System Optimization (Gains) Losses, Net

6 Months Ended

Jun. 30, 2019

Property, Plant and Equipment [Abstract]

The Company’s system optimization initiative 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 (“Franchise Flips”). As of January 1, 2017, the Company completed its plan to reduce its ongoing Company-operated restaurant ownership to approximately 5% of the total system. While the Company has no plans to reduce its ownership below the approximately 5% level, the Company expects to continue to optimize the Wendy’s system through Franchise Flips, as well as evaluating strategic acquisitions of franchised restaurants and strategic dispositions of Company-operated restaurants to existing and new franchisees, to further strengthen the franchisee base, drive new restaurant development and accelerate reimages.

During the six months ended July 1, 2018, the Company completed the sale of three Company-operated restaurants to a franchisee and facilitated 64 Franchise Flips. During the six months ended June 30, 2019, no Company-operated restaurants were sold to franchisees and no Franchise Flips were facilitated by the Company.

Gains and losses recognized on dispositions are recorded to “System optimization (gains) losses, net” in our condensed consolidated statements of operations. Costs related to acquisitions and dispositions under our system optimization initiative are recorded to “Reorganization and realignment costs,” which are further described in Note 6. All other costs incurred related to facilitating Franchise Flips are recorded to “Franchise support and other costs.”

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



	Three Months Ended					Six Months Ended
	June 30, 2019		July 1, 2018			June 30, 2019		July 1, 2018
Gain on sale of restaurants, net (a)	$	—	$	89		$	—	$	89
Post-closing adjustments on sales of restaurants (b)	62		(13		)	54		(225		)
Gain (loss) on sales of other assets, net (c)	48		16			68		(342		)
System optimization gains (losses), net	$	110	$	92		$	122	$	(478	)

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(a)	During the three and six months ended July 1, 2018, the Company received cash proceeds of $1,436 from the sale of three Company-operated restaurants. The value of the net assets that were included in the sale totaled $1,139 and consisted primarily of equipment. In addition, goodwill of $208 was written off in connection with the sale.


(b)	The six months ended July 1, 2018 includes cash proceeds, net of payments of $6.


(c)	During the three and six months ended June 30, 2019, the Company received cash proceeds of $1,240, primarily from the sale of surplus properties. During the three and six months ended July 1, 2018, the Company received cash proceeds of $27 and $372, respectively, primarily from the sale of surplus properties.

Assets Held for Sale

As of June 30, 2019 and December 30, 2018, the Company had assets held for sale of $2,952 and $2,435, respectively, primarily consisting of surplus properties. Assets held for sale are included in “Prepaid expenses and other current assets.”