicken nuggets, chili, french fries, baked potatoes, freshly prepared salads, soft drinks, Frosty® desserts and kids’ meals. In addition, Wendy’s restaurants sell a variety of promotional products on a limited time basis. In March 2020, Wendy’s entered the breakfast daypart across the U.S. system. Wendy’s breakfast menu features a variety of breakfast sandwiches, biscuits and croissants, sides such as seasoned potatoes, oatmeal bars and seasonal fruit, and a beverage platform that includes hot coffee, cold brew iced coffee and our vanilla and chocolate Frosty-ccino iced coffee.

Free-standing Wendy’s restaurants generally include a pick-up window in addition to a dining room. In each of 2018 and 2019, approximately two-thirds of sales at Company-operated restaurants occurred through the pick-up window. In 2020, pick-up window sales represented approximately 83% of sales at Company-operated restaurants, reflecting the impact of the COVID-19 pandemic.
7



Wendy’s strives to maintain quality and uniformity throughout all restaurants by publishing detailed specifications for food products, preparation and service, continual in-service training of employees, restaurant operational audits and field visits from Wendy’s supervisors. In the case of franchisees, field visits are made by Wendy’s personnel who review operations, including quality, service and cleanliness and make recommendations to assist in compliance with Wendy’s specifications.

Supply Chain, Distribution and Purchasing

As of January 3, 2021, three independent processors (five total production facilities) supplied all of the beef used by Wendy’s restaurants in the United States. In addition, six independent processors (14 total production facilities) supplied all of the chicken used by Wendy’s restaurants in the United States. In addition, there was one main in-line distributor of food, packaging and beverage products, excluding breads, that serviced approximately 67% of Wendy’s restaurants in the United States and four additional in-line distributors that, in the aggregate, serviced approximately 32% of Wendy’s restaurants in the United States. Except as discussed below, Wendy’s and its franchisees have not experienced any material shortages of food, equipment, fixtures or other products that are necessary to maintain restaurant operations, and Wendy’s anticipates no such shortages of products and believes that alternate suppliers and distribution sources are available. During 2020, the COVID-19 pandemic led to interruptions in the delivery of certain products to Wendy’s restaurants. For example, we experienced disruptions to our beef supply beginning in early May 2020 as beef suppliers across North America faced production challenges. As a result, some menu items were occasionally in short supply at some Wendy’s system restaurants. While we and our supply chain partners effectively managed through this disruption and the beef supply subsequently returned to normal levels across the Wendy’s system, there can be no assurances that we will not see similar disruptions in the future. Suppliers and distributors to the Wendy’s system must comply with United States Department of Agriculture (“USDA”) and United States Food and Drug Administration (“FDA”) regulations governing the manufacture, packaging, storage, distribution and sale of all food and packaging products.

Wendy’s has a purchasing co-op relationship structure with its franchisees that establishes Quality Supply Chain Co-op, Inc. (“QSCC”). QSCC manages, for the Wendy’s system in the United States and Canada, contracts for the purchase and distribution of food, proprietary paper, operating supplies and equipment under national agreements with pricing based upon total system volume. QSCC’s supply chain management facilitates the continuity of supply and provides consolidated purchasing efficiencies while monitoring and seeking to minimize possible obsolete inventory throughout the Wendy’s supply chain in the United States and Canada. Wendy’s and its franchisees pay sourcing fees to third-party vendors on certain products sourced by QSCC. Such sourcing fees are remitted by these vendors to QSCC and are the primary means of funding QSCC’s operations. Should QSCC’s sourcing fees exceed its expected needs, QSCC’s board of directors may return some or all of the excess to its members in the form of a patronage dividend.

Wendy’s does not sell food or restaurant supplies to its franchisees.

Quality Assurance

Wendy’s quality assurance program is designed to verify that the food products supplied to our restaurants are processed in a safe, sanitary environment and in compliance with our food safety and quality standards. Wendy’s quality assurance personnel conduct multiple sanitation and production audits throughout the year for all of our core menu product processing facilities, which include beef, chicken, pork, buns, french fries, Frosty® dessert ingredients and produce. Animal welfare audits are also conducted at all beef, chicken and pork facilities to confirm compliance with our required animal welfare and handling policies and procedures. In addition to our facility audit program, weekly samples of beef, chicken and other core menu products from our distribution centers are randomly sampled and analyzed by a third-party laboratory to test conformance to our quality specifications. Wendy’s representatives, including third party auditors, regularly conduct evaluations and inspections of all Company-operated and franchise restaurants to test conformance to our sanitation, food safety and operational requirements. Wendy’s has the right to terminate franchise agreements if franchisees fail to comply with quality standards. In response to the COVID-19 pandemic, we adapted and evolved certain of our audits which were traditionally conducted onsite, taking advantage of various virtual tools and resources to engage effectively with our suppliers. We also reviewed and reinforced our strict policies and procedures related to food safety procedures, personal hygiene standards, handwashing requirements and sanitation protocols through frequent communications and retraining, and instituted a brand standard that restaurant employees should wear a mask or face covering and service gloves while working, unless an exception applies.

8


Information Technology

Wendy’s relies on computer systems and information technology to conduct its business. Wendy’s utilizes both commercially available third-party software and proprietary software owned by the Company to run the point-of-sale and kitchen delivery functions and certain other consumer-facing and back-office functions in Wendy’s restaurants. Wendy’s has invested significant resources to focus on consumer-facing technology, including installing a single point-of-sale system for Wendy’s U.S. and Canadian restaurants, activating mobile ordering via Wendy’s mobile apps, launching the Wendy’s Rewards loyalty program and establishing delivery arrangements with third-party vendors for Wendy’s U.S. and Canadian restaurants. We believe our digital platforms are critical to creating a more seamless user experience, providing insights to enhance our relationship with customers and meeting consumer demand for customization, speed and convenience. In December 2019, Wendy’s implemented a plan to realign and reinvest resources in our IT organization to strengthen our ability to accelerate growth. We are partnering with a third-party global IT consultant on this new structure to leverage their global capabilities and enable a more seamless integration between our digital and corporate IT assets.

Trademarks and Service Marks

Wendy’s or its subsidiaries have registered certain trademarks and service marks in the United States Patent and Trademark Office and in international jurisdictions, some of which include Wendy’s®, Old Fashioned Hamburgers® and Quality Is Our Recipe®. Wendy’s believes that these and other related marks are of material importance to its business. Domestic trademarks and service marks have their next required maintenance filings at various times from 2021 to 2031 in order to keep such registrations in force, while international trademarks and service marks have various durations of ten to 15 years. Wendy’s generally intends to maintain and renew its trademarks and service mark registrations in accordance with applicable deadlines.

Wendy’s entered into an Assignment of Rights Agreement with the Company’s founder, Dave Thomas, and his wife dated as of November 5, 2000 (the “Assignment”). Wendy’s had used Mr. Thomas, who was Senior Chairman of the Board until his death on January 8, 2002, as a spokesperson and focal point for its products and services for many years. With the efforts and attributes of Mr. Thomas, Wendy’s has, through its extensive investment in the advertising and promotional use of Mr. Thomas’ name, likeness, image, voice, caricature, endorsement rights and photographs (the “Thomas Persona”), made the Thomas Persona well known in the United States and throughout North America and a valuable asset for both Wendy’s and Mr. Thomas’ estate. Under the terms of the Assignment, Wendy’s acquired the entire right, title, interest and ownership in and to the Thomas Persona, including the sole and exclusive right to commercially use the Thomas Persona.

Research and Development

New product development is important to the Wendy’s system. The Company believes that the development and testing of new and improved products is critical to increasing sales, attracting new customers and differentiating the Wendy’s brand from competitors. The Company maintains a state-of-the-art research and development facility that includes a sensory lab, analytical labs, culinary kitchens and a Wendy’s test kitchen. The Company employs a variety of professionals from the culinary and food science disciplines to bring new and improved products to market.

Seasonality

Wendy’s restaurant operations are moderately seasonal. Wendy’s average restaurant sales are normally higher during the summer months than during the winter months. Because our business is moderately seasonal, results for any quarter are not necessarily indicative of the results that may be achieved for any other quarter or for the full fiscal year.

Competition

Each Wendy’s restaurant is in competition with other food service operations within the same geographical area. The quick-service restaurant segment is highly competitive and includes well-established competitors. Wendy’s competes with other restaurant companies and food outlets, primarily through the quality, variety, convenience, price and value perception of food products offered. The number and location of restaurants, quality and speed of service, attractiveness of facilities, effectiveness of marketing and new product development by Wendy’s and its competitors are also important factors. The price charged for each menu item may vary from market to market (and within markets) depending on competitive pricing and the local cost structure. Wendy’s also competes within the food service industry and the quick-service restaurant sector for customers as well as for personnel, suitable real estate sites and qualified franchisees.

9


Wendy’s competitive position is differentiated by a focus on quality, its use of fresh, never frozen ground beef* and fresh-cut vegetables in the United States, Canada and certain other countries, its unique and diverse menu, its promotional products, its choice of condiments and the atmosphere and décor of its restaurants. (*Fresh beef available in the contiguous U.S., Alaska and Canada.) Wendy’s continues to implement its Image Activation program, which includes reimaging existing Wendy’s restaurants and building new Wendy’s restaurants with innovative exterior and interior restaurant designs, with plans for a significant number of new and reimaged restaurants in 2021 and beyond. The Image Activation program also differentiates the Company from its competitors by its emphasis on selection and performance of restaurant employees that provide friendly and engaged customer service in Wendy’s restaurants.

Many of the leading restaurant chains continue to focus on new restaurant development as one strategy to increase market share through increased consumer awareness and convenience. This results in increased competition for available development sites and higher development costs for those sites. Competitors also employ marketing strategies such as frequent use of price discounting, frequent promotions and heavy advertising expenditures. Continued price discounting, including the use of coupons and offers, in the quick-service restaurant industry and the emphasis on value menus could have an adverse impact on Wendy’s business.

Other restaurant chains have also competed by offering high quality sandwiches made with fresh ingredients and artisan breads, and there are several emerging restaurant chains featuring high quality food served at in-line locations. Several chains have also sought to compete by targeting certain consumer groups, such as capitalizing on trends toward certain types of diets or dietary preferences (e.g., plant-based food, alternative proteins, low carbohydrate, low trans-fat, gluten free or antibiotic free) by offering menu items that are promoted as being consistent with such diets.

Additional competitive pressures for prepared food purchases come from operators outside the restaurant industry. A number of major grocery chains offer fresh deli sandwiches and fully prepared food and meals to go as part of their deli sections. Some of these chains also have in-store cafes with service counters and tables where consumers can order and consume a full menu of items prepared especially for that portion of the operation. Additionally, convenience stores and retail outlets at gas stations frequently offer a wide variety of sandwiches and other foods.

Wendy’s also competes with grocery chains and other retail outlets that sell food to be prepared at home. Competition with these chains and other outlets has increased due to the gap between the price of food at home compared to the price of food purchased at restaurants.

Technology and delivery are becoming increasingly critical parts of the restaurant consumer experience. In the quick-service restaurant category, technology initiatives include mobile interactive technology for brand and menu search information, mobile ordering, mobile payment, mobile offers, customer loyalty and rewards programs and other self-service technologies. An increasing number of restaurant chains have also introduced or expanded their restaurant delivery arrangements as another strategy to increase market share. If our digital commerce platforms or third-party delivery providers do not meet customers’ expectations in terms of security, speed, cost, attractiveness or ease of use, customers may be less inclined to use those platforms or providers and our competitive position could be adversely impacted.

System Optimization

The Company’s system optimization initiative included a shift from Company-operated restaurants to franchised restaurants over time, through acquisitions and dispositions, as well as by facilitating Franchise Flips. During 2016, the Company completed the sale of 310 Company-operated restaurants to franchisees, which resulted in the completion of its plan to reduce its ongoing Company-operated restaurant ownership to approximately 5% of the total Wendy’s system.

While the Company has no plans to reduce its ownership below the approximately 5% level, it expects to continue to optimize the Wendy’s system by facilitating Franchise Flips, as well as evaluating strategic acquisitions of franchised restaurants and strategic dispositions of Company-operated restaurants to existing and new franchisees, to further strengthen the franchisee base, drive new restaurant development and accelerate adoption of Wendy’s Image Activation program. Wendy’s generally retains a right of first refusal in connection with any proposed sale or transfer of franchised restaurants.

During 2018, the Company sold three Company-operated restaurants to franchisees and acquired 16 Wendy’s restaurants from franchisees. During 2019, the Company acquired five Wendy’s restaurants from franchisees. No Company-operated restaurants were sold to franchisees during 2019. One Company-operated restaurant was sold to a franchisee during 2020. In addition, during 2020, 2019 and 2018, the Company facilitated Franchise Flips covering 54, 37 and 96 restaurants, respectively.

10


Franchising

As of January 3, 2021, 228 Wendy’s U.S. franchisees operated 5,520 franchised restaurants in 50 states and the District of Columbia, and 102 Wendy’s international franchisees operated 947 franchised restaurants in 30 foreign countries and U.S. territories.

U.S. Franchise Arrangements

The rights and obligations governing the majority of franchised restaurants operating in the United States are set forth in the Wendy’s current Unit Franchise Agreement (the “Current Franchise Agreement”) (non-traditional locations may operate under an amended agreement). This agreement provides the franchisee the right to construct, own and operate a Wendy’s restaurant upon a site accepted by Wendy’s and to use the Wendy’s system in connection with the operation of the restaurant at that site. The Current Franchise Agreement provides for a 20-year term and a ten-year renewal subject to certain conditions. The initial term may be extended up to 25 years and the renewal extended up to 20 years for qualifying restaurants under the new restaurant development incentive and reimage programs described below in “Franchise Development and Other Relationships”. Wendy’s has in the past franchised under different agreements on a multi-unit basis; however, Wendy’s now grants new Wendy’s franchises on a unit-by-unit basis.

The Current Franchise Agreement requires that the franchisee pay a monthly royalty of 4.0% of sales, as defined in the agreement, from the operation of the restaurant. The agreement also typically requires that the franchisee pay Wendy’s an initial technical assistance fee. In the United States, the standard technical assistance fee required under a newly executed Current Franchise Agreement is currently $50,000 for each new restaurant opened.

The technical assistance fee is used to defray some of the costs to Wendy’s for training, start-up and transitional services related to new and existing franchisees acquiring Company-operated restaurants and in the development and opening of new restaurants. In certain limited instances (such as a reduced franchise agreement term or other unique circumstances), Wendy’s may charge a reduced technical assistance fee or may waive the technical assistance fee. Wendy’s does not select or employ personnel on behalf of franchisees.

International Franchise Arrangements

Wendy’s Restaurants of Canada Inc. (“WROC”), a 100% owned subsidiary of Wendy’s, holds master franchise rights for Canada. The rights and obligations governing the majority of franchised restaurants operating in Canada are set forth in a Single Unit Sub-Franchise Agreement (the “Single Unit Sub-Franchise Agreement”). This document provides the franchisee the right to construct, own and operate a Wendy’s restaurant upon a site accepted by WROC and to use the Wendy’s system in connection with the operation of the restaurant at that site. The Single Unit Sub-Franchise Agreement provides for a 20-year term and a ten-year renewal subject to certain conditions. The sub-franchisee pays to WROC a monthly royalty of 4.0% of sales, as defined in the agreement, from the operation of the restaurant. The agreement also typically requires that the franchisee pay WROC an initial technical assistance fee. The standard technical assistance fee is currently C$50,000 for each new restaurant opened.

