Reorganization and Realignment Costs

The following is a summary of the initiatives included in “Reorganization and realignment costs:”



	Three Months Ended
	April 2, 2017		April 3, 2016
System optimization initiative	$	181	$	2,723
G&A realignment	—		527
Reorganization and realignment costs	$	181	$	3,250

System Optimization Initiative

The Company has recognized costs related to its system optimization initiative, which includes a shift from Company-operated restaurants to franchised restaurants over time, through acquisitions and dispositions, as well as facilitating franchisee-to-franchisee restaurant transfers. The Company expects to incur additional costs, primarily comprised of professional fees, of approximately $1,300 during 2017 in connection with an in-process transaction as of January 1, 2017. All other costs incurred during 2017 related to facilitating franchisee-to-franchisee restaurant transfers will be recorded to “Other operating expense (income), net.”

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



	Three Months Ended				Total Incurred Since Inception
	April 2, 2017		April 3, 2016		Total Incurred Since Inception
Severance and related employee costs	$	3	$	—	$	18,237
Professional fees	130		1,701		16,740
Other	48		77		5,791
	181		1,778		40,768
Accelerated depreciation and amortization (a)	—		945		25,398
Share-based compensation (b)	—		—		5,013
Total system optimization initiative	$	181	$	2,723	$	71,179

_______________


(a)	Primarily includes accelerated amortization of previously acquired franchise rights related to Company-operated restaurants in territories that have been sold in connection with our system optimization initiative.


(b)	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.

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 January 1, 2017		Charges		Payments			Balance April 2, 2017
Severance and related employee costs	$	—	$	3	$	(3	)	$	—
Professional fees	101		130		(143		)	88
Other	—		48		(48		)	—
	$	101	$	181	$	(194	)	$	88



	Balance January 3, 2016		Charges		Payments			Balance April 3, 2016
Severance and related employee costs	$	77	$	—	$	(16	)	$	61
Professional fees	708		1,701		(1,988		)	421
Other	90		77		(117		)	50
	$	875	$	1,778	$	(2,121	)	$	532

General and Administrative (“G&A”) Realignment

In November 2014, the Company initiated a plan to reduce its general and administrative expenses. The plan included 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 achieved 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, which was substantially completed by the end of the second quarter of 2015. The Company recognized costs totaling $527 during the three months ended April 3, 2016 and $23,960 in aggregate since inception. The Company did not incur any expenses during the three months ended April 2, 2017 and does not expect to incur additional costs related to the plan. As of April 2, 2017, our accruals for the G&A realignment plan, which are included in “Accrued expenses and other current liabilities,” totaled $76 and primarily related to severance and related employee costs.

As previously announced in February 2017, the Company expects to reduce G&A expense to approximately 1.5 percent of global systemwide sales by 2020. On May 10, 2017, the Company announced that approximately three-quarters of the total G&A expense reduction of approximately $35,000 is expected to be realized by the end of 2018, with the remainder of the savings being realized in 2019. The Company expects to incur total costs aggregating approximately $28,000 to $33,000, of which $23,000 to $27,000 will be cash expenditures, related to such savings. The cash expenditures are expected to begin in the second half of 2017 and continue into 2019, with approximately half of the total cash expenditures occurring in 2018. The total costs expected to be incurred are comprised of (1) severance and related employee costs of approximately $17,000 to $19,000, (2) share-based compensation costs of approximately $5,000 to $6,000, (3) recruitment and relocation costs of approximately $4,000 to $5,000 and (4) third-party and other costs of approximately $2,000 to $3,000. The Company expects the costs to be recognized beginning in the second quarter of 2017 and continue into 2019, with approximately two-thirds to be recognized during 2017.