Facilities Action Charges (Income), Net



	Three Months Ended				Six Months Ended
	June 29, 2014		June 30, 2013		June 29, 2014			June 30, 2013
System optimization initiative	$	883	$	4,799	$	(43,150	)	$	4,799
Facilities relocation and other transition costs	—		1,154		—			3,324
Breakfast discontinuation	—		361		—			1,029
Arby’s transaction related costs	—		63		—			263
	$	883	$	6,377	$	(43,150	)	$	9,415

System Optimization Initiative

The Company completed 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 substantially completed as of the beginning of the 2014 fiscal year. During the second quarter of 2014, additional regional offices were closed resulting in further severance and related employee costs. 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 charges (income), net” in our condensed consolidated statements of operations.

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



	Three Months Ended						Six Months Ended						Total Incurred Since Inception
	June 29, 2014			June 30, 2013			June 29, 2014			June 30, 2013			Total Incurred Since Inception
Gain on sales of restaurants, net	$	(470	)	$	(1,276	)	$	(61,411	)	$	(1,276	)	$	(108,078	)
System Optimization Remeasurement (a)	77			5,938			2,274			5,938			22,780
Accelerated amortization (b)	—			—			475			—			17,382
Severance and related employee costs	393			—			5,926			—			15,576
Share-based compensation (c)	—			—			3,635			—			4,888
Professional fees	558			125			3,189			125			5,578
Other	325			12			2,762			12			3,625
Total system optimization initiative	$	883		$	4,799		$	(43,150	)	$	4,799		$	(38,249	)

_______________


(a)	Includes remeasurement of land, buildings, leasehold improvements and favorable lease assets at company-owned restaurants that were sold to franchisees in connection with 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					Six Months Ended
	June 29, 2014		June 30, 2013			June 29, 2014			June 30, 2013
Number of restaurants sold to franchisees	—		8			174			8

Proceeds from sales of restaurants	$	—	$	2,800		$	94,991		$	2,800
Net assets sold (a)	—		(843		)	(41,219		)	(843		)
Goodwill related to sales of restaurants	—		(681		)	(12,643		)	(681		)
Net favorable lease assets (b)	—		—			20,921			—
Other	—		—			478			—
	—		1,276			62,528			1,276
Post-closing adjustments on sales of restaurants	470		—			(1,117		)	—
Gain on sales of restaurants, net	$	470	$	1,276		$	61,411		$	1,276

_______________


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


(b)	During the first quarter of 2014, 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 June 29, 2014, there were no restaurant assets held for sale under our 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 June 29, 2014
Severance and employee related costs	$	7,051	$	5,926	$	(8,812	)	$	4,165
Professional fees	137		3,189		(2,741		)	585
Other	260		2,762		(1,865		)	1,157
	$	7,448	$	11,877	$	(13,418	)	$	5,907

Subsequent Event

In August 2014, the Company announced a plan to sell all of its company-owned restaurants in Canada to franchisees by the end of the first quarter of 2015 as part of its ongoing system optimization initiative. As a result, the Company will recognize System Optimization Remeasurement and severance and related employee costs primarily during the second half of 2014. These costs, as well as gains or losses recognized on the sale of its Canadian restaurants under the system optimization initiative will be included in “Facilities action charges (income), net” in our condensed consolidated statement of operations. The Company cannot estimate the costs as well as any gains or losses resulting from future sales of its Canadian restaurants. The Company plans to retain its ownership in a Canadian restaurant real estate joint venture with Tim Hortons Inc. For additional information on the joint venture see Note 4.

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 $1,154 and $3,324 of expense during the three and six months ended June 30, 2013, respectively, and $39,091 since inception. The Company did not incur any expenses during the six months ended June 29, 2014 and does not expect to incur additional costs related to the relocation.