Franchisees who wish to operate Wendy’s restaurants outside of the United States and Canada enter into franchise or license agreements with Wendy’s that generally provide franchise rights for each restaurant for an initial term of ten years or 20 years, depending on the country, and typically include a ten-year renewal provision, subject to certain conditions. The agreements grant a license to the franchisee to use the Wendy’s trademarks and know-how in the operation of a Wendy’s restaurant at a specified location. Generally, the franchisee pays Wendy’s an initial technical assistance fee or other per restaurant fee and monthly fees based on a percentage of gross monthly sales of each restaurant. In certain foreign markets, Wendy’s may grant the franchisee exclusivity to develop a territory in exchange for the franchisee undertaking to develop a specified number of new Wendy’s restaurants in the territory based on a negotiated schedule. In these instances, the franchisee generally pays Wendy’s an upfront development fee, annual development fees or a per restaurant development fee. In certain circumstances, Wendy’s may grant a franchisee the right to sub-franchise in a stated territory, subject to certain conditions.

Franchise Development and Other Relationships

In addition to its franchise and license agreements, Wendy’s also enters into development and/or relationship agreements with certain franchisees. The development agreement provides the franchisee with the right to develop a specified number of new Wendy’s restaurants using the Image Activation program design within a stated, non-exclusive territory for a specified period, subject to the franchisee meeting interim new restaurant development requirements. The relationship agreement
11


addresses other aspects of the franchisor-franchisee relationship, such as restrictions on operating competing restaurants, participation in brand initiatives such as the Image Activation program, employment of approved operators, confidentiality and restrictions on engaging in sale/leaseback or debt refinancing transactions without Wendy’s prior consent.

In order to promote new restaurant development, Wendy’s has an incentive program for franchisees that provides for technical assistance fee waivers and reductions in royalty and national advertising payments for up to the first two years of operation for qualifying new restaurants opened prior to December 31, 2022. In addition, Wendy’s has a restaurant development incentive program that provides for incremental reductions in royalty and national advertising payments for up to the first two years of operation for qualifying new restaurants for existing franchisees that sign up for the program under a new development agreement, or through an extension of their existing development agreement, and commit to incremental development of new Wendy’s restaurants. Under any extended development agreements, franchisees are also eligible for technical assistance fee waivers for restaurants opened one year in advance of their original development schedule so long as the restaurants are opened prior to December 31, 2022. Wendy’s also provides franchisees with the option of an early 20-year or 25-year renewal of their franchise agreement upon completion of reimaging utilizing certain approved Image Activation reimage designs.

Franchised restaurants are required to be operated under uniform operating standards and specifications relating to the selection, quality and preparation of menu items, signage, decor, equipment, uniforms, suppliers, maintenance and cleanliness of premises and customer service. Wendy’s monitors franchisee operations and inspects restaurants periodically to ensure that required practices and procedures are being followed.

See Note 7 and Note 21 of the Financial Statements and Supplementary Data contained in Item 8 herein, and the information under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” herein, for information regarding certain guarantee obligations, reserves, commitments and contingencies involving franchisees.

Advertising and Marketing

In the United States and Canada, Wendy’s advertises nationally through national advertising funds on network and cable television programs, including nationally televised events, and advertises locally primarily through regional network and cable television, radio and social media. Wendy’s maintains two national advertising funds established to collect and administer funds contributed for use in advertising through television, radio, the Internet and a variety of promotional campaigns, including the increasing use of social media. Separate national advertising funds are administered for Wendy’s United States and Canadian restaurant locations. Contributions to the national advertising funds are required to be made by both Company-operated and franchised restaurants and are based on a percentage of restaurant retail sales. In addition to the contributions to the national advertising funds, Wendy’s requires additional contributions to be made for both Company-operated and franchised restaurants based on a percentage of restaurant retail sales for the purpose of local and regional advertising programs. Required franchisee contributions to the national advertising funds and for local and regional advertising programs are governed by the Current Franchise Agreement in the United States and by the Single Unit Sub-Franchise Agreement in Canada. Required contributions by Company-operated restaurants for advertising and promotional programs are at the same percentage of retail sales as franchised restaurants within the Wendy’s system. As of January 3, 2021, the contribution rate for U.S. restaurants was generally 3.5% of retail sales for national advertising and 0.5% of retail sales for local and regional advertising. As of January 3, 2021, the contribution rate for Canadian restaurants was generally 3.0% of retail sales for national advertising and 1.0% of retail sales for local and regional advertising, with the exception of Quebec, for which there is no national advertising contribution rate and the local and regional advertising contribution rate is 4.0% of retail sales. See Note 24 of the Financial Statements and Supplementary Data contained in Item 8 herein for further information regarding advertising.

Human Capital

At Wendy’s, our vision is to become the world’s most thriving and beloved restaurant brand and every day we strive to live our purpose of creating joy and opportunity through food, family and community. Our restaurants, our food, and the value and service we provide to our customers are all integral, but ultimately it is our people that help us deliver our brand promise of “Fast Food Done Right” every single day.

From day one, the Wendy’s business has always been of, for and about people. Respect, equity and fair treatment for our team members, franchisees, supplier partners and vendors is a central part of our business. So is staying true to our values established by our founder Dave Thomas, which include Doing the Right Thing, Treating People with Respect and Giving Something Back. We strive to bring those values to life through daily interactions with our team members and customers and in the communities where we do business. We also continue to invest in our people to ensure we are able to attract, hire and retain great talent throughout our organization. We measure our effectiveness in these areas using various tools and metrics,
12


including administering an employee engagement survey twice a year and tracking our employee turnover rates compared to others in the restaurant industry. During 2020, we continued to outperform our peer group benchmarks and we saw consistent progress in both increased employee engagement and lower turnover.

As of January 3, 2021, the Company was comprised of approximately 14,000 employees, of which approximately two-thirds were part-time, and one-third were full-time. The vast majority of our employees are located in the United States and work in our Company-operated restaurants within our Wendy’s U.S. business segment. Outside of our restaurants, our largest population of employees work in our field support organization or at our Restaurant Support Center in Dublin, Ohio. Our workforce represents nearly all demographics, with diversity in age, race, ethnicity, gender, gender identity and sexual orientation. Specifically, we have more women than men, more employees that identify as persons of color than white, and more employees under the age of 30 than any other age group.

Diversity, Equity and Inclusion

We believe our strategic focus on diversity, equity and inclusion (“DE&I”) helps the Company deliver on our values as well as support our financial performance and global growth strategy. Creating and fostering inclusive work environments and teams allows us to create an engaging and welcoming culture for our employees, which we believe positively affects the quality of products and experience we deliver to our customers.

Our DE&I strategy is built around three pillars. First, we seek to increase our knowledge and accountability to ensure we have a diverse and inclusive mindset. Next, we work to ensure our recruiting and hiring initiatives are reaching a broad audience, so that our workforce represents the communities in which we serve. Third, we strive to expand and develop a strong, diverse pipeline of talent by providing opportunities for growth and development at all levels of our organization. Our senior management and Board of Directors serve an integral role in our DE&I strategy, providing guidance and oversight.

We are fortunate to have several thriving Employee Resource Groups (“ERGs”), which are voluntary employee-led groups, each sponsored by a Wendy’s senior leadership team member. Our ERGs serve an important role in support of our DE&I strategy, creating forums for learning and inclusion, opportunities to celebrate different backgrounds, empowering employees to bring their authentic self to work, and creating leadership and professional development opportunities. Our ERGs focus on employees and allies who identify as Women (Women of Wendy’s), LGBTQ+ (WeQual), Military Veterans & Families (WeVets), Culturally Diverse (WCDN), Black (WeBERG) and Young Professional (WenGEN).

Compensation and Benefits

We are committed to providing market-competitive and equitable pay and benefits to attract and retain great talent. We enable this by benchmarking and analyzing pay and benefits both externally and internally. In addition to competitive hourly rates and base salaries, all general managers and district managers of our Company-operated restaurants are eligible for performance-based cash incentive bonuses, along with all corporate management staff. For our restaurant-level employees, we offer the potential for raises at least twice annually based on individual performance reviews. At Wendy’s, we are committed to providing pay equity for all employees, regardless of gender or ethnicity.

We offer a robust set of benefits to help our employees and their families stay healthy and effectively manage spend related to health and financial well-being. This includes standard benefits, such as medical and prescription drug, dental and vision, 401(k) savings and retirement plans and health savings accounts. In addition, we provide access to our Employee Assistance Program, paid sick leave, paid parental leave and adoption benefits for all employees globally at all levels. For employees based in the U.S., we also provide telehealth visits at no cost to employees enrolled in a Wendy’s health care plan, and telehealth access at a discounted cost to all employees not enrolled in a Company health care plan.

Safety and Well-Being

We are committed to providing safe work environments and providing our employees with the resources they need to promote their well-being. Given the significant impact of the COVID-19 pandemic, 2020 presented a unique set of challenges. We took several actions during the year to support the safety and well-being of our employees, such as providing enhanced safety training and personal protective equipment (PPE), social distancing measures, the ability to take advantage of emergency paid sick leave, recognition pay for our front-line restaurant employees and protection of bonus payments for our restaurant General Managers and District Managers when the COVID-19 pandemic was impacting financial performance outside of the managers’ control.

13


Talent Development

To set our employees up for success and help them achieve their personal development needs and career growth, we invest in training and development programs at all levels within the Company. We also leverage annual processes that support individual performance planning, individual professional development planning and a broad review of talent throughout our organization. Restaurant-level employees take advantage of an extensive online learning curriculum, as well as hands-on training led by crew trainers, managers and field support staff. Restaurant managers and multi-unit operators participate in Wendy’s University, which includes targeted training to develop management and leadership skills. Wendy’s University also provides targeted programming for corporate management staff, including diversity training, people manager training, leadership dialogues and the opportunity to participate in third party conferences and training.

We also share information about our people and human capital initiatives on our website at www.wendys.com/what-we-value, in our annual Corporate Social Responsibility report and on The Square DealTM Wendy’s Blog at www.squaredealblog.com. The contents of our website and these additional information sources are not incorporated by reference in this Form 10-K or any other report or document we file with the Securities and Exchange Commission.

Governmental Regulations

U.S. Operations

The Company and our franchisees are subject to various federal, state and local laws and regulations affecting the operation of our respective businesses, including laws and regulations relating to building and zoning, health, fire and safety, sanitation, food preparation, nutritional content and menu labeling, advertising, information security, privacy and consumer protection, as well as laws, regulations, recommendations and guidelines related to the COVID-19 pandemic. Each Wendy’s restaurant is subject to licensing and regulation by a number of governmental authorities in the state or municipality in which the restaurant is located. The Company is also subject to federal, state and local laws governing labor and employment matters, including minimum wage requirements, overtime and other working conditions, family leave and health care mandates, union organizing, work authorization requirements, insurance and workers’ compensation rules and anti-discrimination and anti-harassment laws applicable to Company employees, and our franchisees are subject to labor and employment laws with respect to their employees. Additionally, the Company and our franchisees are subject to the Americans with Disabilities Act and other similar laws that provide civil rights protections to individuals with disabilities in the context of public accommodations and other areas.

The Company’s franchising activities are subject to the rules and regulations of the Federal Trade Commission (the “FTC”) and various state laws regulating the offer and sale of franchises. The FTC requires that franchisors furnish a franchise disclosure document (“FDD”) containing certain information to prospective franchisees before the execution of a franchise agreement. Several states require registration and disclosure of the FDD in connection with franchise offers and sales and have laws regulating the franchisor-franchisee relationship. These state laws often limit, among other things, the duration and scope of non-competition provisions and the ability of franchisors to terminate franchise agreements or withhold consent to the renewal or transfer of franchise agreements. The Company believes that our FDD, together with applicable state versions or supplements, and franchising procedures comply in all material respects with the FTC’s franchise rules and applicable state franchise laws.

International Operations

Internationally, the Company and our franchisees are subject to national, provincial and local laws and regulations that often are similar to those impacting us and our franchisees in the U.S., including laws and regulations concerning franchises, labor and employment, building and zoning, health, fire and safety, sanitation, food preparation, nutritional content, menu labeling, advertising, information security, privacy and consumer protection, as well as laws, regulations, recommendations and guidelines related to the COVID-19 pandemic. Wendy’s restaurants outside the U.S. are also often subject to tariffs and regulations on imported commodities and equipment and laws regulating foreign investment, as well as anti-bribery and anti-corruption laws. The Company believes that our international franchise disclosure documents and franchising procedures comply in all material respects with the laws of the applicable countries.

14


Environmental Matters

The Company’s operations, including the selection and development of properties that we own or lease and any construction or improvements made at those properties, are subject to a variety of federal, state, local and international environmental laws and regulations, including laws and regulations concerning the storage, handling and disposal of hazardous or toxic substances. Our properties are sometimes located in developed commercial or industrial areas and might previously have been occupied by more environmentally significant operations, such as gas stations. Environmental laws and regulations sometimes require owners or operators of contaminated property to remediate that property, regardless of fault, and could give rise to significant fines, penalties and liabilities, as well as third-party claims. The Company believes that our restaurant operations comply substantially with all applicable environmental laws and regulations.

Legal Matters

The Company is involved in litigation and claims incidental to our business. We provide accruals for such litigation and claims when payment is probable and reasonably estimable. We believe we have adequate accruals for continuing operations for all of our legal and environmental matters. See Item 3 “Legal Proceedings” for additional information.

The Company does not believe that compliance with applicable laws and regulations, including environmental laws and regulations, or the outcome of any legal matters in which we are involved, will have a material adverse effect on our results of operations, financial condition, capital expenditures, earnings or competitive position. However, the Company cannot predict what laws or regulations will be enacted in the future or how existing or future laws or regulations will be administered or interpreted. See Item 1A “Risk Factors” for a discussion of certain risks relating to legal and regulatory requirements, litigation and claims and related matters affecting our business.

Available Information

We make our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to such reports, as well as our annual proxy statement, available, free of charge, on our Investor Relations website as soon as reasonably practicable after such reports are electronically filed with, or furnished to, the Securities and Exchange Commission. We also provide our Code of Business Conduct and Ethics, free of charge, on our website. Our corporate website address is www.wendys.com and our Investor Relations website address is www.irwendys.com. Information contained on those websites is not part of this Form 10-K.

Item 1A. Risk Factors.

We wish to caution readers that in addition to the important factors described elsewhere in this Form 10-K, we have included below certain material factors that have affected, or in the future could affect, our actual results and could cause our actual consolidated results during fiscal 2021, and beyond, to differ materially from those expressed in or implied by any forward-looking statements made by us or on our behalf.

Risks Related to Macroeconomic and Industry Conditions

The novel coronavirus (COVID-19) pandemic has disrupted and is expected to continue to disrupt our business, which has materially affected and could continue to materially affect our results of operations, financial condition and prospects for an extended period of time.

In March 2020, the World Health Organization declared the novel coronavirus (COVID-19) a global pandemic, and governmental authorities around the world implemented measures to reduce the spread of COVID-19. These measures adversely affected customers, workforces, economies and financial markets, and, along with decreased consumer spending, led to an economic downturn in many of our markets. Governmental restrictions and public perceptions of the risks associated with COVID-19 have caused consumers to avoid or limit travel, gatherings in public places and other social interactions, which has adversely affected, and could continue to adversely affect, our business.

