Facilities Action (Income) Charges, Net



	Year Ended
	2014			2013		2012
System optimization initiative	$	(42,026	)	$	4,901	$	—
G&A realignment	12,926			—		—
Facilities relocation and other transition costs	—			4,574		28,990
Breakfast discontinuation	—			1,118		10,569
Arby’s transaction related costs	—			263		1,472
	$	(29,100	)	$	10,856	$	41,031

System Optimization Initiative

In July 2013, the Company announced a system optimization initiative, as part of its brand transformation, which included a plan to sell approximately 425 U.S. company-owned restaurants to franchisees. The Company completed this plan during the first quarter of 2014 with the sale of 174 U.S. company-owned restaurants to franchisees, bringing the aggregate total to 418 during 2013 and 2014. This initiative also included the consolidation of regional and divisional territories which was substantially completed by the end of the second quarter of 2014.

In August 2014, the Company announced a plan to sell all of its company-owned restaurants in Canada to franchisees as part of its ongoing system optimization initiative, which it now anticipates completing by the end of the second quarter of 2015. During the second half of 2014, the Company completed the sale of 29 Canadian restaurants and classified its remaining Canadian restaurants’ assets that will be sold as held for sale.

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”). In addition, the Company has recognized costs related to the system optimization initiative which are illustrated in the table below. These costs have been substantially offset by net gains recognized on sales of restaurants, all of which were recorded to “Facilities action (income) charges, net” in our consolidated statements of operations.

The Company anticipates recognizing additional system optimization related costs through the second quarter of 2015 of approximately $1,000 which include severance and related employee costs and professional fees. The Company is unable to estimate any gains or losses or System Optimization Remeasurement resulting from future sales of its Canadian restaurants. The Company plans to retain its ownership in TimWen. For additional information on the joint venture see Note 6.

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



	Year Ended						Total Incurred Since Inception
	2014			2013			Total Incurred Since Inception
Gain on sales of restaurants, net	$	(69,631	)	$	(46,667	)	$	(116,298	)
System Optimization Remeasurement (a)	8,628			20,506			29,134
Accelerated depreciation and amortization (b)	507			16,907			17,414
Severance and related employee costs	7,608			9,650			17,258
Professional fees	3,424			2,389			5,813
Share-based compensation (c)	3,760			1,253			5,013
Other	3,678			863			4,541
Total system optimization initiative	$	(42,026	)	$	4,901		$	(37,125	)

_______________


(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 11 for more information on non-recurring fair value measurements.


(b)	Primarily 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



	Year Ended
	2014			2013
Number of restaurants sold to franchisees	203			244

Proceeds from sales of restaurants	$	107,833		$	130,154
Net assets sold (a)	(46,874		)	(60,895		)
Goodwill related to sales of restaurants	(14,688		)	(20,578		)
Net favorable (unfavorable) lease assets (liabilities) (b)	28,105			(57		)
Other (c)	(3,465		)	(1,957		)
	70,911			46,667
Post-closing adjustments on sales of restaurants	(1,280		)	—
Gain on sales of restaurants, net	$	69,631		$	46,667

_______________


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


(b)	During 2014 and 2013, the Company recorded favorable lease assets of $53,750 and $37,749, respectively, and unfavorable lease liabilities of $25,645 and $37,806, respectively, as a result of leasing and/or subleasing land, buildings, and/or leasehold improvements to franchisees, in connection with sales of restaurants.


(c)	2014 includes a deferred gain of $1,995 on the sale of eight Canadian restaurants to a franchisee, as a result of Wendy’s providing a guarantee to a lender on behalf of the franchisee. This deferred gain is included in “Other liabilities.” See Note 20 for further information.

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



	Balance December 29, 2013		Charges		Payments			Balance December 28, 2014
Severance and related employee costs	$	7,051	$	7,608	$	(12,424	)	$	2,235
Professional fees	137		3,424		(3,415		)	146
Other	260		3,678		(3,515		)	423
	$	7,448	$	14,710	$	(19,354	)	$	2,804



	Balance December 30, 2012		Charges		Payments			Balance December 29, 2013
Severance and related employee costs	$	—	$	9,650	$	(2,599	)	$	7,051
Professional fees	—		2,389		(2,252		)	137
Other	—		863		(603		)	260
	$	—	$	12,902	$	(5,454	)	$	7,448

Assets Held for Sale



	Year End
	2014		2013
Number of restaurants classified as held for sale	102		181

Net assets held for sale	$	24,416	$	29,630

Subsequent to December 28, 2014, the Company completed the sale of certain assets used in the operation of nine Wendy’s Canadian restaurants for cash proceeds of approximately $3,000, subject to customary purchase price adjustments.

