Leases

At December 31, 2017, Wendy’s and its franchisees operated 6,634 Wendy’s restaurants. Of the 337 Company-operated Wendy’s restaurants, Wendy’s owned the land and building for 146 restaurants, owned the building and held long-term land leases for 141 restaurants and held leases covering land and building for 50 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 December 31, 2017, Wendy’s also owned 521 and leased 1,296 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
	2017		2016		2015
Rental expense:
Minimum rentals	$	90,889	$	77,952	$	77,606
Contingent rentals	19,021		18,291		18,270
Total rental expense (a)	$	109,910	$	96,243	$	95,876

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(a)	Amounts exclude sublease income of $126,814, $95,072, and $61,618 recognized during 2017, 2016 and 2015, respectively.

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



	Year Ended
	2017		2016		2015
Rental income:
Minimum rentals	$	169,857	$	123,171	$	68,241
Contingent rentals	20,246		19,944		18,731
Total rental income	$	190,103	$	143,115	$	86,972

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 December 31, 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
2018	$	47,095		$	96,265	$	64,511	$	75,583	$	53,808
2019	45,700			94,824		65,036		75,787		54,779
2020	46,633			93,803		66,137		75,443		55,392
2021	48,221			93,255		67,929		75,133		56,996
2022	49,320			92,951		69,115		75,488		58,574
Thereafter	759,337			1,116,173		1,048,796		910,200		948,101
Total minimum payments	$	996,306		$	1,587,271	$	1,381,524	$	1,287,634	$	1,227,650
Less interest	(528,342		)
Present value of minimum capital lease payments (a)	$	467,964

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(a)	The present value of minimum capital lease payments of $7,422 and $460,542 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
	December 31, 2017			January 1, 2017
Land	$	272,411		$	271,160
Buildings and improvements	313,108			312,067
Restaurant equipment	2,444			1,507
	587,963			584,734
Accumulated depreciation and amortization	(128,003		)	(110,166		)
	$	459,960		$	474,568

Our net investment in direct financing leases is as follows:



	Year End
	December 31, 2017			January 1, 2017
Future minimum rental receipts	$	662,889		$	401,452
Unearned interest income	(433,175		)	(277,747		)
Net investment in direct financing leases	229,714			123,705
Net current investment in direct financing leases (a)	(625		)	(101		)
Net non-current investment in direct financing leases (b)	$	229,089		$	123,604

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


(b)	Included in “Net investment in direct financing leases.”

During 2017, 2016 and 2015, the Company recognized $22,869, $14,630 and $6,058 in interest income related to our direct financing leases, respectively, which is included in “Interest expense, net.”