In response to the COVID-19 pandemic, in March 2020, we updated our brand standard to include the closure of all dining rooms except where there were specific needs, or a drive-thru or pick-up window option was not available, subject to applicable federal, state and local requirements. Substantially all Wendy’s restaurants continued to offer drive-thru and delivery service to our customers. During the second quarter of 2020, we began implementing our restaurant and dining room reopening process through a phased approach in accordance with federal, state and local requirements, with customer and team member safety as
15


our top priority. Dining rooms have been re-opening at each restaurant owner’s discretion, subject to applicable regulatory restrictions. As of January 3, 2021, approximately 75% of dining rooms were open across the Wendy’s system offering carryout and, in some cases, dine in services. The COVID-19 pandemic has also resulted in the temporary closure of certain restaurants across the Wendy’s system. As of January 3, 2021, more than 99% of our global systemwide restaurants were operating.

As a result of the COVID-19 pandemic, our customer counts and systemwide sales have been significantly negatively impacted. Even as mobility continues to increase, customers have been and may continue to be reluctant to return to in-restaurant dining, and consumer spending may continue to be adversely impacted for an extended period of time as a result of decreased consumer confidence and the impact of lost wages due to increased unemployment. During the fourth quarter and full year of 2020, global same-restaurant sales increased 4.7% and 1.2%, respectively, primarily driven by the positive impact of our new breakfast daypart in the United States and higher average check, partially offset by a decline in customer counts.

The COVID-19 pandemic has also adversely affected new restaurant development and restaurant reimaging. Due to the uncertain and challenging economic and market conditions, we delayed construction of certain new Company-operated restaurants and reimaging of existing Company-operated restaurants and also extended the new restaurant development and Image Activation requirements of our franchisees by one year. These delays could affect our ability to drive future growth in our business.

The impact of the COVID-19 pandemic has had, and could continue to have, an adverse effect on our franchisees’ operations and financial condition. Following the onset of the pandemic, we took certain actions to support our franchisees, including extending payment terms for royalties, extending or abating payment terms for advertising fund contributions and offering to defer base rent payments on properties owned by the Company and leased to franchisees. To the extent our franchisees experience financial distress, including as a result of the COVID-19 pandemic, it could negatively affect our results of operations, cash flows and financial condition through delayed or reduced payments of royalties, advertising fund contributions or rent.

The COVID-19 pandemic led, and could again lead, to interruptions in the delivery of food or other supplies to Wendy’s restaurants arising from delays or restrictions on shipping or manufacturing, closures of supplier or distributor facilities or financial distress or insolvency of suppliers or distributors. These delays or interruptions could impact the availability of certain food items at Wendy’s restaurants, including beef, chicken, pork and other core menu products. For example, we experienced disruptions to our beef supply beginning in early May 2020 as beef suppliers across North America faced production challenges. As a result, some menu items were occasionally in short supply at some Wendy’s system restaurants. While we and our supply chain partners effectively managed through this disruption and the beef supply subsequently returned to normal levels across the Wendy’s system, there can be no assurances that we will not see similar disruptions in the future. Our results of operations and those of our franchisees could be adversely affected if our key suppliers or distributors are unable to fulfill their responsibilities and we are unable to identify alternative suppliers or distributors in a timely manner or effectively transition the impacted business to new suppliers or distributors.

The COVID-19 pandemic could also lead to labor shortages or increased labor costs. The risk or perceived risk of contracting the virus could adversely affect the ability or cost of adequately staffing restaurants, which could be exacerbated to the extent that the Company or franchisees have employees who test positive for the virus. If a significant percentage of our or our franchisees’ workforce is unable to work, whether because of illness, quarantine, travel limitations or other governmental actions or restrictions, our operations and the operations of our franchisees may be negatively impacted, which could materially affect our results of operations and financial condition. We took several actions to help support our employees and protect the health and safety of our employees and customers, such as implementing a new emergency sick leave policy, providing temporary wage increases to restaurant employees and purchasing additional sanitation supplies and personal protective materials, which contributed to increased operating costs.

The impacts from the COVID-19 pandemic could have a material adverse effect on our liquidity and capital resources. We currently believe we have the ability to pursue additional sources of liquidity if needed or desired to fund operating cash requirements or for other purposes. However, there can be no assurance that additional liquidity will be readily available or available on terms acceptable to us. If the disruptions caused by COVID-19 worsen, our ability to comply with certain debt covenants under our securitized financing facility could be adversely affected. Additionally, negative changes to our credit ratings due to the impact or expected impact of COVID-19 could have an adverse effect on our existing indebtedness, our ability to access additional capital, our cost of borrowing and our overall liquidity position and financial condition.

16


In addition to the risks described above, the COVID-19 pandemic has had, and could continue to have, the effect of heightening other risks disclosed in this risk factors section, including, but not limited to, risks related to competition, economic conditions and disruptions, brand value and perception, consumer preferences and spending, commodity costs, labor, supply chain and purchasing, new restaurant development and reimaging, performance of the breakfast daypart, franchisees, leasing and ownership of real estate, international operations, digital commerce and technology, cybersecurity, our securitized financing facility and levels of indebtedness, complaints or litigation, legal and regulatory requirements, impairment charges and payment of future dividends. We cannot predict the ultimate duration, scope or severity of the COVID-19 pandemic or its ultimate impact on our results of operations, financial condition and prospects.

Competition from other restaurant companies, as well as grocery chains and other retail food outlets, or poor customer experience at Wendys restaurants, could hurt our brand.

The market segments in which Wendy’s restaurants compete are highly competitive with respect to, among other things, price, food quality and presentation, service, location, convenience, and the nature and condition of the restaurant facility. If customers have a poor experience at a Wendy’s restaurant, whether at a Company-operated or franchised restaurant, we may experience a decrease in customer counts. Further, Wendy’s restaurants compete with a variety of locally owned restaurants, as well as competitive regional, national and global restaurant chains. Several of these chains compete by offering menu items that are targeted at certain consumer groups or dietary trends. Additionally, many of our competitors have introduced lower cost value meal menu options and have employed marketing strategies that include frequent use of price discounting (including through the use of coupons and other offers), frequent promotions and heavy advertising expenditures. Some of our competitors have substantially greater financial, marketing, personnel and other resources than we do, which may allow them to react to changes in pricing and marketing strategies better than we can and drive higher levels of brand awareness among consumers. This product and price competition could result in reduced revenues and loss of market share.

Moreover, new companies, including operators outside the quick-service restaurant industry, may enter market areas in which Wendy’s restaurants operate and target our customer base. For example, additional competitive pressures for prepared food purchases have come from deli sections and in-store cafes of a number of major grocery store chains, as well as from convenience stores and casual dining outlets. Such competitors may have, among other things, lower operating costs, better locations, better facilities, more effective marketing and more efficient operations. Wendy’s also competes with grocery chains and other retail outlets that sell food to be prepared at home. Competition with these chains and other outlets has increased due to the gap between the price of food prepared at home compared to the price of food purchased at restaurants. This increased product and price competition could put deflationary pressure on the selling price of products offered at Wendy’s restaurants. All such competition may adversely affect our brand, business, results of operations and financial condition.

Disruptions in the national and global economies, or in regions that have a high concentration of Wendy’s restaurants, could adversely impact our business, results of operations and financial condition.

Disruptions in the national and global economies could result in higher unemployment rates and declines in consumer confidence and spending. If such disruptions occur, they may result in significant declines in consumer food-away-from-home spending and customer counts in our restaurants and those of our franchisees. There can be no assurance that government responses to economic disruptions will restore consumer confidence. Ongoing disruptions in the national and global economies may adversely impact our business, results of operations and financial condition. Additionally, adverse economic conditions in regions that contain a high concentration of Wendy’s restaurants, including markets in which our Company-operated restaurants are located, could also have a material adverse impact on our results of operations.

Changes in discretionary consumer spending, and in consumer tastes and preferences, could adversely affect our business, results of operations and financial condition.

The success of the Wendy’s system depends to a significant extent on discretionary consumer spending, which is influenced by general economic conditions and the availability of discretionary income. Any material decline in the amount of discretionary spending or a decline in consumer food-away-from-home spending could hurt our business, results of operations and financial condition. Our success also depends to a large extent on continued consumer acceptance of our offerings, the success of our operating, promotional, marketing and new product development initiatives and the reputation of our brand. If we are unable to continue to achieve consumer acceptance or adapt to changes in consumer preferences, including with respect to nutrition, health or dietary trends or environmental or social concerns, Wendy’s restaurants may lose customers, and the resulting revenues from Company-operated restaurants and the royalties that we receive from franchisees may decline.

17


Risks Related to Brand Perception and Value

Our success depends substantially on our corporate reputation and on the value and perception of our brand.

Our success depends in large part upon our ability to maintain and enhance the value of our brand, our customers’ loyalty to our brand and a positive relationship with our franchisees and other business partners. Brand value is based in part on consumer perceptions on a variety of subjective qualities. Business incidents, whether isolated or recurring, and whether originating from us, our franchisees or our business partners, can significantly reduce brand value and consumer trust, particularly if the incidents receive considerable publicity or result in litigation. For example, our brand could be damaged by claims or perceptions about the quality or safety of our products or the quality or reputation of our franchisees or other business partners, regardless of whether such claims or perceptions are true. Our brand could also be adversely impacted by other incidents described in this risk factors section, including incidents related to customer service, customer health or safety, a failure to attract and retain qualified employees, food safety or other health concerns regarding our products, the impact of social media, data privacy violations, cyber incidents or reports of our employees, franchisees or business partners taking controversial positions or acting in an unethical, illegal or socially irresponsible manner. Any such incidents could cause a decline in consumer confidence in our brand and reduce consumer demand for our products, which could have a material adverse impact on our business, results of operations and financial condition.

Our results of operations depend in part on the effectiveness of our marketing and advertising programs and the successful development and launch of new products.

Our results of operations are heavily influenced by brand marketing and advertising and by our ability to develop and launch new and innovative products. Our marketing and advertising programs may not be successful or we may fail to develop commercially successful new products, which may impact our ability to attract new customers and retain existing customers, which, in turn, could materially and adversely affect our results of operations. Moreover, because franchisees contribute to advertising funds based on a percentage of gross sales at their franchise restaurants, advertising fund expenditures are dependent upon sales volumes across the Wendy’s system. If systemwide sales decline, this could result in a reduced amount of funds available for our marketing and advertising programs. In addition, to the extent we use value offerings or other promotions or discounts in our marketing and advertising programs to drive customer counts, these actions may condition our customers to resist higher menu prices or result in reduced demand for premium products.

Our inability or failure to recognize, respond to and effectively manage the accelerated impact of social media could adversely impact our brand, business and results of operations.

In recent years, there has been a significant increase in the use of social media platforms, including social media and news aggregation websites and other forms of internet-based communications that allow individuals access to a broad audience. The rising popularity of social media has increased the speed and accessibility of information dissemination and given users the ability to more effectively organize collective actions such as boycotts and other brand-damaging behaviors. The dissemination of information via social media, whether accurate or inaccurate, could harm our business, brand, reputation, results of operation and financial condition. This damage may be immediate, without an opportunity to correct inaccurate information or respond to or address particular issues. In addition, as part of our marketing efforts, we frequently use social media to communicate with consumers in order to build their awareness of, engagement with, and loyalty to us. Failure to use social media effectively or appropriately, particularly as compared to our competitors, could lead to a decline in brand value, customer visits and revenues. Laws and regulations governing the use of social media continue to rapidly evolve. A failure by us, our employees, our franchisees or third parties acting on our behalf to abide by applicable laws and regulations in the use of social media could adversely impact our reputation, brand, results of operations and financial condition or subject us to litigation, fines or other penalties. Social media risks could also arise from employees not following defined policies for the use of social media during business operations, or actions taken by employees during personal activities outside of their employment, but which could still reflect negatively on the Wendy’s brand.

We may be unable to adequately protect our intellectual property, which could harm the value of our brand and hurt our business.

Our intellectual property is material to the conduct of our business. We rely on a combination of trademarks, copyrights, service marks, trade secrets and similar intellectual property rights to protect our brand and other intellectual property. The success of our business strategy depends, in part, on our continued ability to use our trademarks and service marks to increase brand awareness and further develop our branded products in existing and new markets. If our efforts to protect our intellectual property are not adequate, or if any third party misappropriates, infringes, dilutes or otherwise violates our intellectual property,
18


the value of our brand may be harmed, which could have a material adverse effect on our business. While we try to ensure that the quality of our brand is maintained by all of our franchisees, we cannot ensure that franchisees will not take actions that hurt the value of our intellectual property or the reputation of the Wendy’s brand or restaurant system. Any damage or violation of our intellectual property could harm our image, brand or competitive position and, if we commence litigation to enforce our rights, cause us to incur significant legal fees and diversion of resources. Also, if we do not attempt or are unable to successfully protect, maintain or enforce our intellectual property rights, there could be a material adverse effect on our business or results of operations as a result of, among other things, consumer confusion, dilution of the Wendy’s brand or increased competition from unauthorized users of our brand.

We have registered certain trademarks and have other trademark registrations pending in the United States and certain foreign jurisdictions. Not all of the trademarks that are used in the Wendy’s system have been registered in all of the countries in which we do business or may do business in the future, and some trademarks will never be registered in all of these countries. Rights in trademarks are generally national in character and are obtained on a country-by-country basis by the first person to obtain protection through use or registration in that country in connection with specific products or services. Some countries’ laws do not protect unregistered trademarks at all, or make them more difficult to enforce, and third parties have filed, or may in the future file, for “Wendy’s” or similar marks. Accordingly, we may not be able to adequately protect the Wendy’s brand everywhere in the world and use of the Wendy’s brand may result in liability for trademark infringement, trademark dilution or unfair competition. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as the laws of the United States. We cannot ensure that all of the steps we have taken to protect our intellectual property in the United States and foreign countries will be adequate.

We cannot ensure that third parties will not bring infringement claims against us in the future. Any such claim, whether or not it has merit, could be time-consuming, cause delays in introducing new menu items, require costly modifications to advertising and promotional materials, harm our brand, image, competitive position or ability to expand our operations into other jurisdictions, cause us to incur significant costs related to defense or settlement or require us to enter into royalty or licensing agreements. As a result, any such claim could harm our business and adversely impact our results of operations and financial condition. In addition, third parties may assert that certain of our intellectual property, or our rights therein, are invalid or unenforceable. If our rights in any of our intellectual property were found to infringe third-party rights, or portions thereof were deemed invalid or unenforceable, we may be forced to defend or resolve related claims and incur related expenses. In addition, such loss of rights could permit competing uses of such intellectual property which, in turn, could harm our business and adversely impact our results of operations and financial condition.

Food safety events or health concerns regarding our products could create negative publicity and adversely affect our brand, business and results of operations.

Food safety is a top priority for Wendy’s, and we dedicate substantial resources to food safety matters to ensure our customers enjoy safe, quality food products. However, food safety events, including instances of food-borne illness (such as salmonella or E. coli), have occurred in the food industry in the past, and could occur in the future. Food safety events, whether or not involving Wendy’s restaurants or other restaurant companies, could adversely affect the price and availability of certain products and result in negative publicity for Wendy’s or the restaurant industry. This negative publicity may reduce demand for Wendy’s food and could result in a decrease in customer counts to Wendy’s restaurants as consumers shift their preferences to our competitors or to other products or food types. Any report linking our restaurants or suppliers to food-borne illnesses or food tampering, contamination, mislabeling or other food-safety issues could damage the value of our brand immediately and severely hurt sales of our products and possibly lead to product liability claims, litigation (including class actions) or other damages. The Wendy’s system may also be adversely impacted by consumer concerns regarding the nutritional aspects of the products we sell, the ingredients in our products or the cooking processes used in our restaurants. These or similar concerns could result in less demand for our products and a decline in sales at Company-operated restaurants and in royalties from sales at franchised restaurants.

