Leases

At January 1, 2017, Wendy’s and its franchisees operated 6,537 Wendy’s restaurants. Of the 330 Company-operated Wendy’s restaurants, Wendy’s owned the land and building for 149 restaurants, owned the building and held long-term land leases for 128 restaurants and held leases covering land and building for 53 restaurants. Lease terms are generally initially between 15 and 20 years and, in most cases, provide for rent escalations and renewal options. Certain leases contain contingent rent provisions that require additional rental payments based upon restaurant sales volume in excess of specified amounts. The Company also leases restaurant, office and transportation equipment. Certain leases also provide for payments of other costs such as real estate taxes, insurance and common area maintenance, which have been excluded from rental expense and future minimum rental payments set forth in the tables below.

As of January 1, 2017, Wendy’s also owned 519 and leased 979 properties that were either leased or subleased principally to franchisees. Initial lease terms are generally 20 years and, in most cases, provide for rent escalations and renewal options. Certain leases to franchisees also include contingent rent provisions based on sales volume exceeding specified amounts. The lessee bears the cost of real estate taxes, insurance and common area maintenance, which have been excluded from rental income and future minimum rental receipts set forth in the tables below.

Rental expense for operating leases consists of the following components:



	Year Ended
	2016		2015		2014
Rental expense:
Minimum rentals	$	77,952	$	77,606	$	76,178
Contingent rentals	18,291		18,270		19,967
Total rental expense (a)	$	96,243	$	95,876	$	96,145

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(a)	Amounts exclude sublease income of $95,072, $61,618, and $46,743 recognized during 2016, 2015 and 2014, respectively.

Rental income for operating leases and subleases consists of the following components:



	Year Ended
	2016		2015		2014
Rental income:
Minimum rentals	$	123,171	$	68,241	$	50,249
Contingent rentals	19,944		18,731		17,745
Total rental income	$	143,115	$	86,972	$	67,994

The following table illustrates the Company’s future minimum rental payments and rental receipts for non-cancelable leases and subleases, including rental receipts for direct financing leases as of January 1, 2017. Rental receipts below are presented separately for owned properties and for leased properties based on the classification of the underlying lease.



	Rental Payments					Rental Receipts
Fiscal Year	Capital Leases			Operating Leases		Capital Leases		Operating Leases		Owned Properties
2017	$	25,749		$	74,400	$	34,841	$	64,562	$	52,840
2018	26,226			72,080		35,024		64,155		53,013
2019	25,235			71,825		35,120		64,391		53,980
2020	25,727			70,831		35,753		64,144		54,573
2021	27,104			70,490		37,180		64,226		56,362
Thereafter	418,349			898,439		572,645		849,766		996,857
Total minimum payments	$	548,390		$	1,258,065	$	750,563	$	1,171,244	$	1,267,625
Less interest	(336,676		)
Present value of minimum capital lease payments (a)	$	211,714

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(a)	The present value of minimum capital lease payments of $1,902 and $209,812 are included in “Current portion of long-term debt” and “Long-term debt,” respectively.

Properties owned by the Company and leased to franchisees and other third parties under operating leases include:



	Year End
	January 1, 2017			January 3, 2016
Land	$	271,160		$	165,667
Buildings and improvements	312,067			188,621
Office, restaurant and transportation equipment	1,507			1,162
	584,734			355,450
Accumulated depreciation and amortization	(110,166		)	(63,476		)
	$	474,568		$	291,974

Our net investment in direct financing leases is as follows:



	Year End
	January 1, 2017			January 3, 2016
Future minimum rental receipts	$	401,452		$	200,213
Unearned interest income	(277,747		)	(135,426		)
Net investment in direct financing leases	123,705			64,787
Net current investment in direct financing leases (a)	(101		)	(25		)
Net non-current investment in direct financing leases (b)	$	123,604		$	64,762

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(a)	Included in “Accounts and notes receivable, net.”


(b)	Included in “Other assets.”