System Optimization Gains, Net

9 Months Ended

Sep. 29, 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 nine months ended September 29, 2019 and September 30, 2018, the Company facilitated three and 73 Franchise Flips, respectively. Additionally, during the nine months ended September 30, 2018, the Company completed the sale of three Company-operated restaurants to a franchisee. No Company-operated restaurants were sold to franchisees during the nine months ended September 29, 2019.

Gains and losses recognized on dispositions are recorded to “System optimization gains, 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				Nine Months Ended
	September 29, 2019		September 30, 2018		September 29, 2019		September 30, 2018
Gain on sale of restaurants, net (a)	$	—	$	—	$	—	$	89
Post-closing adjustments on sales of restaurants (b)	1,033		279		1,087		54
Gain (loss) on sales of other assets, net (c)	7		207		75		(135		)
System optimization gains, net	$	1,040	$	486	$	1,162	$	8

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(a)	During the nine months ended September 30, 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 three and nine months ended September 29, 2019 and September 30, 2018 include the recognition of deferred gains of $911 and $503, respectively, as a result of the resolution of certain contingencies related to the extension of lease terms for restaurants previously sold to franchisees. The nine months ended September 30, 2018 also includes cash proceeds, net of payments of $6.


(c)	During the three and nine months ended September 29, 2019, the Company received cash proceeds of $798 and $2,038, respectively, and during the three and nine months ended September 30, 2018 received cash proceeds of $1,049 and $1,421, respectively, primarily from the sale of surplus properties.

Assets Held for Sale

As of September 29, 2019 and December 30, 2018, the Company had assets held for sale of $2,391 and $2,435, respectively, primarily consisting of surplus properties. Assets held for sale are included in “Prepaid expenses and other current assets.”