Facilities Action Charges, Net



	Three Months Ended				Six Months Ended
	June 30, 2013		July 1, 2012		June 30, 2013		July 1, 2012
System optimization initiative	$	4,799	$	—	$	4,799	$	—
Facilities relocation and other transition costs	1,154		9,426		3,324		14,957
Breakfast discontinuation	361		—		1,029		—
Arby’s transaction related costs	63		562		263		1,174
	$	6,377	$	9,988	$	9,415	$	16,131

System Optimization Initiative

In July 2013, the Company announced a system optimization initiative, as part of its brand transformation, which includes a plan to sell approximately 425 company-owned restaurants to franchisees by mid-year 2014. The Company’s system optimization initiative also includes the consolidation of regional and divisional territories. As a result of the system optimization initiative, the Company anticipates recognizing the following costs during 2013 and 2014: (1) losses on remeasuring long-lived assets to fair value upon determination that the assets will be leased and/or subleased to franchisees in connection with the sale or anticipated sale of restaurants (“System Optimization Remeasurement”), (2) professional fees and (3) severance and related employee costs. These costs, as well as gains or losses recognized on the sale of restaurants under the system optimization initiative will be recorded to “Facilities action charges, net” in our condensed consolidated statement of operations. The Company estimates severance and related employee costs will total between $7,000 and $10,000. The Company cannot estimate the other components of the system optimization initiative resulting from future sales of restaurants.

The effects of the sale of eight restaurants which occurred prior to the announcement of our system optimization initiative, as well as losses on remeasuring long-lived assets to fair value upon determination that the assets will be leased and/or subleased to franchisees in connection with the anticipated sale of restaurants in the third quarter of 2013 have been presented as system optimization and included in “Facilities action charges, net” in our condensed consolidated statement of operations for the three and six months ended June 30, 2013.

The following is a summary of the activity recorded under our system optimization initiative:



	Three Months Ended
	June 30, 2013
Gain on the sale of restaurants (a)	$	(1,276	)
System Optimization Remeasurement (b)	5,938
Professional fees	125
Other	12
Total system optimization initiative	$	4,799

_______________


(a)	During the three months ended June 30, 2013, Wendy’s sold eight restaurants to franchisees for $2,800. Net assets sold totaled $843 and consisted primarily of cash, inventory and equipment. In addition, goodwill of $681 was written off in connection with the sales.

(b)

Represents the loss on remeasurement of long-lived assets (including land, buildings, leasehold improvements and favorable lease assets) at certain company-owned restaurants to fair value as a result of the Company’s decision to lease and/or sublease such land and/or buildings and sell certain other restaurant assets to franchisees in connection with our system optimization initiative. See Note 6 for more information on non-recurring fair value measurements.

Restaurant Assets Held for Sale



	June 30, 2013
Number of restaurants classified as assets held for sale (a)	54

Restaurant assets held for sale (b)	$	10,050

_______________


(a)	Represents the number of restaurants which have assets classified as held for sale and included in “Prepaid expenses and other current assets” as of June 30, 2013.


(b)	Net restaurant assets held for sale primarily consist of cash, inventory and equipment.

In the third quarter of 2013, the Company completed the sale of certain assets used in the operation of 22 Wendy’s restaurants which were classified as held for sale as of June 30, 2013, for cash proceeds of approximately $9,310, subject to customary purchase price adjustments. This sale is expected to result in an estimated pre-tax gain of approximately $4,300.

Facilities Relocation and Other Transition Costs

The relocation of the Company’s Atlanta restaurant support center to Ohio was substantially completed during 2012. The Company expects to record any remaining costs related to the relocation, which are anticipated to aggregate approximately $1,400, during the remainder of 2013.



	Three Months Ended				Six Months Ended				Total Incurred Since Inception		Total Expected to be Incurred
	June 30, 2013		July 1, 2012		June 30, 2013		July 1, 2012		Total Incurred Since Inception		Total Expected to be Incurred
Severance, retention and other payroll costs	$	424	$	4,317	$	1,366	$	7,316	$	16,663	$	17,140
Relocation costs	444		1,505		1,261		2,081		6,483		7,405
Atlanta facility closure costs	177		133		395		177		4,936		4,936
Consulting and professional fees	21		1,933		128		2,818		5,056		5,056
Other	88		879		174		1,265		2,314		2,345
	1,154		8,767		3,324		13,657		35,452		36,882
Accelerated depreciation expense	—		659		—		1,300		2,118		2,118
Share-based compensation	—		—		—		—		271		271
Total	$	1,154	$	9,426	$	3,324	$	14,957	$	37,841	$	39,271

The table below presents a rollforward of our accruals for facility relocation costs, which are included in “Accrued expenses and other current liabilities” and “Other liabilities.”



	Balance December 30, 2012		Charges		Payments			Balance June 30, 2013
Severance, retention and other payroll costs	$	4,121	$	1,366	$	(3,293	)	$	2,194
Relocation costs	500		1,261		(1,761		)	—
Atlanta facility closure costs	4,170		395		(1,118		)	3,447
Consulting and professional fees	80		128		(208		)	—
Other	9		174		(183		)	—
	$	8,880	$	3,324	$	(6,563	)	$	5,641

Breakfast Discontinuation

In January 2013, Wendy’s announced that it was discontinuing the breakfast daypart at certain restaurants. During the three and six months ended June 30, 2013, we reflected $361 and $1,029, respectively, of costs for such discontinuance, primarily representing the remaining carrying value of breakfast related equipment no longer being used.

Arby’s Transaction Related Costs

As disclosed in our Form 10-K, the remaining Arby’s transaction related costs were associated with the relocation of a corporate executive that were being expensed over the three year period following the executive’s relocation in accordance with the terms of the agreement. In accordance with the terms of a separation agreement with such executive, the remaining unamortized costs were recorded to severance expense and included in “General and administrative” during the second quarter of 2013. The Company does not expect to incur additional costs related to the sale of Arby’s.