Net assets held for sale consist primarily of cash, inventory, equipment and an estimate of allocable goodwill and are included in “Prepaid expenses and other current assets” as of December 28, 2014 and December 29, 2013.

Subsequent Events

In February 2015, the Company announced plans to sell approximately 500 additional restaurants to franchisees and reduce its ongoing company-owned restaurant ownership to approximately 5% of the total system by the middle of 2016, as part of its ongoing system optimization initiative. As a result, the Company anticipates recognizing additional System Optimization Remeasurement. However, the Company cannot estimate such charges or any gains or losses resulting from future sales of its restaurants.

G&A Realignment

As announced in November 2014, the Company initiated a plan to reduce its general and administrative expenses. The plan includes a realignment and reinvestment of resources to focus primarily on accelerated restaurant development and consumer-facing restaurant technology to drive long-term growth. The Company expects to achieve the majority of the expense reductions through the realignment of its U.S. field operations and savings at its Restaurant Support Center in Dublin, Ohio. As a result, the Company recorded a $12,926 charge to “Facilities action (income) charges, net” during the fourth quarter of 2014, which primarily included severance and related employee costs. The Company expects to incur additional costs aggregating approximately $11,500 to $13,500 during the first half of 2015, comprised of severance and related employee costs of $2,500, recruitment and relocation costs of $5,000 for the reinvestment in resources to drive long-term growth and share-based compensation of $4,000 to $6,000. The Company anticipates this initiative will be substantially completed by the end of the second quarter of 2015.

The following is a summary of the activity recorded under our G&A realignment plan:



	Year Ended
	2014
Severance and related employee costs	$	11,917
Recruitment and relocation costs	209
Other	88
	12,214
Share-based compensation (a)	712
Total G&A realignment	$	12,926

_______________


(a)	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 G&A realignment plan.

The table below presents a rollforward of our accrual for our G&A realignment plan, which is included in “Accrued expenses and other current liabilities.”



	Balance December 29, 2013		Charges		Payments			Balance December 28, 2014
Severance and related employee costs	$	—	$	11,917	$	(308	)	$	11,609
Recruitment and relocation costs	—		209		(60		)	149
Other	—		88		(83		)	5
	$	—	$	12,214	$	(451	)	$	11,763

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 did not incur any expenses during 2014 and does not expect to incur additional costs related to the relocation.



	Year Ended				Total Incurred Since Inception
	2013		2012		Total Incurred Since Inception
Severance, retention and other payroll costs	$	1,856	$	9,952	$	17,153
Relocation costs	1,898		5,222		7,120
Atlanta facility closure costs	337		4,541		4,878
Consulting and professional fees	128		4,928		5,056
Other	355		2,126		2,495
	4,574		26,769		36,702
Accelerated depreciation expense	—		1,921		2,118
Share-based compensation	—		300		271
Total	$	4,574	$	28,990	$	39,091

As of December 28, 2014, our accruals for facilities relocation and other transition costs, which are included in “Accrued expenses and other current liabilities” and “Other liabilities,” totaled $2,259 and related to Atlanta facility closure costs.

The table below presents a rollforward of our accruals for facilities relocation and other transition costs during 2013, which were included in “Accrued expenses and other current liabilities” and “Other liabilities.”



	Balance December 30, 2012		Charges		Payments			Balance December 29, 2013
Severance, retention and other payroll costs	$	4,121	$	1,856	$	(5,038	)	$	939
Relocation costs	500		1,898		(2,398		)	—
Atlanta facility closure costs	4,170		337		(1,733		)	2,774
Consulting and professional fees	80		128		(208		)	—
Other	9		355		(364		)	—
	$	8,880	$	4,574	$	(9,741	)	$	3,713

Breakfast Discontinuation

During 2013 and 2012, the Company reflected costs totaling $1,118 and $10,569, respectively, resulting from the discontinuation of the breakfast daypart at certain restaurants. Costs during 2013 primarily consisted of the remaining carrying value of breakfast related equipment no longer being used. Costs during 2012 consisted primarily of (1) the remaining net carrying value of $5,277 for certain breakfast equipment and (2) amounts advanced to franchisees of $3,544 for breakfast equipment which will not be reimbursed.

Arby’s Transaction Related Costs

As a result of the sale of Arby’s in July 2011, we expensed costs related to the Arby’s transaction during 2013 and 2012 of $263 and $1,472, respectively, and $41,919 since inception. The Company did not incur any expenses during 2014 and does not expect to incur additional costs related to the transaction. Costs paid during 2013 totaled $959 and were primarily for severance, retention and other payroll costs. As of December 29, 2013, no accrual remained.