System Optimization Gains, Net

9 Months Ended

Sep. 29, 2024

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 facilitating franchisee-to-franchisee restaurant transfers (“Franchise Flips”). As of September 29, 2024, Company-operated restaurant ownership was approximately 5% of the total system. While the Company has no plans to move its ownership away from approximately 5% of the total system, the Company expects to continue to optimize the Wendy’s system through 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 reimages. During the nine months ended September 29, 2024 and October 1, 2023, the Company facilitated 14 and 88 Franchise Flips, respectively. Additionally, during the nine months ended September 29, 2024, the Company completed the sale of one Company-operated restaurant to a franchisee. No Company-operated restaurants were sold to or purchased from franchisees during the nine months ended October 1, 2023.

Gains and losses recognized on dispositions are recorded to “System optimization gains, net” in our condensed consolidated statements of operations. Costs related to acquisitions and dispositions under our system optimization initiative are recorded to “Reorganization and realignment costs,” which are further described in Note 4. All other costs incurred related to facilitating Franchise Flips are recorded to “Franchise support and other costs.”

The following is a summary of the disposition activity recorded as a result of our system optimization initiative:


	Three Months Ended				Nine Months Ended
	September 29, 2024		October 1, 2023		September 29, 2024		October 1, 2023
Number of restaurants sold to franchisees	1		—		1		—

Proceeds from sales of restaurants	$	834	$	—	$	834	$	—
Net assets sold (a)	(725)		—		(725)		—
Other	6		—		6		—
	115		—		115		—
Post-closing adjustments on sales of restaurants (b)	440		537		694		537
Gain on sales of restaurants, net	555		537		809		537

Loss on sales of other assets, net (c)	(135)		(417)		(236)		(418)
System optimization gains, net	$	420	$	120	$	573	$	119

_______________

(a)Net assets sold consisted primarily of land.

(b)Represents the recognition of deferred gains as a result of the resolution of certain contingencies related to the extension of lease terms for restaurants previously sold to franchisees.

(c)During the three and nine months ended September 29, 2024, the Company received net cash proceeds of $1,787 and $2,388, respectively, primarily from the sale of surplus and other properties. During the nine months ended October 1, 2023, the Company received net cash proceeds of $280 primarily from the sale of surplus and other properties.

Assets Held for Sale

As of September 29, 2024 and December 31, 2023, the Company had assets held for sale of $2,517 and $2,689, respectively, primarily consisting of surplus properties. Assets held for sale are included in “Prepaid expenses and other current assets.”