Facilities Action (Income) Charges, Net



	Three Months Ended
	March 30, 2014			March 31, 2013
System optimization initiative	$	(44,033	)	$	—
Facilities relocation and other transition costs	—			2,170
Breakfast discontinuation	—			668
Arby’s transaction related costs	—			200
	$	(44,033	)	$	3,038

System Optimization Initiative

The Company completed its system optimization initiative, announced in July 2013, with the sale of 174 company-owned restaurants to franchisees during the first quarter of 2014. In total, the Company has sold 418 restaurants during 2013 and 2014, under its system optimization initiative. This initiative also included the consolidation of regional and divisional territories which was completed as of the beginning of the 2014 fiscal year. As a result of the system optimization initiative, the Company recorded losses on remeasuring long-lived assets to fair value upon determination that the assets were going to be leased and/or subleased to franchisees in connection with the sale of restaurants (“System Optimization Remeasurement”). Gains or losses recognized on sales of restaurants under the system optimization initiative, as well as costs incurred related to the system optimization initiative are recorded to “Facilities action (income) charges, net” in our condensed consolidated statements of operations. The Company anticipates post-closing adjustments on sales of restaurants; however, it does not anticipate any significant additional charges under the system optimization initiative.

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



	Three Months Ended			Total Incurred Since Inception
	March 30, 2014			Total Incurred Since Inception
Gain on sales of restaurants, net	$	(60,941	)	$	(107,608	)
System Optimization Remeasurement (a)	2,197			22,703
Accelerated amortization (b)	475			17,382
Severance and related employee costs	5,533			15,183
Share-based compensation (c)	3,635			4,888
Professional fees	2,631			5,020
Other	2,437			3,300
Total system optimization initiative	$	(44,033	)	$	(39,132	)

_______________


(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 5 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 were 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, Net



	Three Months Ended
	March 30, 2014
Number of restaurants sold to franchisees	174

Proceeds from sales of restaurants	$	94,991
Net assets sold (a)	(41,219		)
Goodwill related to sales of restaurants	(12,643		)
Net favorable lease assets (b)	20,921
Other	478
	62,528
Post-closing adjustments on sales of restaurants	(1,587		)
Gain on sales of restaurants, net	$	60,941

_______________


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


(b)	The Company recorded favorable lease assets of $43,332 and unfavorable lease liabilities of $22,411 as a result of leasing and/or subleasing land, buildings, and/or leasehold improvements to franchisees, in connection with sales of restaurants.

As of March 30, 2014, there were no remaining restaurant assets held for sale under the system optimization initiative.

The table below presents a rollforward of our accrual for the system optimization initiative, which is included in “Accrued expenses and other current liabilities.”



	Balance December 29, 2013		Charges		Payments			Balance March 30, 2014
Severance and employee related costs	$	7,051	$	5,533	$	(5,392	)	$	7,192
Professional fees	137		2,631		(2,330		)	438
Other	260		2,437		(1,835		)	862
	$	7,448	$	10,601	$	(9,557	)	$	8,492

Facilities Relocation and Other Transition Costs

As announced in December 2011, we commenced the relocation of the Company’s Atlanta restaurant support center to Ohio, which was substantially completed during 2012. The Company incurred $2,170 of expense during the three months ended March 31, 2013 and $39,091 since inception. The Company did not incur any expenses during the three months ended March 31, 2014 and does not expect to incur additional costs related to the relocation. As of March 30, 2014, our accruals for facilities relocation costs, which are included in “Accrued expenses and other current liabilities” and “Other liabilities,” totaled $2,701 and primarily related to Atlanta facility closure costs.

Breakfast Discontinuation

During the three months ended March 31, 2013, we reflected $668 of costs resulting from the discontinuation of the breakfast daypart at certain restaurants which primarily consisted of the remaining carrying value of breakfast related equipment no longer being used. The Company does not expect to incur additional costs related to the breakfast discontinuation.