Revenue (Notes)

12 Months Ended

Jan. 02, 2022

Revenue [Abstract]

Revenue from Contract with Customer

Revenue

Nature of Goods and Services

The Company generates revenues from sales at Company-operated restaurants and earns fees and rental income from franchised restaurants. Revenues are recognized upon delivery of food to the customer at Company-operated restaurants or upon the fulfillment of terms outlined in the franchise agreement for franchised restaurants. The franchise 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 franchise agreement generally provides for a 20-year term and a 10-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 certain new restaurant development and reimaging programs.

The franchise agreement requires that the franchisee pay a royalty based on a percentage of sales at the franchised restaurant, as well as make contributions to the Advertising Funds based on a percentage of sales. Wendy’s may offer development incentive programs from time to time that provide for a discount or lesser royalty amount or Advertising Fund

contribution for a limited period of time. The agreement also typically requires that the franchisee pay Wendy’s a technical assistance fee. 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 restaurants and in the development and opening of new restaurants. The franchise agreement also requires that the franchisee pay an annual fee for technology services. The technology fee is a flat fee dependent on each restaurant’s sales.

Wendy’s also enters into development agreements with certain franchisees. The development agreement generally provides the franchisee with the right to develop a specified number of new Wendy’s restaurants using the Image Activation design within a stated, non-exclusive territory for a specified period, subject to the franchisee meeting interim new restaurant development requirements.

Wendy’s owns and leases sites from third parties, which it leases and/or subleases to franchisees. Noncancelable lease terms are generally initially between 15 and 20 years and, in most cases, provide for rent escalations and renewal options. The initial lease term for properties leased or subleased to franchisees is generally set to be coterminous with the initial 20-year term of the related franchise agreement and any renewal term is coterminous with the 10-year renewal term of the related franchise agreement.

Royalties and contributions to the Advertising Funds are generally due within the month subsequent to which the revenue was generated through sales at the franchised restaurant. Technical assistance fees and renewal fees are generally due upon execution of the related franchise agreement. Annual technology fees are due in quarterly installments. Rental income is due in accordance with the terms of each lease, which is generally at the beginning of each month.

Disaggregation of Revenue

The following tables disaggregate revenue by segment and source for 2021, 2020 and 2019:

	Wendy’s U.S.		Wendy’s International		Global Real Estate & Development		Total
2021
Sales at Company-operated restaurants	$	730,415	$	3,659	$	—	$	734,074
Franchise royalty revenue	407,317		53,392		—		460,709
Franchise fees	64,170		5,391		6,478		76,039
Franchise rental income	—		—		236,655		236,655
Advertising funds revenue	365,594		23,927		—		389,521
Total revenues	$	1,567,496	$	86,369	$	243,133	$	1,896,998
2020
Sales at Company-operated restaurants	$	722,764	$	—	$	—	$	722,764
Franchise royalty revenue	373,162		43,346		—		416,508
Franchise fees	22,126		1,962		4,153		28,241
Franchise rental income	—		—		232,648		232,648
Advertising funds revenue	313,330		20,334		—		333,664
Total revenues	$	1,431,382	$	65,642	$	236,801	$	1,733,825
2019
Sales at Company-operated restaurants	$	707,485	$	—	$	—	$	707,485
Franchise royalty revenue	355,702		44,998		—		400,700
Franchise fees	21,889		2,978		3,432		28,299
Franchise rental income	—		—		233,065		233,065
Advertising funds revenue	319,231		20,222		—		339,453
Total revenues	$	1,404,307	$	68,198	$	236,497	$	1,709,002

Contract Balances

The following table provides information about receivables and contract liabilities (deferred franchise fees) from contracts with customers:

	Year End
	January 2, 2022 (a)		January 3, 2021 (a)
Receivables, which are included in “Accounts and notes receivable, net” (b)	$	49,168	$	57,677
Receivables, which are included in “Advertising funds restricted assets”	65,497		63,252
Deferred franchise fees (c)	97,186		97,785

_______________

(a)Excludes funds collected from the sale of gift cards, which are primarily reimbursed to franchisees upon redemption at franchised restaurants and do not ultimately result in the recognition of revenue in the Company’s consolidated statements of operations.

(b)Includes receivables related to “Sales” and “Franchise royalty revenue and fees.”

(c)Deferred franchise fees are included in “Accrued expenses and other current liabilities” and “Deferred franchise fees” and totaled $9,084 and $88,102 as of January 2, 2022, respectively, and $8,691 and $89,094 as of January 3, 2021, respectively.

Significant changes in deferred franchise fees are as follows:

	Year Ended
	2021		2020		2019
Deferred franchise fees at beginning of period	$	97,785	$	100,689	$	102,205
Revenue recognized during the period	(19,838)		(8,955)		(9,487)
New deferrals due to cash received and other	19,239		6,051		7,971
Deferred franchise fees at end of period	$	97,186	$	97,785	$	100,689

Anticipated Future Recognition of Deferred Franchise Fees

The following table reflects the estimated franchise fees to be recognized in the future related to performance obligations that are unsatisfied at the end of the period:

Estimate for fiscal year:
2022	$	9,084
2023	6,284
2024	6,096
2025	5,911
2026	5,795
Thereafter	64,016
	$	97,186