Risks Related to Our Business Strategy

Our predominantly franchised business model presents a number of risks.

As of January 3, 2021, approximately 95% of restaurants in the Wendy’s system were operated by franchisees. Wendy’s franchisees are contractually obligated to operate their restaurants in accordance with the standards set forth in our franchise and other agreements with them. Wendy’s also provides training and support to franchisees. However, franchisees are independent third parties that we do not control, and franchisees own, operate and oversee the daily operations of their restaurants. Specifically, franchisees are solely responsible for developing and utilizing their own policies and procedures,
19


making their own hiring, firing and disciplinary decisions, scheduling hours and establishing wages, and managing their day-to-day employment processes and procedures, all of which is done independent of Wendy’s and in compliance with all applicable laws, rules or regulations. Further, franchisees have discretion as to the prices charged to customers. As a result, the ultimate success and quality of any franchise restaurant rests with the franchisee. If franchisees do not successfully operate their restaurants in a manner consistent with required standards, their royalty payments to us could be adversely affected and our brand’s image and reputation could be harmed, both of which in turn could hurt our business and results of operations. In addition, the failure of franchisees to adequately engage in succession planning may adversely affect their restaurant operations and development of new Wendy’s restaurants, which in turn could hurt our business and results of operations.

Wendy’s franchisees are an integral part of our business and growth strategy. We may be unable to successfully implement our growth strategies if franchisees do not participate in the implementation of those strategies. Our business and results of operations could be adversely affected if a significant number of franchisees do not participate in brand strategies, such as new restaurant development, Image Activation, digital commerce platforms and technologies and the execution of breakfast across the U.S. system, which in turn may harm our business and financial condition. In addition, Wendy’s current franchise model, and the way our brand strategies are executed across the system, may make it difficult for our brand to respond and adapt to the speed of change in technology, consumer preferences, the regulatory environment or other factors as quickly as may be required to maintain and grow market share and remain competitive. Certain of our competitors that have a significantly higher percentage of company-operated restaurants than we do may have greater influence over their respective restaurant systems and greater ability to implement operational initiatives and business strategies.

We receive revenues in the form of royalties and national advertising funds contributions (both of which are generally based on a percentage of sales at franchised restaurants), as well as rent and fees from franchisees. Accordingly, a substantial portion of our financial results is to a large extent dependent upon the operational and financial success of our franchisees. If sales trends or economic conditions worsen for franchisees, or if the overall business or financial health of franchisees deteriorates, their results of operations or financial condition may worsen and our royalty, national advertising funds, rent and other fee revenues may decline and our accounts receivable and related allowance for doubtful accounts may increase. Additionally, when Company-operated restaurants with leased real estate are sold to franchisees, we are often required to remain responsible for lease payments for these restaurants in the event the purchasing franchisees default on their leases. During periods of declining sales and profitability, the incidence of franchisee defaults for these lease payments may increase and we may be required to make payments and seek recourse against the franchisee. In addition, if franchisees fail to renew their franchise agreements or we are unable to identify, attract and retain new franchisees who meet our criteria, then our royalty revenues may decrease and our future growth could be adversely affected.

The growth of our business is dependent on new restaurant openings, which could be affected by factors beyond our control.

Our business derives earnings from sales at Company-operated restaurants as well as royalties and other fees received from franchised restaurants. Growth in our revenues and earnings is dependent on new restaurant openings. Numerous factors beyond our control may adversely affect new restaurant openings, which in turn could hurt our business and results of operations. These factors include, among others, (i) our ability to attract new franchisees; (ii) the availability of site locations for new restaurants; (iii) the ability of restaurant owners to obtain financing; (iv) the ability of restaurant owners to attract, train and retain qualified operating personnel; (v) construction and development costs, particularly in highly competitive markets; (vi) the ability of restaurant owners to secure required governmental approvals and permits in a timely manner, or at all; and (vii) adverse weather conditions. Our growth strategy also includes an increased focus on non-traditional development, such as fuel and transportation centers, food courts and other retail locations, military bases, dark kitchens and delivery-only locations. Our inability to identify suitable locations, achieve consumer acceptance or otherwise execute our non-traditional development strategy could have an adverse impact on our results of operation and financial condition.

Our Image Activation program may not positively affect sales or improve our results of operations, and franchisees may not participate in our Image Activation program to the extent expected by us.

We continue to implement our Image Activation program, which includes reimaging existing Wendy’s restaurants and building new Wendy’s restaurants with innovative exterior and interior restaurant designs. Our Image Activation program may not positively affect sales at Wendy’s restaurants or improve our results of operations. There can also be no assurance that franchisees will participate in the Image Activation program to the extent expected by the Company. In order to support our Image Activation program and promote new restaurant development, we have provided franchisees with certain incentive programs for qualifying new and reimaged restaurants, including reductions in royalty and national advertising payments and options for the early renewal of franchise agreements. It is possible we may provide additional financial incentives to
20


franchisees, which could result in additional expenses, a reduction of royalties or other revenues or the incurrence of other costs or liabilities, such as loan guarantees, interest rate subsidies or collectability of loans. Some franchisees may need to borrow funds in order to participate in the Image Activation program. If franchisees are unable to obtain financing at commercially reasonable rates, or at all, they may be unwilling or unable to invest in the reimaging of their existing restaurants or the development of new restaurants, and our future growth and results of operations could be adversely affected.

We may be unable to manage effectively the acquisition and disposition of restaurants, or successfully implement other strategic initiatives, which could adversely affect our business, results of operations and financial results.

We continue to optimize the Wendy’s system through our system optimization initiative, which includes facilitating the transfer of restaurants between and among franchisees, as well as evaluating strategic acquisitions of franchised restaurants and strategic dispositions of Company-operated restaurants to existing and new franchisees, to further strengthen the franchisee base, drive new restaurant development and accelerate adoption of our Image Activation program. The success of this initiative is dependent upon many factors, such as the availability of sellers and buyers, the availability of financing, the ability to negotiate transactions on terms deemed acceptable and the ability to successfully transition and integrate restaurant operations. Acquisitions of franchised restaurants pose various risks to our operations, including (i) diversion of management’s attention to the integration of acquired restaurant operations; (ii) increased operating expenses and the inability to achieve expected cost savings and operating efficiencies; (iii) exposure to liabilities arising out of prior operations of acquired restaurants; and (iv) the assumption of long-term, non-cancelable leases. Our system optimization initiative places demands on our operational and financial management resources and may require us to expand these resources. If we are unable to execute our system optimization initiative or effectively manage the acquisition and disposition of restaurants, our business and financial results could be adversely affected.

In addition, Wendy’s from time to time evaluates and may pursue other opportunities for growth through new and existing franchise partners, joint venture investments, expansion of our brand through other opportunities and strategic mergers, acquisitions and divestitures. These strategic initiatives involve various inherent risks, including, without limitation, general business risk, integration and synergy risk, market acceptance risk and risks associated with the potential distraction of management. Strategic transactions may not ultimately create value for us or our stockholders and may harm our reputation and materially adversely affect our business, results of operations and financial condition.

Our leasing and ownership of significant amounts of real estate exposes us to possible liabilities and losses, including liabilities associated with environmental matters.

We have significant real estate operations in connection with our business and are subject to all of the risks associated with leasing and owning real estate. Our real estate values and the costs associated with our real estate operations are impacted by a variety of factors, including changes in the investment climate for real estate, macroeconomic trends, governmental regulations, insurance, demographic trends, supply and demand for the ownership and operation of restaurants and environmental matters. A significant change in real estate values, or an increase in costs as result of any of these factors, could adversely affect our results of operations and financial condition.

We are subject to federal, state and local environmental, health and safety laws and regulations concerning the discharge, storage, handling, release and disposal of hazardous or toxic substances. These environmental laws provide for significant fines, penalties and liabilities, sometimes without regard to whether the owner, operator or occupant of the property knew of, or was responsible for, the release or presence of the hazardous or toxic substances. Third parties may also make claims against owners, operators or occupants of properties for personal injuries and property damage associated with releases of or exposure to such substances. A number of our restaurant sites were formerly gas stations or are adjacent to current or former gas stations or were used for other commercial activities that can create environmental impacts. We have not conducted a comprehensive environmental review of all of our properties and we may not have identified all of the potential environmental liabilities at our leased and owned properties, and any such liabilities identified in the future could cause us to incur significant costs, including costs associated with litigation, fines or clean-up responsibilities. We cannot predict the amount of future expenditures that may be required in order to comply with any environmental laws or regulations or to satisfy any such claims.

We generally secure long-term real estate interests for our leased restaurants and have limited flexibility to quickly alter our real estate portfolio. Many leases provide that the landlord may increase the rent over the term of the lease and any renewals of the term. Most leases require us to pay the costs of insurance, taxes, maintenance and utilities. We generally cannot cancel these leases prior to the expiration of their term. If an existing or future restaurant is not profitable, and we decide to close it, we may nonetheless be committed to perform our obligations under the applicable lease including, among other things, paying rent for the balance of the lease term. In addition, as each lease expires, we may fail to negotiate additional renewals or renewal
21


options, either on commercially acceptable terms or at all, which could cause us to close restaurants in desirable locations, negatively impacting our results of operations.

The breakfast daypart is competitive across the restaurant industry and we may be unable to achieve or maintain market share or reach targeted levels of breakfast sales and profits.

Wendy’s entered the breakfast daypart across the U.S. system in March 2020. The Company and franchisee leadership worked closely to align on a breakfast program designed to drive incremental sales and profits through a strong economic model. However, we may be unable to achieve market share and reach targeted levels of breakfast sales and profits due to competitive pressures and responses from our competitors, some of whom are well-established in the breakfast daypart, or other factors, including operational complexity, food and labor costs, lack of consumer acceptance, discretionary spending patterns that differ from other dayparts and changes to customer mobility and daily routines, including as a result of the COVID-19 pandemic. In addition, breakfast sales could cannibalize sales during other parts of the day and may have negative impacts on restaurant margins. The continued active support and engagement of our franchisees is also critical for the successful performance of the breakfast daypart. The breakfast daypart may require significant financial resources, including the Company’s plans to fund incremental marketing and advertising campaigns. Our inability to successfully execute on our strategy for the breakfast daypart could have a material adverse impact on our business, results of operations and financial condition.

Our international operations are subject to various risks and uncertainties and there is no assurance that our international operations will be profitable.

In addition to many of the factors described in this risk factors section, our business outside of the United States is subject to a number of additional factors, including international economic and political conditions, risk of corruption and violations of the U.S. Foreign Corrupt Practices Act or similar laws of other countries, the inability to adapt to differing cultures or consumer preferences, inadequate brand infrastructure within foreign countries to support our international activities, inability to obtain adequate supplies meeting our quality standards and product specifications or interruptions in obtaining such supplies, challenges and risks associated with managing and monitoring suppliers, restrictions on our ability to move cash out of certain foreign countries, currency regulations and fluctuations, diverse government regulations and tax systems, uncertain or differing interpretations of rights and obligations in connection with international franchise agreements, the collection of royalties and other fees from international franchisees, the inability to protect technology, data or intellectual property rights, compliance with international privacy and information security laws and regulations, the availability and cost of land, construction costs, other legal, financial or regulatory impediments to the development or operation of new restaurants and the inability to identify, attract and retain experienced management, qualified franchisees and joint venture partners. Adverse conditions or unforeseen events in countries that contain a high concentration of Wendy’s restaurants (including Canada, our largest international market), could have a material adverse impact on our international growth strategy and results of operations. In addition, to the extent we invest in international Company-operated restaurants or joint ventures, we would also have the risk of operating losses related to those restaurants, which could adversely affect our results of operations and financial condition. There can be no assurance that our international growth strategy will be successful or that our international operations will be profitable.

As previously announced, Wendy’s intends to open Company-operated restaurants in the United Kingdom and, if successful, plans to expand into other anchor markets in Europe utilizing a franchise model. New markets may have low brand awareness as well as competitive conditions, consumer tastes, discretionary spending patterns and social and cultural differences that are more difficult to predict or satisfy than our existing markets. We may need to make greater investments than we originally planned in advertising and promotional activity to build brand awareness, which could negatively impact the profitability of our operations. In addition, we may be unable to obtain desirable locations for new restaurants at reasonable prices, or at all, and restaurants may have higher construction, occupancy, food and labor costs than we currently anticipate. Moreover, geopolitical risks, including the United Kingdom’s decision to leave the European Union, may result in increased regulatory complexities and economic uncertainty. Any of these risks and uncertainties, and other factors we cannot anticipate, could have a material adverse impact on our business, results of operations and financial condition.

Risks Related to Supply Chain and Labor

Changes in commodity costs and other operating costs could adversely affect our results of operations.

Our profitability depends in part on our ability to anticipate and react to changes in commodity costs (including beef, chicken, pork, cheese and grains), supplies, fuel, utilities, distribution and other operating costs. Increases in commodity costs, particularly beef or chicken prices, could adversely affect our future results of operations. Our business is susceptible to
22


increases in commodity and other operating costs as a result of various factors beyond our control, such as weather conditions and patterns, demand, food safety concerns, product recalls, federal ethanol policy, fuel costs and government regulations. Significant increases in expenses incurred by consumers, such as living expenses or gasoline prices, could also result in decreased customer counts at our restaurants, which could adversely affect our business. We cannot predict whether we will be able to anticipate and react to changing commodity costs by adjusting our purchasing practices and menu prices, and a failure to do so could adversely affect our results of operations. In addition, we may not seek to or be able to pass along price increases to our customers. If increased costs were passed to our customers, demand for our products may decrease, which in turn could adversely affect our results of operations.

Shortages or interruptions in the supply or distribution of perishable food products could damage our brand and adversely affect our business and results of operations.

Wendy’s and our franchisees are dependent on frequent deliveries of perishable food products that meet brand specifications. Shortages or interruptions in the supply of perishable food products caused by unanticipated demand, problems in production or distribution, disease or food-borne illnesses, political unrest, health epidemics or pandemics, inclement weather or other calamities or conditions could adversely affect the availability, quality and cost of ingredients, which could lower revenues, increase operating costs, damage brand reputation and otherwise harm our business and the businesses of our franchisees. Certain of the products sold in our restaurants, such as beef and chicken, are sourced from a limited number of suppliers, which may increase our reliance on those suppliers. In addition, our system relies on a limited number of in-line distributors to deliver certain food, packaging and beverage products to our restaurants. If a disruption of service from any of our key suppliers or distributors was to occur, we could experience short-term increases in our costs while supply and distribution channels were adjusted, and we may be unable to identify or negotiate with new suppliers or distributors on terms that are commercially reasonable to us. As discussed above, the COVID-19 pandemic led, and could again lead, to delays or interruptions in the delivery of food or other supplies to Wendy’s restaurants, which could impact the availability and cost of certain food items at Wendy’s restaurants.

We do not exercise ultimate control over purchasing for our restaurant system, which could harm our business, results of operations and financial condition.

