Leases

3 Months Ended

Apr. 02, 2023

Leases [Abstract]

Leases, Company as Lessee

Leases

Nature of Leases

The Company operates restaurants that are located on sites owned by us and sites leased by us from third parties. In addition, the Company owns sites and leases sites from third parties, which it leases and/or subleases to franchisees. At April 2, 2023, Wendy’s and its franchisees operated 7,095 Wendy’s restaurants. Of the 414 Company-operated Wendy’s restaurants, Wendy’s owned the land and building for 158 restaurants, owned the building and held long-term land leases for 145 restaurants and held leases covering the land and building for 111 restaurants. Wendy’s also owned 486 and leased 1,192 properties that were either leased or subleased principally to franchisees. The Company also leases restaurant, office and transportation equipment.

Company as Lessee

The components of lease cost are as follows:

	Three Months Ended
	April 2, 2023		April 3, 2022
Finance lease cost:
Amortization of finance lease assets	$	4,063	$	4,064
Interest on finance lease liabilities	10,750		10,645
	14,813		14,709
Operating lease cost	21,449		20,661
Variable lease cost (a)	16,081		14,803
Short-term lease cost	1,506		1,433
Total operating lease cost (b)	39,036		36,897
Total lease cost	$	53,849	$	51,606

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(a)Includes expenses for executory costs of $9,848 and $9,608 for the three months ended April 2, 2023 and April 3, 2022, respectively, for which the Company is reimbursed by sublessees.

(b)Includes $30,598 and $28,925 for the three months ended April 2, 2023 and April 3, 2022, respectively, recorded to “Franchise rental expense” for leased properties that are subsequently leased to franchisees. Also includes $7,865 and $7,294 for the three months ended April 2, 2023 and April 3, 2022, respectively, recorded to “Cost of sales” for leases for Company-operated restaurants.

Leases, Company as Lessor

Company as Lessor

The components of lease income are as follows:

	Three Months Ended
	April 2, 2023		April 3, 2022
Sales-type and direct-financing leases:
Selling profit	$	129	$	480
Interest income (a)	7,862		7,740
Operating lease income	42,156		43,314
Variable lease income	15,651		14,557
Franchise rental income (b)	$	57,807	$	57,871

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(a)Included in “Interest expense, net.”

(b)Includes sublease income of $42,951 and $43,165 recognized during the three months ended April 2, 2023 and April 3, 2022, respectively. Sublease income includes lessees’ variable payments to the Company for executory costs of $9,778 and $9,535 for the three months ended April 2, 2023 and April 3, 2022, respectively.