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System Optimization (Gains) Losses, Net
 9 Months Ended
Oct. 02, 2016
Property, Plant and Equipment [Abstract]  
System Optimization Gains, Net
System Optimization (Gains) Losses, Net

In July 2013, the Company announced a system optimization initiative, as part of its brand transformation, which includes a shift from company-owned restaurants to franchised restaurants over time, through acquisitions and dispositions, as well as facilitating franchisee-to-franchisee restaurant transfers. 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 end of 2016. During 2015, 2014 and 2013, the Company completed the sale of 327, 255 and 244 company-owned restaurants to franchisees, respectively, which included the sale of all of its company-owned restaurants in Canada.

During the nine months ended October 2, 2016 and September 27, 2015, the Company completed the sale of 211 and 109 company-owned restaurants to franchisees, respectively. The Company recognized net gains totaling $48,106 and $14,751 on the sale of company-owned restaurants and other assets during the nine months ended October 2, 2016 and September 27, 2015, respectively. In addition, the Company facilitated the transfer of 144 restaurants between franchisees during the nine months ended October 2, 2016. The Company expects to complete its plan to reduce company-owned restaurant ownership to approximately 5% of the total system with the sale of 98 restaurants during the remainder of 2016, all of which were classified as held for sale as of October 2, 2016.

Gains and losses recognized on dispositions are recorded to “System optimization (gains) losses, net” in our condensed consolidated statements 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 5.

The following is a summary of the disposition activity recorded as a result of our system optimization initiative:
 
Three Months Ended
 
Nine Months Ended
 
October 2,
2016
 
September 27,
2015
 
October 2,
2016
 
September 27,
2015
Number of restaurants sold to franchisees
156

 
9

 
211

 
109

 
 
 
 
 
 
 
 
Proceeds from sales of restaurants
$
124,765

 
$
3,084

 
$
164,380

 
$
39,133

Net assets sold (a)
(58,227
)
 
(1,867
)
 
(75,282
)
 
(19,247
)
Goodwill related to sales of restaurants
(24,254
)
 
(483
)
 
(30,630
)
 
(8,346
)
Net (unfavorable) favorable leases (b)
(6,225
)
 
(1,506
)
 
(11,131
)
 
5,889

Other (c)
(726
)
 
—

 
(1,521
)
 
(3,224
)
 
35,333

 
(772
)
 
45,816

 
14,205

Post-closing adjustments on sales of restaurants (d)
(120
)
 
(495
)
 
(1,710
)
 
(1,134
)
Gain (loss) on sales of restaurants, net
35,213

 
(1,267
)
 
44,106

 
13,071

 
 
 
 
 
 
 
 
Gain on sales of other assets, net (e)
2,543

 
1,169

 
4,000

 
1,680

System optimization gains (losses), net
$
37,756

 
$
(98
)
 
$
48,106

 
$
14,751

_______________

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

(b)
During the three and nine months ended October 2, 2016, the Company recorded favorable lease assets of $2,114 and $2,297, respectively, and unfavorable lease liabilities of $8,339 and $13,428, respectively, as a result of leasing and/or subleasing land, buildings and/or leasehold improvements to franchisees in connection with sales of restaurants. During the three and nine months ended September 27, 2015, the Company recorded favorable lease assets of $185 and $25,992, respectively, and unfavorable lease liabilities of $1,691and $20,103, respectively.

(c)
The nine months ended September 27, 2015 includes a deferred gain of $2,658 related to the sale of 14 Canadian restaurants to a franchisee during the second quarter of 2015, as a result of certain contingencies related to the extension of lease terms. The deferred gain is included in “Other liabilities.” The nine months ended September 27, 2015 also includes a note receivable of $1,801 from a franchisee in connection with the sale of 16 Canadian restaurants, which was recognized as part of the overall loss on sale during the second quarter of 2015.

(d)
The nine months ended September 27, 2015 includes the recognition of a gain on sale of $2,450 related to the repayment of notes receivable from franchisees in connection with sales of restaurants in 2014.

(e)
During the three and nine months ended October 2, 2016, the Company received cash proceeds of $4,006 and $9,469, respectively, primarily from the sale of surplus properties. During the three and nine months ended September 27, 2015, the Company received cash proceeds of $4,576 and $7,174, respectively.

Assets Held for Sale
 
October 2,
2016
 
January 3, 2016
Number of restaurants classified as held for sale
98

 
99

Net restaurant assets held for sale (a)
$
37,370

 
$
50,262

 
 
 
 
Other assets held for sale (a)
$
4,198

 
$
7,124

_______________

(a)
Net restaurant assets held for sale include 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.”

As part of our system optimization initiative, the Company completed sales of certain assets used in the operation of 52 Wendy’s company-owned restaurants subsequent to October 2, 2016 for cash proceeds of approximately $36,600, subject to customary purchase price adjustments.