While we require and seek to ensure that all suppliers to the Wendy’s system meet certain quality control standards, our franchisees ultimately control the purchasing of food, proprietary paper, equipment and other operating supplies from third party suppliers through QSCC, Wendy’s independent purchasing co-op. QSCC manages, for the Wendy’s system in the United States and Canada, contracts for the purchase and distribution of food, proprietary paper, equipment and other operating supplies under national agreements with pricing based on total system volume. We do not control the decisions and activities of QSCC. If QSCC does not properly estimate the product needs of the Wendy’s system, makes poor purchasing decisions or ceases its operations, or if our relationship with QSCC is terminated for any reason, system sales, operating costs and supply chain management could be adversely affected, which could harm our franchisees and have a material adverse impact on our business, results of operations and financial condition.

Our business could be hurt by increased labor costs or labor shortages.

Labor is a primary component in the cost of operating our restaurants. We devote significant resources to recruiting and training our managers and hourly employees. Increased labor costs due to competition, increased wages or employee benefits costs (including various federal, state and local actions to increase minimum wages), unionization activity or other factors would adversely impact our cost of sales and operating expenses. In addition, Wendy’s success depends on our ability to attract, motivate and retain qualified employees, including restaurant managers and staff as well as employees and key personnel at our restaurant support center, and our inability to do so could adversely affect our business and results of operations.

Our success depends in part upon the continued succession and retention of certain key personnel and the effectiveness of our leadership structure.

We believe that over time our success has been dependent to a significant extent upon the efforts and abilities of our senior leadership team and other key personnel. Our failure to retain members of our senior leadership team or other key personnel could adversely affect our ability to build on the efforts we have undertaken to increase the efficiency and performance of our business. In addition, changes to our leadership and organizational structure can be inherently difficult to manage, and if we are unable to implement any such changes effectively, our business, results of operations and financial results could be adversely affected.
23



Risks Related to Technology and Cybersecurity

There are risks and uncertainties associated with our increasing dependence on digital commerce platforms and technologies and alternative methods of delivery.

Advances in technologies, including advances in digital food ordering and delivery technologies, and changes in consumer behavior driven by such advances could have a negative effect on our business. Technology and consumer offerings continue to develop and evolve, and we expect that new and enhanced technologies and consumer offerings will be available in the future, including those with a focus on restaurant modernization, restaurant technology, digital engagement, online ordering and delivery. Our inability to predict consumer acceptance of new technology or our failure to adequately invest in new technology or adapt to technological developments and industry trends could result in a loss of customers and related market share. In addition, our competitors, some of whom have greater resources than we do, may be able to benefit from changes in technologies or consumer acceptance of such changes, which could harm our competitive position and brand.

An increasing amount of our sales and revenues is derived from digital orders, which includes online ordering and delivery. We have implemented technology and targeted advertising and promotions to support the growth of our digital business. If we are unable to continue to grow our digital business, it may be difficult for us to achieve our planned sales growth. If our digital commerce platforms, including the Wendy’s mobile app and online ordering system, do not meet customers’ expectations in terms of security, speed, attractiveness or ease of use, customers may be less inclined to return to those platforms, which could negatively impact our business, results of operations and financial condition. Our business could also be negatively impacted if we are unable to successfully implement or execute other consumer-facing digital initiatives, such as curbside pick-up and mobile carryout. We rely on third-party delivery services to fulfill delivery orders, and errors or failures by those providers to make timely deliveries could cause customers to stop ordering from us. The third-party restaurant delivery business is intensely competitive, with a number of companies competing for capital, market share, online traffic and delivery drivers. If the third-party delivery services that we utilize cease or curtail their operations, increase their fees or give greater priority or promotions on their platforms to our competitors, our delivery business and our sales may be negatively impacted. If we are unable to successfully respond to the challenges arising from our increased reliance on our digital business, this could have a material adverse impact on our brand, business, results of operations and financial condition.

We are heavily dependent on computer systems and information technology and any material failure, misuse, interruption or breach of our systems or technology could adversely affect our business, results of operations and financial condition.

We are heavily dependent on our computer systems and information technology to conduct our business, including point-of-sale processing in our restaurants, management of our supply chain, collection of cash, payment of obligations and various other processes and procedures. Our ability to efficiently manage our business depends significantly on the reliability and capacity of these systems and information technology. The failure of these systems and information technology to operate effectively, an interruption in such systems or technology or a breach in security of these systems could be harmful and cause delays in customer service, result in the loss of data, reduce efficiency or cause delays in operations. Significant capital investments might be required to remediate any such problems or to maintain or upgrade our computer systems and information technology or transition to replacement systems. Additionally, the success of certain of our strategic initiatives, including the expansion and acceleration of our consumer-facing digital capabilities to connect with customers and drive growth, is highly dependent on our technology systems. Any security breach involving our or our franchisees’ point-of-sale or other systems could result in a loss of consumer confidence and potential costs associated with fraud. Also, despite our considerable efforts and resources to secure our computer systems and information technology, security breaches, such as unauthorized access and computer viruses, may occur, resulting in system disruptions, shutdowns or unauthorized disclosure of confidential information, which in turn could adversely affect our business, results of operations and financial condition.

As previously announced, we have implemented a plan to realign and reinvest resources in our IT organization to strengthen our ability to accelerate growth. We are partnering with a third-party global IT consultant on this new structure to leverage their global capabilities and enable a more seamless integration between our digital and corporate IT assets. We are dependent to a significant extent on our ongoing relationship and engagement with the consultant, including their personnel and resources, technological expertise and ability to help execute our digital, restaurant technology and enterprise technology initiatives. The inability of us or the consultant to successfully execute our technology growth initiatives could have an adverse impact on our business, results of operations and financial condition.

24


The occurrence of cyber incidents, or a deficiency in cybersecurity, could negatively impact our brand, business, results of operations and financial condition.

A number of retailers and other companies have experienced serious cyber incidents and breaches of their information technology systems. As our reliance on technology has increased, so have the risks posed to our systems, both internal and those managed by third parties. Because we and our franchisees accept electronic forms of payment from customers, our business requires the collection and retention of customer data, including credit and debit card numbers and other personally identifiable information, in various information systems that we and our franchisees maintain and in those maintained by third parties with whom we and our franchisees contract to provide credit card processing and related services. We also maintain important internal data, such as personally identifiable information about our employees and franchisees and information relating to our operations. Our use of personally identifiable information is regulated by international, federal and state laws, as well as by certain third-party agreements. As privacy and information security laws and regulations change, we may incur additional costs to ensure that we remain in compliance with those laws and regulations. If our security and information systems are compromised or if our employees or franchisees fail to comply with these laws, regulations or contract terms, and this information is obtained by unauthorized persons or used inappropriately, it could adversely affect our reputation, disrupt our operations, damage our relationship with customers, franchisees or employees and result in costly litigation, judgments, or penalties resulting from violation of applicable laws and payment card industry regulations. A cyber incident could also require us to notify customers, employees or other groups, result in adverse publicity or a loss in consumer confidence, sales and profits, increase fees payable to third parties or cause us to incur penalties or remediation and other costs that could adversely affect our business, results of operations and financial condition. While we have implemented various processes, procedures and controls to help mitigate the risk of a cyber incident and maintain insurance coverage to address cyber incidents, these measures do not guarantee that a cyber incident could not occur or that our reputation and financial results will not be adversely affected by such an incident.

As previously reported, in 2015 and 2016, certain of our franchisees experienced cybersecurity incidents. As a result of those incidents, the Company was named as a defendant in separate class actions brought by consumers and financial institutions, and certain of our directors and executive officers were named as defendants in a shareholder derivative action. These civil proceedings sought damages and other relief allegedly arising from the cybersecurity incidents. In February 2019, the court granted final approval of the settlement of the consumer class action, and in November 2019, the court granted final approval of the settlement of the financial institutions class action. Both matters are now considered fully paid and closed. In January 2020, the court granted preliminary approval of the proposed settlement of the putative shareholder derivative action, which remains subject to certain notice and objection provisions and final court approval. These and any other claims or investigations related to cybersecurity incidents may adversely affect how we and our franchisees operate the business, divert the attention of management, have a negative effect on our reputation, and adversely affect our results of operations or financial condition.

Risks Related to Our Indebtedness

The Company and certain of our subsidiaries are subject to various restrictions, and substantially all of the assets of certain subsidiaries are security, under the terms of a securitized financing facility.

Wendy’s Funding, LLC, a limited-purpose, bankruptcy-remote, wholly owned indirect subsidiary of the Company, is the master issuer (the “Master Issuer”) of outstanding senior secured notes under a securitized financing facility entered into in June 2015. Under the facility, the Master Issuer issued and has outstanding certain series of fixed rate and variable funding notes (collectively, the “Senior Notes”). The Senior Notes are secured by a security interest in substantially all of the assets of the Master Issuer and certain other limited-purpose, bankruptcy-remote, wholly-owned indirect subsidiaries of the Company that act as guarantors (collectively, the “Securitization Entities”), except for certain real estate assets and subject to certain limitations as set forth in the indenture governing the Senior Notes (the “Indenture”) and the related guarantee and collateral agreement. The assets of the Securitization Entities include most of the domestic and certain of the foreign revenue-generating assets of the Company and its subsidiaries, which principally consist of franchise-related agreements, certain Company-operated restaurants, intellectual property and license agreements for the use of intellectual property.

The Senior Notes are subject to a series of covenants and restrictions customary for transactions of this type, including (i) that the Master Issuer maintains specified reserve accounts to be used to make required payments in respect of the Senior Notes, (ii) provisions relating to optional and mandatory prepayments and the related payment of specified amounts, including specified make-whole payments under certain circumstances, (iii) certain indemnification payments in the event, among other things, the assets pledged as collateral for the Senior Notes are in stated ways defective or ineffective and (iv) covenants relating to recordkeeping, access to information and similar matters. The Senior Notes are subject to customary rapid
25


amortization events provided for in the Indenture, including events tied to failure to maintain stated debt service coverage ratios, the sum of global gross sales for specified restaurants being below certain levels on certain measurement dates, certain manager termination events, an event of default, and the failure to repay or refinance on the applicable scheduled maturity date. The Senior Notes are also subject to certain customary events of default, including events relating to non-payment of required interest, principal, or other amounts due on or with respect to the Senior Notes, failure to comply with covenants within certain time frames, certain bankruptcy events, breaches of specified representations and warranties, failure of security interests to be effective, and certain judgments. In the event that a rapid amortization event occurs under the Indenture (including, without limitation, upon an event of default under the Indenture or the failure to repay the securitized debt at the end of the applicable term), the funds available to the Company would be reduced or eliminated, which would in turn reduce our ability to operate or grow our business.

In addition, the Indenture and the related management agreement contain various covenants that limit the Company and its subsidiaries’ ability to engage in specified types of transactions, subject to certain exceptions, including, for example, to (i) incur or guarantee additional indebtedness, (ii) sell certain assets, (iii) create or incur liens on certain assets to secure indebtedness or (iv) consolidate, merge, sell or otherwise dispose of all or substantially all of their assets. As a result of these restrictions, the Company may not have adequate resources or flexibility to continue to manage the business and provide for growth of the Wendy’s system, which could have a material adverse effect on the Company’s future growth prospects, results of operations, financial condition and liquidity.

We have a significant amount of debt outstanding, and such indebtedness could adversely affect our business, results of operations and financial condition.

As of January 3, 2021, the Company had approximately $2.2 billion of outstanding debt on its balance sheet. Additionally, a subsidiary of the Company has issued variable funding notes, which allows for the borrowing of up to $250.0 million from time to time on a revolving basis. This level of debt could have significant consequences on the Company’s future operations, including: (i) making it more difficult to meet payment and other obligations under outstanding debt; (ii) resulting in an event of default if the Company’s subsidiaries fail to comply with the financial and other restrictive covenants contained in debt agreements, which event of default could result in all of the Company’s subsidiaries’ debt becoming immediately due and payable; (iii) reducing the availability of the Company’s cash flow to fund working capital, capital expenditures, equity and debt repurchases, dividends, acquisitions and other general corporate purposes, and limiting the Company’s ability to obtain additional financing for these purposes; (iv) subjecting the Company to the risk of increased sensitivity to interest rate increases on indebtedness with variable interest rates; (v) limiting the Company’s flexibility in planning for or reacting to, and increasing its vulnerability to, changes in the Company’s business, the industry in which it operates and the general economy; and (vi) placing the Company at a competitive disadvantage compared to its competitors that are less leveraged. Further, the Company’s outstanding variable funding notes may accrue interest based on the London interbank offered rate (“LIBOR”), which is expected to be discontinued after 2021. If LIBOR is discontinued, we may need to renegotiate certain loan documents and we cannot predict what alternative index would be negotiated with our lenders or the resulting impact on our interest expense.

The ability of the Company to make payments on, repay or refinance its debt, and any additional debt, and to fund planned capital expenditures, dividends and other cash needs will depend largely upon its future operating performance and ability to generate significant cash flows. In addition, the ability of the Company to borrow funds in the future to make payments on its debt will depend on the satisfaction of the covenants in the securitized financing facility and other debt agreements, and other agreements it may enter into in the future. Specifically, the Company will need to maintain specified financial ratios and satisfy financial condition tests. There can be no assurance that the Company’s business will generate sufficient cash flow from operations or that future borrowings will be available under the Company’s securitized financing facility or other debt agreements or from other sources in an amount sufficient to enable the Company to pay its debt or to fund its dividend and other liquidity needs. If the Company’s subsidiaries are not able to generate sufficient cash flow to service their debt obligations, they may need to refinance or restructure debt, sell assets, reduce or delay capital investments, or seek to raise additional capital. If the Company’s subsidiaries are unable to implement one or more of these alternatives, they may not be able to meet debt payment and other obligations.

In addition to the Company’s outstanding indebtedness, certain of the Company’s subsidiaries have significant contractual requirements for the purchase of soft drinks. If consumer preferences change and customers purchase fewer soft drinks than expected or estimated, such contractual commitments may adversely affect the financial condition of the Company. The Company has also provided loan guarantees to various lenders on behalf of franchisees entering into debt arrangements for new restaurant development and equipment financing. In addition, certain of the Company’s subsidiaries also guarantee or are contingently liable for certain leases of their respective franchisees for which they have been indemnified. These commitments,
26


guarantees and other liabilities could have an adverse effect on the Company’s liquidity and the ability of its subsidiaries to meet payment obligations.

The Company may incur additional indebtedness, guarantees, commitments or other liabilities in the future. If new debt, guarantees, commitments or other liabilities are added to the Company’s current consolidated debt levels, the related risks that the Company now faces could be amplified.

Risks Related to Our Common Stock

There can be no assurance regarding whether or to what extent we will pay dividends on our common stock in the future.

Holders of our common stock will only be entitled to receive such dividends as our Board of Directors may declare out of funds legally available for such payments. Any dividends will be made at the discretion of our Board of Directors and will depend on our earnings, financial condition, cash requirements and such other factors as the Board may deem relevant from time to time. In addition, because Wendy’s is a holding company, its ability to declare and pay dividends is dependent upon cash, cash equivalents and short-term investments on hand and cash flows from its subsidiaries. The ability of our subsidiaries to pay cash dividends to the holding company is dependent upon their ability to achieve sufficient cash flows after satisfying their respective cash requirements, including the requirements and restrictions under our securitized financing facility and other debt agreements.

A substantial amount of our common stock is concentrated in the hands of certain stockholders.

Nelson Peltz, our Chairman and former Chief Executive Officer, Peter May, our Vice Chairman and former President and Chief Operating Officer, Matthew Peltz, a director of the Company, and Edward Garden, a former director of the Company, beneficially own shares of our outstanding common stock that collectively constitute approximately 19% of the Company’s total voting power as of February 23, 2021. These individuals may, from time to time, acquire beneficial ownership of additional shares of common stock.

