Basis of Presentation

The accompanying unaudited condensed consolidated financial statements (the “Financial Statements”) of The Wendy’s Company (“The Wendy’s Company” and, together with its subsidiaries, the “Company,” “we,” “us” or “our”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and, therefore, do not include all information and footnotes required by GAAP for complete financial statements. In our opinion, the Financial Statements contain all adjustments necessary to present fairly our financial position as of October 2, 2016 and the results of our operations for the three and nine months ended October 2, 2016 and September 27, 2015 and cash flows for the nine months ended October 2, 2016 and September 27, 2015. The results of operations for the three and nine months ended October 2, 2016 are not necessarily indicative of the results to be expected for the full 2016 fiscal year. These Financial Statements should be read in conjunction with the audited consolidated financial statements for The Wendy’s Company and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended January 3, 2016 (the “Form 10-K”).

The principal subsidiary of the Company is Wendy’s International, LLC and its subsidiaries (“Wendy’s”). The Company manages and internally reports its business geographically. The operation and franchising of Wendy’s^®restaurants in North America (defined as the United States of America (“U.S.”) and Canada) comprises virtually all of our current operations and represents a single reportable segment. The revenues and operating results of Wendy’s restaurants outside of North America are not material.

We report on a fiscal year consisting of 52 or 53 weeks ending on the Sunday closest to or on December 31. All three and nine month periods presented herein contain 13 weeks and 39 weeks, respectively. All references to years and quarters relate to fiscal periods rather than calendar periods.

On May 31, 2015, Wendy’s completed the sale of its company-owned bakery, The New Bakery Company, LLC and its subsidiaries (collectively, the “Bakery”), a 100% owned subsidiary of Wendy’s. As a result of the sale of the Bakery, as further discussed in Note 2, the Bakery’s results of operations for the period from December 29, 2014 through May 31, 2015 and the gain on disposal have been included in “Net (loss) income from discontinued operations” in our condensed consolidated statements of operations.

The Company records rental income, including any related amortization of favorable and unfavorable lease balances, for properties leased or subleased to franchisees to “Franchise revenues.” Lease expense, including any related amortization, for leased properties that are subsequently subleased to franchisees is recorded to “Other operating expense, net.” We further describe our accounting for leases in our Form 10-K.

The following table presents the franchise rental income and lease expense included in our condensed consolidated statements of operations:



	Three Months Ended				Nine Months Ended
	October 2, 2016		September 27, 2015		October 2, 2016		September 27, 2015
Rental income	$	37,329	$	22,492	$	102,420	$	60,548
Lease expense	17,534		12,428		49,684		33,736

In connection with the reimaging of restaurants as part of our Image Activation program, we have recorded accelerated depreciation of $2,930 and $6,578 during the nine months ended October 2, 2016 and September 27, 2015, respectively, on certain long-lived assets to reflect their use over shortened estimated useful lives. We describe the circumstances under which we record accelerated depreciation for properties in our Form 10-K.

Certain reclassifications have been made to the prior year presentation to conform to the current year presentation.