System Optimization Losses (Gains), Net

In July 2013, the Company announced a system optimization initiative, as part of its brand transformation, which includes opportunistic acquisitions and dispositions, as well as a shift from company-owned restaurants to franchised restaurants over time. During 2013 and 2014, the Company completed the sale of 244 and 255 company-owned restaurants to franchisees, respectively. The Company is currently in the process of selling all of its company-owned restaurants in Canada to franchisees which it anticipates completing by the end of the second quarter of 2015. In February 2015, the Company announced plans to sell approximately 540 additional restaurants to franchisees and reduce its ongoing company-owned restaurant ownership to approximately 5% of the total system by the middle of 2016. The Company is currently unable to estimate any gains or losses resulting from future sales of its restaurants.

Gains and losses recognized on dispositions are recorded to “System optimization losses (gains), net” in our condensed consolidated statement of operations. Costs related to our system optimization initiative are recorded to “Reorganization and realignment costs,” and include severance and employee related costs, professional fees and other associated costs, which are further described in Note 4.

The following is a summary of the disposition activity recorded as a result of our system optimization initiative:



	Three Months Ended
	March 29, 2015			March 30, 2014 (d)
Number of restaurants sold to franchisees	17			178

Proceeds from sales of restaurants	$	4,581		$	101,560
Net assets sold (a)	(2,222		)	(42,016		)
Goodwill related to sales of restaurants	(1,023		)	(13,658		)
Net (unfavorable) favorable leases (b)	(528		)	24,981
Other	(402		)	300
	406			71,167
Post-closing adjustments on sales of restaurants	(1,573		)	(1,587		)
(Loss) gain on sales of restaurants, net	(1,167		)	69,580

Gain on sales of other assets, net (c)	354			3,412
System optimization (losses) gains, net	$	(813	)	$	72,992

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


(b)	During the three months ended March 29, 2015 and March 30, 2014, the Company recorded favorable lease assets of $2,379 and $47,392, respectively, and unfavorable lease liabilities of $2,907 and $22,411, respectively, as a result of leasing and/or subleasing land, buildings, and/or leasehold improvements to franchisees, in connection with sales of restaurants.


(c)	During the three months ended March 29, 2015 and March 30, 2014, Wendy’s received cash proceeds of $1,702 and $6,897, respectively, primarily from the sale of surplus properties as well as the sale of a company-owned aircraft during the first quarter of 2014.


(d)	Reclassifications have been made to the prior year presentation to include sales of restaurants previously reported in “Other operating expense, net” to conform to the current year presentation. See Note 1 for further details.

Assets Held for Sale



	March 29, 2015		December 28, 2014 (a)
Number of restaurants classified as held for sale	84		106
Net restaurant assets held for sale	$	19,972	$	25,266

Other assets held for sale	$	10,230	$	13,469

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(a)	Reclassifications have been made to the prior year presentation to include restaurants previously excluded from our system optimization initiative to conform to the current year presentation. See Note 1 for further details.

Net restaurant assets held for sale include our remaining Canadian company-owned restaurants and consist primarily of cash, inventory, equipment and an estimate of allocable goodwill. Other assets held for sale primarily consist of surplus properties. Assets held for sale are included in “Prepaid expenses and other current assets.”