On December 1, 2011, the Company entered into an agreement (the “Trian Agreement”) with Messrs. N. Peltz, May and Garden, and several of their affiliates (the “Covered Persons”). Pursuant to the Trian Agreement, our Board of Directors, including a majority of the independent directors, approved, for purposes of Section 203 of the Delaware General Corporation Law, the Covered Persons becoming the owners (as defined in Section 203(c)(9)) of or acquiring an aggregate of up to (and including), but not more than, 32.5% (subject to certain adjustments set forth in the Trian Agreement) of the outstanding shares of the Company’s common stock, such that no such persons would be subject to the restrictions set forth in Section 203 solely as a result of such ownership. This concentration of ownership gives these individuals significant influence over the outcome of actions requiring stockholder approval, including the election of directors and the approval of mergers, consolidations and the sale of all or substantially all of the Company’s assets. They are also in a position to have significant influence to prevent or cause a change in control of the Company.

Our certificate of incorporation contains certain anti-takeover provisions and permits our Board of Directors to issue preferred stock without stockholder approval and limits our ability to raise capital from affiliates.

Certain provisions in our certificate of incorporation are intended to discourage or delay a hostile takeover of control of the Company. Our certificate of incorporation authorizes the issuance of shares of “blank check” preferred stock, which will have such designations, rights and preferences as may be determined from time to time by our Board of Directors. Accordingly, our Board of Directors is empowered, without stockholder approval, to issue preferred stock with dividend, liquidation, conversion, voting or other rights that could adversely affect the voting power and other rights of the holders of our common stock. The preferred stock could be used to discourage, delay or prevent a change in control of the Company that is determined by the Board of Directors to be undesirable. Our certificate of incorporation prohibits the issuance of preferred stock to affiliates, unless offered ratably to the holders of our common stock, subject to an exception in the event that the Company is in financial distress and the issuance is approved by the Audit Committee of our Board of Directors. This prohibition limits our ability to raise capital from affiliates.

27


General Business Risks

Complaints or litigation could hurt our brand, business, results of operations and financial condition.

Wendy’s customers may file from time to time complaints or lawsuits against us or our franchisees alleging that we are responsible for an illness or injury they suffered at or after a visit to a Wendy’s restaurant, or alleging that there was a problem with food quality or operations at a Wendy’s restaurant. We may also be subject to a variety of other claims arising in the ordinary course of our business, including personal injury claims, contract claims, claims from franchisees, intellectual property claims, data privacy claims and claims alleging violations of law regarding workplace and employment matters, discrimination and similar matters, including class action lawsuits. Regardless of whether any claims against us are valid or whether we are found to be liable, claims may be expensive to defend and may divert management’s attention away from operations, hurt our performance and have a negative impact on our brand. While we believe we have adequate accruals for all of our legal and environmental matters, we cannot estimate the aggregate possible range of loss for our existing litigation and claims due to most proceedings 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 are thus inherently difficult. Insurance policies contain customary limitations, conditions and exclusions that can affect the amount of insurance proceeds ultimately received. A judgment significantly in excess of our insurance coverage for any claims could materially adversely affect our results of operations or financial condition. Additionally, the restaurant industry has been subject to a number of claims alleging that the menus and actions of restaurant chains have contributed to the obesity or otherwise adversely impacted the health of certain of their customers. Adverse publicity resulting from these allegations may harm the reputation of our restaurants, even if the allegations are not directed against our restaurants or are not valid. Moreover, complaints, litigation or adverse publicity experienced by one or more of our franchisees could also hurt our brand or business as a whole.

Existing and changing legal and regulatory requirements, as well as an increasing focus on environmental, social and governance issues, could adversely affect our brand, business, results of operations and financial condition.

Each Wendy’s restaurant is subject to licensing and regulation by health, sanitation, safety and other agencies in the state or municipality in which the restaurant is located, as well as to federal laws, rules and regulations and requirements of non-governmental entities such as payment card industry rules. State and local government authorities may enact laws, rules or regulations that impact restaurant operations and the cost of conducting those operations. There can be no assurance that we and our franchisees will not experience material difficulties or failures in obtaining the necessary licenses or approvals for new restaurants, which could delay the opening of such restaurants in the future. In addition, more stringent and varied requirements of local regulators with respect to tax, zoning, land use and environmental factors could delay or prevent development of new restaurants in particular locations.

We are subject to various laws and regulations that govern the offer and sale of a franchise, including rules by the U.S. Federal Trade Commission. Various state, provincial and foreign laws regulate certain aspects of the franchise relationship, including terminations and the refusal to renew franchises. The failure to comply with these laws and regulations in any jurisdiction or to obtain required government approvals could result in a ban or temporary suspension on future franchise sales, fines and penalties or require us to make offers of rescission or restitution, any of which could adversely affect our business and results of operations. We could also face lawsuits by franchisees based upon alleged violations of these laws. We and our franchisees are also subject to the Fair Labor Standards Act, which governs such matters as minimum wages, overtime and other working conditions, along with the ADA, family leave mandates and a variety of other state laws that govern these and other employment law matters. Changes in laws, rules, regulations and governmental policies could increase our costs, result in increased litigation, investigations, enforcement actions, fines or liabilities and adversely affect our business, results of operations and financial condition. The same consequences may result should any law, rule, regulation, governmental policy or judicial decision declare that Wendy’s is a joint employer with our franchisees. If we are unable to effectively manage the risks associated with our complex regulatory environment, it could have a material adverse effect on our business and financial condition.

We are also subject to legal and compliance risks and associated liability related to privacy and data collection, protection and management as it relates to information associated with our technology-related services and platforms made available to customers, employees, franchisees, business partners or other third parties. We are subject to a variety of U.S. federal and state and foreign laws and regulations in this area. These laws and regulations have been subject to frequent change, and there may be jurisdictions that propose or enact new data privacy requirements in the future. Failure to meet applicable data privacy requirements could result in substantial penalties and materially adversely impact our financial results or brand perceptions. Additionally, changing laws and regulations could require us and our franchisees to change or limit the way we collect or use
28


information in operating our business, which may result in additional costs, limit our marketing or growth strategies and adversely affect our business and results of operations.

Additionally, there has been increasing public focus by investors, environmental activists, the media and governmental and nongovernmental organizations on social and environmental sustainability matters, including packaging and waste, animal health and welfare, human rights, climate change, carbon footprints and land, energy and water use. As a result, we have experienced increased pressure and expectations to make commitments, establish goals or set targets with respect to various environmental and social issues and to take the actions necessary to meet those commitments, goals and targets. If we are not effective in addressing social and environmental sustainability matters, consumer trust in our brand may suffer. In addition, the actions needed to achieve our sustainability goals could result in market, operational, execution and other costs, which could have a material adverse effect on our business and financial condition.

Our current insurance may not provide adequate levels of coverage against claims that have been or may be filed.

We currently maintain insurance that we believe to be adequate for businesses of our size and type. However, there are types of losses we could encounter that cannot be insured against or that we believe are not economically reasonable to insure, such as losses due to natural disasters or acts of terrorism. In addition, we currently self-insure a significant portion of expected losses under workers’ compensation, general liability, auto liability and property insurance programs. Unanticipated changes in the actuarial assumptions and management estimates underlying our reserves for these losses could result in materially different amounts of expense, which could harm our business and adversely affect our results of operations and financial condition. We also currently maintain insurance coverage to address cyber incidents. Applicable insurance policies contain customary limitations, conditions and exclusions, and there can be no assurance that our cyber insurance policies will cover substantially all of the costs and expenses related to any previous or future cyber incidents. In addition, our future insurance premiums may increase, and we may be unable to obtain similar levels of insurance on reasonable terms, or at all, due to challenging conditions in the insurance industry. Any inadequacy of, or inability to obtain, insurance coverage could have a material adverse effect on our results of operation and financial condition.

Changes in accounting standards, or the recognition of impairment or other charges, could adversely affect our future results of operations.

New accounting standards or changes in financial reporting requirements, accounting principles or practices, including with respect to our critical accounting estimates, could adversely affect our future results. We may also be affected by the nature and timing of decisions about underperforming markets or assets, including decisions that result in impairment or other charges that reduce our earnings. In assessing the recoverability of our long-lived assets, goodwill and intangible assets, we consider changes in economic conditions and make assumptions regarding estimated future cash flows and other factors. These estimates are highly subjective and can be significantly impacted by many factors such as business and economic conditions, operating costs, inflation, competition, consumer and demographic trends and restructuring activities. If our estimates or underlying assumptions change in the future, or if the operating performance or cash flows of our business decline, we may be required to record impairment charges, which could have a significant adverse effect on our reported results for the affected periods.

Tax matters, including changes in tax rates or laws, imposition of new taxes, disagreements with taxing authorities and unanticipated tax liabilities, could impact our results of operations and financial condition.

We are subject to income and other taxes in the United States and foreign jurisdictions, and our operations, plans and results are affected by tax matters and initiatives around the world. In particular, we are affected by the impact of changes to tax rates, laws or policies or related authoritative interpretations. We are also impacted by the settlement of adjustments proposed by taxing and governmental authorities in connection with our tax reviews and audits, all of which will depend on their timing, nature and scope. While we believe our recorded provision for income taxes properly reflects all applicable tax laws as currently enacted, there can be no assurance that we would be successful in challenging adjustments by the relevant tax authorities. Any significant increases in income tax rates, changes in income tax laws or unfavorable resolution of tax matters could have a material adverse impact on our results of operations and financial condition.

Our operations are subject to fluctuations in foreign currency exchange rates.

Most of our revenues, costs and indebtedness is denominated in U.S. dollars, which is also our reporting currency. Our international operations that are denominated in currencies other than the U.S. dollar are translated to U.S. dollars for our financial reporting purposes and are impacted by fluctuations in currency exchange rates and changes in currency regulations.
29


Our exposures to foreign currency risk are primarily related to fluctuations in the Canadian dollar relative to the U.S. dollar for our Canadian operations. Unfavorable currency fluctuations could reduce our royalty income and revenues. While we attempt to minimize our foreign currency risks, our risk management strategies may not be effective and our results of operations and financial condition could be adversely affected.

Our operations are influenced by adverse weather conditions.

Wendy’s restaurant operations are impacted by adverse weather conditions. Harsh weather conditions that keep customers from dining out can result in lost sales and revenues for our restaurants. For example, a heavy snowstorm in the Northeast or Midwest or a hurricane in the Southeast can shut down an entire metropolitan area, resulting in a reduction in sales in that area. Our first quarter includes winter months and historically has a lower level of sales at Company-operated restaurants. Because a significant portion of our restaurant operating costs is fixed or semi-fixed in nature, the loss of sales during these periods could hurt our operating margins and profits. For these reasons, quarter-to-quarter comparisons may not be a good indication of the Company’s performance or how we may perform in the future.

Our results can be adversely affected by unforeseen events, such as natural disasters, hostilities, social unrest, health epidemics or pandemics or other catastrophic events.

Unforeseen events, such as natural disasters, hostilities (including terrorist activities and public or workplace violence), social unrest, health epidemics or pandemics or other catastrophic events can adversely affect consumer spending, consumer confidence, restaurant sales and operations and our ability to perform corporate or support functions at our restaurant support center, any of which could affect our business, results of operations and financial condition.

Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties.

We believe that our properties, taken as a whole, are generally well maintained and are adequate for our current and foreseeable business needs.

The following table contains information about our principal office facilities as of January 3, 2021:
ACTIVE FACILITIESFACILITIES LOCATIONLAND TITLEAPPROXIMATE SQ. FT. OF FLOOR SPACE
Corporate HeadquartersDublin, OhioOwned324,025 *
Wendy’s Restaurants of Canada Inc.Burlington, Ontario, CanadaLeased8,917 **
_____________________

*    QSCC, Wendy’s independent supply chain purchasing co-op, leases 14,493 square feet of this space from Wendy’s. The Corporate Headquarters serves all of our operating segments.
**    The Wendy’s Restaurants of Canada Inc. facility primarily serves the International operating segment.

At January 3, 2021, Wendy’s and its franchisees operated 6,828 Wendy’s restaurants. Of the 361 Company-operated restaurants in the Wendy’s U.S. segment, Wendy’s owned the land and building for 142 restaurants, owned the building and held long-term land leases for 149 restaurants and held leases covering the land and building for 70 restaurants. Lease terms are generally initially between 15 and 20 years and, in most cases, provide for rent escalations and renewal options. Certain leases contain contingent rent provisions that require additional rental payments based upon restaurant sales volume in excess of specified amounts. As part of the Global Real Estate & Development segment, Wendy’s also owned 509 and leased 1,245 properties that were either leased or subleased principally to franchisees as of January 3, 2021. Surplus land and buildings are generally held for sale and are not material to our financial condition or results of operations.

30


Item 3. Legal Proceedings.

The Company is involved in litigation and claims incidental to our business. 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 for our existing litigation and claims for various reasons, including, but not limited to, many proceedings being in preliminary stages, with various motions either yet to be submitted or pending, discovery yet to occur and/or 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 and future developments could cause these actions or claims, individually or in aggregate, to have a material adverse effect on the Company’s financial condition, results of operations, or cash flows of a particular reporting period.

Item 4. Mine Safety Disclosures.

Not applicable.
31


PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

The Company’s common stock is traded on the Nasdaq Global Select Market (“Nasdaq”) under the symbol “WEN.”

The Company’s common stock is entitled to one vote per share on all matters on which stockholders are entitled to vote. The Company has no class of equity securities currently issued and outstanding except for its common stock. However, the Company is currently authorized to issue up to 100 million shares of preferred stock.

During the first three quarters of the 2019 fiscal year, the Company paid quarterly cash dividends of $0.10 per share of common stock. During the fourth quarter of the 2019 fiscal year, the Company paid a quarterly cash dividend of $0.12 per share of common stock. During the first quarter of the 2020 fiscal year, the Company paid a quarterly cash dividend of $0.12 per share of common stock. During the second and third quarters of the 2020 fiscal year, the Company paid quarterly cash dividends of $0.05 per share of common stock. During the fourth quarter of 2020, the Company paid a quarterly cash dividend of $0.07 per share of common stock.

During the first quarter of 2021, the Company declared a dividend of $0.09 per share of common stock to be paid on March 15, 2021 to shareholders of record as of March 5, 2021. Although the Company currently intends to continue to declare and pay quarterly cash dividends, there can be no assurance that any additional quarterly cash dividends will be declared or paid or as to the amount or timing of such dividends, if any. Future dividend payments, if any, will be made at the discretion of our Board of Directors and will be based on such factors as the Company’s earnings, financial condition and cash requirements and other factors.

As of February 23, 2021, there were approximately 22,241 holders of record of the Company’s common stock.

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 fourth fiscal quarter of 2020:

Issuer Repurchases of Equity Securities
PeriodTotal Number of Shares Purchased (1)Average Price Paid per ShareTotal Number of Shares Purchased as Part of Publicly Announced PlanApproximate Dollar Value of Shares that May Yet Be Purchased Under the Plan (2)
September 28, 2020
through
November 1, 2020
91,653 $23.58 86,285 $81,715,463 
November 2, 2020
through
November 29, 2020
249,262 $22.56 248,033 $76,122,127 
November 30, 2020
through
January 3, 2021
387,018 $22.28 377,359 $67,715,469 
Total727,933 $22.54 711,677 $67,715,469 

(1)Includes 16,256 shares reacquired by the Company from holders of share-based awards to satisfy certain requirements associated with the vesting or exercise of the respective award. The shares were valued at the fair market value of the Company’s common stock on the vesting or exercise date of such awards, as set forth in the applicable plan document.

