Facilities Action Charges, Net



	Three Months Ended				Nine Months Ended
	September 29, 2013		September 30, 2012		September 29, 2013		September 30, 2012
System optimization initiative	$	21,557	$	—	$	26,356	$	—
Facilities relocation and other transition costs	632		11,285		3,956		26,242
Breakfast discontinuation	86		—		1,115		—
Arby’s transaction related costs	—		145		263		1,319
	$	22,275	$	11,430	$	31,690	$	27,561

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 has recorded 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”). The Company does not anticipate significant changes to the System Optimization Remeasurement through the completion of the initiative, although such changes could occur if actual future rental payments differ substantially from estimated payments. In addition, the Company anticipates recognizing the following costs related to the system optimization initiative during 2013 and 2014: (1) accelerated depreciation and amortization, (2) severance and related employee costs, (3) share-based compensation, (4) professional fees and (5) other costs. These costs, as well as gains or losses recognized on sales of restaurants under the system optimization initiative will be recorded to “Facilities action charges, net” in our condensed consolidated statements of operations. The Company’s estimate for costs to be incurred under the system optimization initiative during the remainder of 2013 and 2014 totals approximately $25,900 and includes: (1) accelerated amortization of previously acquired franchise rights in territories being sold of $14,300, (2) severance and employee related costs of $7,000, (3) professional fees of $3,000 and (4) share-based compensation of $1,600. The Company cannot reasonably estimate the gains or losses resulting from future sales of restaurants.

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



	Three Months Ended			Nine Months Ended
	September 29, 2013			September 29, 2013
Gain on sales of restaurants, net	$	(1,665	)	$	(2,941	)
System Optimization Remeasurement (a)	12,421			18,359
Accelerated amortization (b)	3,130			3,130
Severance and related employee costs	6,131			6,131
Share-based compensation (c)	755			755
Professional fees	704			829
Other	81			93
Total system optimization initiative	$	21,557		$	26,356

_______________


(a)	Includes remeasurement of land, buildings, leasehold improvements and favorable lease assets at all company-owned restaurants included in our system optimization initiative. See Note 6 for more information on non-recurring fair value measurements.


(b)	Includes accelerated amortization of previously acquired franchise rights related to company-owned restaurants in territories that are being sold in connection with our system optimization initiative.


(c)	Represents incremental share-based compensation resulting from the modification of stock options and performance-based awards in connection with the termination of employees under our system optimization initiative.

Gain on Sales of Restaurants



	Three Months Ended			Nine Months Ended
	September 29, 2013			September 29, 2013
Number of restaurants sold to franchisees	53			61

Proceeds from sales of restaurants	$	22,871		$	25,671
Net assets sold (a)	(13,646		)	(14,489		)
Goodwill related to sales of restaurants	(5,621		)	(6,302		)
Net unfavorable lease liabilities (b)	(1,884		)	(1,884		)
Other	(22		)	(22		)
	1,698			2,974
Post-closing adjustments on prior sales of restaurants	(33		)	(33		)
Gain on sales of restaurants, net	$	1,665		$	2,941

_______________


(a)	Net assets sold consisted primarily of cash, inventory and equipment.


(b)	The Company recorded favorable lease assets of $8,789 and unfavorable lease liabilities of $10,673 as a result of the lease and/or sublease of land, buildings, and/or leasehold improvements to franchisees, in connection with sales of restaurants.

Restaurant Assets Held for Sale



	September 29, 2013
Number of restaurants classified as held for sale	367

Restaurant net assets held for sale	$	56,569

As of September 29, 2013, the Company determined that all of the remaining restaurants which are part of the system optimization initiative meet the criteria to be classified as held for sale. Restaurant net assets held for sale consist primarily of cash, inventory and property and are included in “Prepaid expenses and other current assets” as of September 29, 2013.

Subsequent Events

Subsequent to the end of the third quarter of 2013, the Company completed the sale of certain assets used in the operation of 37 Wendy’s restaurants for cash proceeds of approximately $25,685, subject to customary purchase price adjustments. These sales are expected to result in an estimated pre-tax gain of approximately $4,047.

Facilities Relocation and Other Transition Costs

The relocation of the Company’s Atlanta restaurant support center to Ohio was substantially completed during 2012. All of the remaining costs related to the relocation, which are anticipated to aggregate approximately $800, will be recorded during the fourth quarter of 2013.



	Three Months Ended					Nine Months Ended				Total Incurred Since Inception		Total Expected to be Incurred
	September 29, 2013			September 30, 2012		September 29, 2013		September 30, 2012		Total Incurred Since Inception		Total Expected to be Incurred
Severance, retention and other payroll costs	$	394		$	2,236	$	1,760	$	9,552	$	17,057	$	17,176
Relocation costs	303			1,776		1,564		3,857		6,786		7,447
Atlanta facility closure costs	(92		)	4,224		303		4,401		4,844		4,844
Consulting and professional fees	—			1,676		128		4,494		5,056		5,056
Other	27			752		201		2,017		2,341		2,359
	632			10,664		3,956		24,321		36,084		36,882
Accelerated depreciation expense	—			621		—		1,921		2,118		2,118
Share-based compensation	—			—		—		—		271		271
Total	$	632		$	11,285	$	3,956	$	26,242	$	38,473	$	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 September 29, 2013
Severance, retention and other payroll costs	$	4,121	$	1,760	$	(4,114	)	$	1,767
Relocation costs	500		1,564		(2,064		)	—
Atlanta facility closure costs	4,170		303		(1,287		)	3,186
Consulting and professional fees	80		128		(208		)	—
Other	9		201		(210		)	—
	$	8,880	$	3,956	$	(7,883	)	$	4,953

Breakfast Discontinuation

In January 2013, Wendy’s announced that it was discontinuing the breakfast daypart at certain restaurants. During the three and nine months ended September 29, 2013, we reflected $86 and $1,115, 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.