(2)In February 2020, our Board of Directors authorized the repurchase of up to $100.0 million of our common stock through February 28, 2021, when and if market conditions warranted and to the extent legally permissible. As previously announced, in March 2020, the Company temporarily suspended all share repurchase activity in connection with the Company’s response to the COVID-19 pandemic. In July 2020, our Board of Directors approved an extension of the February 2020 authorization by one year, through February 28, 2022, when and if market and economic conditions warrant and to the extent legally permissible. The Company resumed share repurchases in August 2020.

32


Subsequent to January 3, 2021 through February 23, 2021, the Company repurchased 0.5 million shares with an aggregate purchase price of $9.6 million, excluding commissions.

Item 6. Selected Financial Data.

The following selected financial data has been derived from our consolidated financial statements. The data set forth below should be read in conjunction with “Managements Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and notes thereto.
Year Ended (1) (2)
20202019201820172016
(In millions, except per share amounts)
Sales (3)$722.8 $707.5 $651.6 $622.8 $920.8 
Franchise royalty revenue and fees (3)444.7 429.0 409.0 410.5 371.5 
Franchise rental income (3) (4)232.6 233.1 203.3 190.1 143.1 
Advertising funds revenue333.7 339.4 326.0 — — 
Revenues1,733.8 1,709.0 1,589.9 1,223.4 1,435.4 
Cost of sales (3)614.9 597.5 548.6 517.9 752.1 
Advertising funds expense345.4 338.1 321.9 — — 
System optimization (gains) losses, net (5)(3.1)(1.3)(0.5)39.1 (71.9)
Reorganization and realignment costs (6)16.0 17.0 9.1 22.6 10.1 
Impairment of long-lived assets (7)8.0 7.0 4.7 4.1 16.2 
Operating profit269.3 262.6 249.9 214.8 314.8 
Loss on early extinguishment of debt (8)— (8.5)(11.5)— — 
Investment (loss) income, net (9)(0.2)25.6 450.7 2.7 0.7 
(Provision for) benefit from income taxes (10)(35.0)(34.6)(114.8)93.0 (72.1)
Net income
$117.8 $136.9 $460.1 $194.0 $129.6 
Net income per share:
Basic$.53 $.60 $1.93 $.79 $.49 
Diluted.52 .58 1.88 .77 .49 
Dividends per share$.29 $.42 $.34 $.28 $.245 
Weighted average diluted shares outstanding228.0 235.1 245.0 252.3 266.7 
Net cash provided by operating activities$284.4 $288.9 $224.2 $238.8 $193.8 
Capital expenditures69.0 74.5 69.9 81.7 150.0 
January 3, 2021December 29, 2019December 30, 2018December 31, 2017January 1, 2017
(In millions)
Total assets (4)$5,040.0 $4,994.5 $4,292.0 $4,096.9 $3,939.3 
Long-term debt, including current portion2,247.1 2,280.3 2,328.8 2,286.4 2,300.6 
Finance lease liabilities, including current portion518.2 491.9 455.6 468.0 211.7 
Stockholders’ equity549.6 516.4 648.4 573.2 527.7 
_______________

(1)The Company’s fiscal reporting periods consist of 52 or 53 weeks ending on the Sunday closest to December 31 and are referred to herein as (1) “the year ended January 3, 2021” or “2020,” (2) “the year ended December 29, 2019” or “2019,” (3) “the year ended December 30, 2018” or “2018,” (4) “the year ended December 31, 2017” or “2017” and (5) “the year ended January 1, 2017” or “2016.” 2020 consisted of 53 weeks, while each of 2019, 2018, 2017 and 2016 consisted of 52 weeks.

33


(2)The Company applied the revenue recognition guidance effective at the beginning of 2018 using the modified retrospective method, whereby the cumulative effect of initially adopting the guidance was recognized as an adjustment to the opening balance of equity at January 1, 2018. Therefore, periods prior to 2018 do not reflect adjustments for the guidance and are not comparable.

(3)The decline in sales and cost of sales and the related increase in franchise royalty revenue and fees and franchise rental income during 2016 through 2017 is primarily a result of the sale of Wendy’s Company-operated restaurants to franchisees under our system optimization initiative, which began in 2013. As of January 1, 2017, the Company completed its plan to reduce its ongoing Company-operated restaurant ownership to approximately 5% of the total system.

(4)The Company adopted the new accounting guidance for leases during the first quarter of 2019 using the effective date as the date of initial application; therefore, periods prior to 2019 do not reflect adjustments for the guidance and are not comparable.

(5)System optimization (gains) losses, net includes all gains and losses recognized on dispositions of restaurants and other assets in connection with Wendy’s system optimization initiative. See Note 3 of the Financial Statements and Supplementary Data contained in Item 8 herein for further discussion.

(6)Reorganization and realignment costs include the impact of (1) Wendy’s operations and field realignment plan in 2020, (2) Wendy’s information technology (“IT”) realignment plan in 2019 through 2020, (3) Wendy’s May 2017 general and administrative (“G&A”) realignment plan in 2017 through 2020, (4) costs related to Wendy’s system optimization initiative in 2016 through 2020 and (5) Wendy’s November 2014 G&A realignment plan in 2016. See Note 5 of the Financial Statements and Supplementary Data contained in Item 8 herein for further discussion.

(7)Impairment of long-lived assets primarily includes impairment charges on (1) restaurant-level assets resulting from the deterioration in operating performance of certain Company-operated restaurants, (2) restaurant-level assets resulting from the Company’s decision to lease and/or sublease properties to franchisees in connection with the sale or anticipated sale of Company-operated restaurants, including any subsequent lease modifications, and (3) restaurant-level assets resulting from the closing of Company-operated restaurants and classifying such surplus properties as held for sale. See Note 17 of the Financial Statements and Supplementary Data contained in Item 8 herein for further discussion.

(8)Loss on early extinguishment of debt primarily relates to refinancings, redemptions and repayments of long-term debt. See Note 12 of the Financial Statements and Supplementary Data contained in Item 8 herein for further discussion.

(9)Investment (loss) income, net includes (1) a cash settlement related to a previously held investment during 2019 and (2) the gain on sale of our remaining ownership interest in Inspire Brands, Inc. (“Inspire Brands”) (formerly Arby’s) during 2018. See Note 8 and Note 18 of the Financial Statements and Supplementary Data contained in Item 8 herein for further discussion.

(10)The benefit from income taxes in 2017 includes the impact of the Tax Cuts and Jobs Act. See Note 14 of the Financial Statements and Supplementary Data contained in Item 8 herein for further discussion.

34


Item 7. 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 consolidated financial statements and the related notes that appear elsewhere within this report. Certain statements we make under this Item 7 constitute “forward-looking statements” under the Private Securities Litigation Reform Act of 1995. See “Special Note Regarding Forward-Looking Statements and Projections” in “Part I” preceding “Item 1 - Business.” You should consider our forward-looking statements in light of the risks discussed under the heading “Risk Factors” in Item 1A above, as well as our consolidated financial statements, related notes and other financial information appearing elsewhere in this report 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 is primarily engaged in the business of operating, developing and franchising a system of distinctive quick-service restaurants serving high quality food. Wendy’s opened its first restaurant in Columbus, Ohio in 1969. Today, Wendy’s is the #2 quick-service restaurant company in the hamburger sandwich segment in the United States (the “U.S.”) based on traffic share*, and the third largest globally with 6,828 restaurants in the U.S and 30 foreign countries and U.S. territories as of January 3, 2021. (*Based on The NPD Group CREST® data for the twelve months ended December 2020.)

The Company is comprised of the following segments: (1) Wendy’s U.S., (2) Wendy’s International and (3) Global Real Estate & Development. Wendy’s U.S. includes the operation and franchising of Wendy’s restaurants in the U.S. and derives its revenues from sales at Company-operated restaurants and royalties, fees and advertising fund collections from franchised restaurants. Wendy’s International includes the franchising of Wendy’s restaurants in countries and territories other than the U.S. and derives its revenues from royalties, fees and advertising fund collections from franchised restaurants. Global Real Estate & Development includes real estate activity for owned sites and sites leased from third parties, which are leased and/or subleased to franchisees, and also includes our share of the income of our TimWen real estate joint venture. In addition, Global Real Estate & Development earns fees from facilitating franchisee-to-franchisee restaurant transfers (“Franchise Flips”) and providing other development-related services to franchisees. In this Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” the Company reports on the segment profit for each of the three segments described above. The Company measures segment profit based on segment adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”). Segment adjusted EBITDA excludes certain unallocated general and administrative expenses and other items that vary from period to period without correlation to the Company’s core operating performance. See “Results of Operations” below and Note 26 of the Financial Statements and Supplementary Data contained in Item 8 herein for segment financial information.

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

We adopted the new accounting guidance for leases effective December 31, 2018, which had a material impact on our consolidated financial statements. Beginning with the first quarter of 2019, our financial condition and results of operations reflect adoption of this guidance; however, prior period results were not restated. See Note 1 of the Financial Statements and Supplementary Data contained in Item 8 herein for further information.

Executive Overview

Our Business

As of January 3, 2021, the Wendy’s restaurant system was comprised of 6,828 restaurants, with 5,881 Wendy’s restaurants in operation in the U.S. Of the U.S. restaurants, 361 were operated by the Company and 5,520 were operated by a total of 228 franchisees. In addition, at January 3, 2021, there were 947 Wendy’s restaurants in operation in 30 foreign countries and U.S. territories, all of which were franchised.

35


The revenues from our restaurant business are derived from two principal sources: (1) sales at Company-operated restaurants and (2) franchise-related revenues, including royalties, national advertising funds contributions, rents and franchise fees received from Wendy’s franchised restaurants. Company-operated restaurants comprised approximately 5% of the total Wendy’s system as of January 3, 2021.

Wendy’s operating results are impacted by a number of external factors, including commodity costs, labor costs, intense price competition, unemployment and consumer spending levels, general economic and market trends and weather. The COVID-19 pandemic has had and may continue to have the effect of heightening the impact of many of these factors. See “Sales Trends and COVID-19 Update” below and “Special Note Regarding Forward-Looking Statements and Projections” in “Part I” preceding “Item 1 - Business” for additional information.

Wendy’s long-term growth opportunities include investing in accelerated global growth through (1) building our breakfast daypart, (2) continued implementation of consumer-facing digital platforms and technologies and (3) expanding the Company’s footprint through targeted U.S. expansion and accelerated international expansion through same-restaurant sales growth and new restaurant development, including the Company’s plan to open Company-operated restaurants in the United Kingdom (“U.K.”) in the first half of 2021.

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. Restaurants temporarily closed for more than one fiscal week are excluded from same-restaurant sales. Same-restaurant sales exclude the impact of the 53rd week of 2020. For 2020, same-restaurant sales compares the 52 weeks from December 30, 2019 through December 27, 2020 to the 52 weeks from December 31, 2018 through December 29, 2019. For fiscal 2021, same restaurant sales will compare the 52 weeks from January 4, 2021 through January 2, 2022 to the 52 weeks from January 6, 2020 through January 3, 2021. 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.

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 price increases, the effectiveness of our advertising and marketing initiatives, featured products, product mix, fluctuations in food and labor costs, restaurant openings, remodels and closures and the level of our fixed and semi-variable 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’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 profitability.

Average Unit Volumes - We calculate Company-operated restaurant average unit volumes by summing the average weekly sales of all Company-operated restaurants which reported sales during the week. Average unit volumes exclude the impact of the 53rd week of 2020. For 2020, average unit volumes are calculated using the 52 weeks from December 30, 2019 through December 27, 2020.
Franchised restaurant average unit volumes is a non-GAAP financial measure, which includes sales by franchised restaurants, which 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. We calculate franchised restaurant average unit volumes by summing the average weekly sales of all franchised restaurants which reported sales during the week.
36



The Company calculates same-restaurant sales and systemwide sales growth 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.

Same-restaurant sales and systemwide sales exclude sales from Venezuela and, beginning in the third quarter of 2018, exclude sales from Argentina due to the highly inflationary economies of those countries. The Company considers economies that have had cumulative inflation in excess of 100% over a three-year period as highly inflationary.

The Company believes its presentation of same-restaurant sales, restaurant margin, systemwide sales and average unit volumes provide a meaningful perspective of the underlying operating performance of the Company’s current business and enables investors to better understand and evaluate the Company’s historical and prospective operating performance. The Company believes that these metrics are important supplemental measures of operating performance because they highlight trends in the Company’s business that may not otherwise be apparent when relying solely on GAAP financial measures. The Company believes investors, analysts and other interested parties use these metrics in evaluating issuers and that the presentation of these measures facilitates a comparative assessment of the Company’s operating performance. With respect to same-restaurant sales, systemwide sales and franchised restaurant average unit volumes, the Company also believes that the data is useful in assessing consumer demand for the Company’s products and the overall success of the Wendy’s brand.

The non-GAAP financial measures discussed above do not replace the presentation of the Company’s financial results in accordance with GAAP. Because all companies do not calculate non-GAAP financial measures in the same way, these measures as used by other companies may not be consistent with the way the Company calculates such measures.

Sales Trends and COVID-19 Update

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

In response to the pandemic, in March 2020, Wendy’s updated its brand standard to include the closure of all dining rooms except where there were specific needs, or a drive-thru or pick-up window option was not available, subject to applicable federal, state and local requirements. Substantially all Wendy’s restaurants continued to offer drive-thru and delivery service to our customers.

During the second quarter of 2020, the Company began to implement its restaurant and dining room reopening process through a phased approach in accordance with federal, state and local requirements, with customer and team member safety as its top priority. Dining rooms have been re-opening at each restaurant owner’s discretion, subject to applicable regulatory restrictions. As of January 3, 2021, approximately 75% of dining rooms were open across the Wendy’s system offering carryout and, in some cases, dine in services.

The COVID-19 pandemic has resulted in the temporary closure of certain restaurants across the Wendy’s system. As of January 3, 2021, systemwide temporary restaurant closures totaled 17 and 45 in the U.S. and internationally, respectively, which represents less than 1% of all system restaurants.

The following table shows same-restaurant sales for the fiscal months of January through June and the third and fourth quarters of 2020:
January through FebruaryMarchAprilMayJuneThird
Quarter
Fourth
Quarter (a)
Same-restaurant sales:
U.S. systemwide3.7 %(7.7)%(14.0)%(1.9)%5.1 %7.0 %5.5 %
International5.4 %(17.0)%(28.3)%(15.7)%(10.7)%(2.1)%(2.3)%
Global systemwide3.9 %(8.6)%(15.3)%(3.3)%3.4 %6.1 %4.7 %
________________
37



(a)Excludes the impact of the 53rd week in 2020.

As a result of the COVID-19 pandemic, global systemwide same-restaurant sales began to be materially adversely impacted in the fiscal month of March, with the fiscal month of April seeing the greatest impact. The decrease in same-restaurant sales was driven by a significant decline in customer count, partially offset by an increase in average check. Subsequently, global same-restaurant sales improved beginning in May, turned positive to 3.4% growth in June and increased 6.1% and 4.7% during the third and fourth quarters, respectively. Through the week ended February 21, 2021, U.S. and global systemwide same-restaurant sales increased approximately 6.0% and 5.0%, respectively. The improvement in same-restaurant sales since the lows seen in March and April has been primarily driven by a significant increase in customer counts since that time.

Breakfast Launch

Wendy’s long-term growth opportunities include investing in accelerated global growth, which includes building upon our breakfast daypart. Since the launch of breakfast across the U.S. system on March 2, 2020, same-restaurant sales have benefited from this new daypart, with breakfast contributing 6.2%, 6.4% and 6.3% to U.S. systemwide same-restaurant sales during the second, third and fourth quarters of 2020, respectively. The Company funded $14.6 million of incremental advertising to support the breakfast daypart during 2020.

Digital

Wendy’s long-term growth opportunities include accelerating same-restaurant sales through continued implementation of consumer-facing digital platforms and technologies. The Company has invested significant resources to focus on consumer-facing technology, including activating mobile ordering via Wendy’s mobile app, launching the Wendy’s Rewards loyalty program and establishing delivery agreements with third-party vendors for Wendy’s U.S. and Canadian restaurants. The Company’s digital business continues to grow and represented approximately 5% of U.S. systemwide sales during 2020, which is more than double the amount in 2019.

Operations and Field Realignment

In September 2020, the Company initiated a plan to reallocate resources to better support the long-term growth strategies for Company and franchise operations (the “Operations and Field Realignment Plan”). The Operations and Field Realignment Plan realigns the Company’s restaurant operations team, including transitioning from separate leaders of Company and franchise operations to a single leader of all U.S. restaurant operations. We also expect to incur contract termination charges, including the planned closure of certain field offices. The Company expects to incur total costs aggregating approximately $7.0 million to $9.0 million, of which approximately $6.5 million to $8.5 million will be cash expenditures, related to the Operations and Field Realignment Plan. Costs related to the Operations and Field Realignment Plan are recorded to “Reorganization and realignment costs.” During 2020, the Company recognized costs totaling $3.8 million, which primarily included severance and related employee costs and share-based compensation. The Company expects to incur additional costs aggregating approximately $3.0 million to $5.0 million, comprised primarily of third-party and other costs. The Company expects to recognize the majority of the remaining costs and make the majority of the remaining cash expenditures associated with the Operations and Field Realignment Plan during 2021.

Information Technology (“IT”) Realignment

In December 2019, our Board of Directors approved a plan to realign and reinvest resources in the Company’s IT organization to strengthen its ability to accelerate growth (the “IT Realignment Plan”). The Company has partnered with a third-party global IT consultant on this new structure to leverage their global capabilities, which will enable a more seamless integration between its digital and corporate IT assets. The IT Realignment Plan has reduced certain employee compensation and other related costs that the Company has reinvested back into IT to drive additional capabilities and capacity across all of its technology platforms. Additionally, in June 2020, the Company made changes to its leadership structure that included the elimination of the Chief Digital Experience Officer position and the creation of a Chief Information Officer position, for which the Company completed the hiring process in October 2020. Costs related to the IT Realignment Plan are recorded to “Reorganization and realignment costs.” During 2020 and 2019, the Company recognized costs totaling $7.3 million and $9.1 million, respectively, which primarily included third-party and other costs and recruitment and relocation costs in 2020 and severance and related employee costs and third-party and other costs in 2019. The Company does not expect to incur any material additional costs under the IT Realignment Plan.
38



NPC Quality Burgers, Inc. (“NPC”)

As previously announced, NPC, the Company’s largest franchisee, filed for chapter 11 bankruptcy in July 2020 and commenced a process to sell all or substantially all of its assets, including its interest in approximately 393 Wendy’s restaurants across eight different markets, pursuant to a court-approved auction process. On November 18, 2020, the Company submitted a consortium bid together with a group of pre-qualified franchisees to acquire NPC’s Wendy’s restaurants. Under the terms of the consortium bid, several existing and new franchisees would have been the ultimate purchasers of seven of the NPC markets, while the Company would have acquired one market.

On January 7, 2021, following a court-approved mediation process, NPC and certain affiliates of Flynn Restaurant Group (“FRG”) and the Company entered into separate asset purchase agreements under which all of NPC’s Wendy’s restaurants will be sold to Wendy’s approved franchisees. Under the proposed transaction, FRG will acquire approximately half of NPC’s Wendy’s restaurants in four markets, while several existing Wendy’s franchisees that were part of the Company’s consortium bid will acquire the other half of NPC’s Wendy’s restaurants in the other four markets. The Company does not expect to acquire and operate any restaurants as part of this transaction. The Company expects that the sale of the restaurants will be completed in the late first quarter or early second quarter of 2021, subject to the satisfaction of various closing conditions specified in the asset purchase agreements.
39


This section of this Form 10-K generally discusses 2020 and 2019 items and year-to-year comparisons between 2020 and 2019. For discussion related to 2018 items and year-to-year comparisons between 2019 and 2018 that are not included in this Form 10-K, please refer to Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2019 Form 10-K, filed with the United States Securities and Exchange Commission on February 26, 2020.

Results of Operations

The tables included throughout this Results of Operations section set forth in millions (except as otherwise indicated) the Company’s consolidated results of operations for the years ended January 3, 2021, December 29, 2019 and December 30, 2018. Except as noted below, the Company’s consolidated results of operations described below includes the benefit of the 53rd week in 2020.
202020192018
AmountChangeAmountChangeAmount
Revenues:
Sales$722.8 $15.3 $707.5 $55.9 $651.6 
Franchise royalty revenue and fees444.7 15.7 429.0 20.0 409.0 
Franchise rental income232.6 (0.5)233.1 29.8 203.3 
Advertising funds revenue333.7 (5.7)339.4 13.4 326.0 
1,733.8 24.8 1,709.0 119.1 1,589.9 
Costs and expenses: 
Cost of sales614.9 17.4 597.5 48.9 548.6 
Franchise support and other costs26.5 (17.2)43.7 18.5 25.2 
Franchise rental expense125.6 1.7 123.9 32.8 91.1 
Advertising funds expense345.4 7.3 338.1 16.2 321.9 
General and administrative206.9 6.7 200.2 (17.3)217.5 
Depreciation and amortization132.8 1.1 131.7 2.8 128.9 
System optimization gains, net(3.1)(1.8)(1.3)(0.8)(0.5)
Reorganization and realignment costs16.0 (1.0)17.0 7.9 9.1 
Impairment of long-lived assets8.0 1.0 7.0 2.3 4.7 
Other operating income, net(8.5)2.9 (11.4)(4.9)(6.5)
1,464.5 18.1 1,446.4 106.4 1,340.0 
Operating profit269.3 6.7 262.6 12.7 249.9 
Interest expense, net(117.7)(1.7)(116.0)3.6 (119.6)
Loss on early extinguishment of debt— 8.5 (8.5)3.0 (11.5)
Investment (loss) income, net(0.2)(25.8)25.6 (425.1)450.7 
Other income, net1.4 (6.4)7.8 2.4 5.4 
Income before income taxes
152.8 (18.7)171.5 (403.4)574.9 
Provision for income taxes(35.0)(0.4)(34.6)80.2 (114.8)
Net income$117.8 $(19.1)$136.9 $(323.2)$460.1 

40


2020% of Total Revenues2019% of Total Revenues2018% of Total Revenues
Revenues:
Sales$722.8 41.7 %$707.5 41.4 %$651.6 41.0 %
Franchise royalty revenue and fees:
Franchise royalty revenue416.5 24.0 %400.7 23.4 %377.9 23.7 %
Franchise fees28.2 1.7 %28.3 1.7 %31.1 2.0 %
Total franchise royalty revenue and fees
444.7 25.7 %429.0 25.1 %409.0 25.7 %
Franchise rental income232.6 13.4 %233.1 13.6 %203.3 12.8 %
Advertising funds revenue333.7 19.2 %339.4 19.9 %326.0 20.5 %
Total revenues$1,733.8 100.0 %$1,709.0 100.0 %$1,589.9 100.0 %
2020% of 
Sales
2019% of 
Sales
2018% of 
Sales
Cost of sales:
Food and paper$221.8 30.7 %$222.8 31.5 %$207.0 31.8 %
Restaurant labor233.6 32.3 %214.7 30.3 %194.4 29.8 %
Occupancy, advertising and other operating costs
159.5 22.1 %160.0 22.7 %147.2 22.6 %
Total cost of sales$614.9 85.1 %$597.5 84.5 %$548.6 84.2 %

2020% of Sales2019% of Sales2018% of Sales
Restaurant margin$107.9 14.9 %$110.0 15.5 %$103.0 15.8 %

The tables below present certain of the Company’s key business measures, which are defined and further discussed in the “Executive Overview” section included herein.
202020192018
Key business measures:
U.S. same-restaurant sales (a):
Company-operated restaurants(0.7)%3.1 %1.3 %
Franchised restaurants2.3 %2.9 %0.5 %
Systemwide2.0 %2.9 %0.6 %
International same-restaurant sales (a) (b)(6.0)%3.2 %4.7 %
Global same-restaurant sales (a):
Company-operated restaurants(0.7)%3.1 %1.3 %
Franchised restaurants (b)1.4 %2.9 %1.0 %
Systemwide (b)1.2 %2.9 %1.0 %
________________

(a)Excludes the impact of the 53rd week in 2020.

(b)Includes international franchised restaurants same-restaurant sales (excluding Venezuela, and excluding Argentina beginning in the third quarter of 2018, due to the impact of the highly inflationary economies of those countries).
41


202020192018
Key business measures (continued):
Systemwide sales: (a)
Company-operated$722.8 $707.5 $651.6 
U.S. franchised9,508.5 9,055.2 8,719.1 
U.S. systemwide10,231.3 9,762.7 9,370.7 
International franchised (b)1,107.2 1,181.6 1,141.9 
Global systemwide$11,338.5 $10,944.3 $10,512.6 
Restaurant average unit volumes (in thousands): (c)
Company-operated$1,978.5 $1,989.6 $1,918.0 
U.S. franchised1,708.9 1,664.1 1,612.8 
U.S. systemwide1,725.5 1,684.0 1,630.8 
International franchised (b)1,199.5 1,357.5 1,359.2 
Global systemwide$1,654.7 $1,641.4 $1,596.1 
________________

(a)During 2020 and 2019, global systemwide sales increased 3.7% and 4.4%, respectively, U.S. systemwide sales increased 4.8% and 4.2%, respectively, and international franchised sales decreased 5.5% and increased 6.7%, respectively, on a constant currency basis. 2020 systemwide sales growth percentages include a positive impact of approximately 2.0% for the 53rd week in 2020.

(b)Excludes Venezuela, and excludes Argentina beginning in the third quarter of 2018, due to the impact of the highly inflationary economies of those countries.

(c)Excludes the impact of the 53rd week in 2020.

Company-operatedU.S. FranchisedInternational FranchisedSystemwide
Restaurant count:
Restaurant count at December 30, 2018
353 5,457 901 6,711 
Opened105 75 182 
Closed(3)(62)(40)(105)
Net purchased from (sold by) franchisees(5)— — 
Restaurant count at December 29, 2019
357 5,495 936 6,788 
Opened91 49 147 
Closed(2)(67)(38)(107)
Net (sold to) purchased by franchisees(1)— — 
Restaurant count at January 3, 2021
361 5,520 947 6,828 

Sales202020192018
AmountChangeAmountChangeAmount
Sales$722.8 $15.3 $707.5 $55.9 $651.6 

The increase in sales during 2020 was primarily due to (1) sales during the 53rd week of 2020 of approximately $13.7 million and (2) a net increase in the number of Company-operated restaurants in operation during 2020 compared to 2019. These increases were partially offset by a 0.7% decrease in Company-operated same-restaurant sales. Company-operated same-restaurant sales declined due to a decrease in customer count as a result of the COVID-19 pandemic, partially offset by (1) the positive impact from the launch of breakfast and (2) higher average check.

42


Franchise Royalty Revenue and Fees202020192018
AmountChangeAmountChangeAmount
Franchise royalty revenue$416.5 $15.8 $400.7 $22.8 $377.9 
Franchise fees28.2 (0.1)28.3 (2.8)31.1 
$444.7 $15.7 $429.0 $20.0 $409.0 

The increase in franchise royalty revenue during 2020 was primarily due to (1) royalties earned during the 53rd week of 2020 of approximately $7.8 million, (2) a 1.4% increase in global franchise same-restaurant sales and (3) a net increase in the number of franchise restaurants in operation during 2020 compared to 2019. The increase in franchise same-restaurant sales reflects (1) the positive impact from the launch of breakfast in the U.S. and (2) higher average check, partially offset by a decrease in customer count as a result of the COVID-19 pandemic.

Franchise Rental Income202020192018
AmountChangeAmountChangeAmount
Franchise rental income$232.6 $(0.5)$233.1 $29.8 $203.3 

The decrease in franchise rental income during 2020 was primarily due to assigning certain leases to franchisees during 2019.

Advertising Funds Revenue202020192018
AmountChangeAmountChangeAmount
Advertising funds revenue$333.7 $(5.7)$339.4 $13.4 $326.0 

The Company maintains two national advertising funds established to collect and administer funds contributed for use in advertising and promotional programs for Company-operated and franchised restaurants in the U.S. and Canada. Franchisees make contributions to the national advertising funds based on a percentage of sales of the franchised restaurants. The decrease in advertising funds revenue during 2020 was primarily due to the impact of the COVID-19 pandemic. The positive impact from the launch of breakfast did not impact advertising funds revenue due to the Company’s decision in March 2020 to abate national advertising fund contributions on breakfast sales for the remainder of 2020 in response to the COVID-19 pandemic. The decrease in advertising funds revenue was partially offset by revenues earned during the 53rd week of 2020 of approximately $6.4 million.

Cost of Sales, as a Percent of Sales202020192018
AmountChangeAmountChangeAmount
Food and paper30.7 %(0.8)%31.5 %(0.3)%31.8 %
Restaurant labor32.3 %2.0 %30.3 %0.5 %29.8 %
Occupancy, advertising and other operating costs22.1 %(0.6)%22.7 %0.1 %22.6 %
85.1 %0.6 %84.5 %0.3 %84.2 %

The increase in cost of sales, as a percent of sales, during 2020 was primarily due to (1) a decrease in customer count, reflecting the impact of the COVID-19 pandemic, (2) restaurant labor cost increases, which included incremental recognition pay during April and May, and (3) an increase in commodity costs. These impacts were partially offset by (1) higher average check and (2) lower insurance costs.

43


Franchise Support and Other Costs202020192018
AmountChangeAmountChangeAmount
Franchise support and other costs$26.5 $(17.2)$43.7 $18.5 $25.2 

The decrease in franchise support and other costs during 2020 was primarily due to (1) the prior year investments of $16.4 million to support U.S. franchisees in preparation of the launch of breakfast and (2) the prior year purchase of digital scanning equipment for franchisees of $5.3 million. These decreases were partially offset by further investments made in 2020 to support U.S. franchisees in preparation of the launch of breakfast.

Franchise Rental Expense202020192018
AmountChangeAmountChangeAmount
Franchise rental expense$125.6 $1.7 $123.9 $32.8 $91.1 

The increase in franchise rental expense during 2020 was primarily due to the impact of assigning certain leases to franchisees in 2019.

Advertising Funds Expense202020192018
AmountChangeAmountChangeAmount
Advertising funds expense$345.4 $7.3 $338.1 $16.2 $321.9 

The increase in advertising funds expense during 2020 was primarily due to the Company’s funding of $14.6 million of incremental advertising to support the breakfast daypart. This increase was partially offset by the impact of the COVID-19 pandemic.