Leases (Notes)

9 Months Ended

Sep. 29, 2019

Nature of Leases

The Company operates restaurants that are located on sites owned by us and sites leased by us from third parties. In addition, the Company owns sites and leases sites from third parties, which it leases and/or subleases to franchisees. At September 29, 2019, Wendy’s and its franchisees operated 6,743 Wendy’s restaurants. Of the 356 Company-operated Wendy’s restaurants, Wendy’s owned the land and building for 143 restaurants, owned the building and held long-term land leases for 144 restaurants and held leases covering the land and building for 69 restaurants. Wendy’s also owned 512 and leased 1,255 properties that were either leased or subleased principally to franchisees. The Company also leases restaurant, office and transportation equipment.

Determination of Whether a Contract Contains a Lease

The Company evaluates the contracts it enters into to determine whether such contracts contain leases. A contract contains a lease if the contract conveys the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration. At commencement, contracts containing a lease are further evaluated for classification as an operating or finance lease where the Company is a lessee, or as an operating, sales-type or direct financing lease where the Company is a lessor, based on their terms.

ROU Model and Determination of Lease Term

The Company uses the ROU model to account for leases where the Company is the lessee, which requires an entity to recognize a lease liability and ROU asset on the lease commencement date. A lease liability is measured equal to the present value of the remaining lease payments over the lease term and is discounted using the incremental borrowing rate, as the rate implicit in the Company’s leases is not readily determinable. The incremental borrowing rate is the rate of interest that the Company would have to pay to borrow, on a collateralized basis over a similar term, an amount equal to the lease payments in a similar economic environment. Lease payments include payments made before the commencement date and any residual value guarantees, if applicable. The initial ROU asset consists of the initial measurement of the lease liability, adjusted for any favorable or unfavorable terms for leases acquired from franchisees, as well as payments made before the commencement date, initial direct costs and lease incentives earned. When determining the lease term, the Company includes option periods that it is reasonably certain to exercise as failure to renew the lease would impose a significant economic detriment. For properties used for Company-operated restaurants, the primary economic detriment relates to the existence of unamortized leasehold improvements which might be impaired if we choose not to exercise the available renewal options. The lease term for properties leased or subleased to franchisees is determined based upon the economic detriment to the franchisee and includes consideration of the length of the franchise agreement, historical performance of the restaurant and the existence of bargain renewal options. Lease terms for real estate are generally initially between 15 and 20 years and, in most cases, provide for rent escalations and renewal options.

Operating Leases

For operating leases, minimum lease payments or receipts, including minimum scheduled rent increases, are recognized as rent expense where the Company is a lessee, or income where the Company is a lessor, as applicable, on a straight-line basis (“Straight-Line Rent”) over the applicable lease terms. There is a period under certain lease agreements referred to as a rent holiday (“Rent Holiday”) that generally begins on the possession date and ends on the rent commencement date. During a Rent Holiday, no cash rent payments are typically due under the terms of the lease; however, expense is recorded for that period on a straight-line basis. The excess of the Straight-Line Rent over the minimum rents paid is included in the ROU asset where the Company is a lessee. The excess of the Straight-Line Rent over the minimum rents received is recorded as a deferred lease asset and is included in “Other assets” where the Company is a lessor. Certain leases contain provisions, referred to as contingent rent (“Contingent Rent”), that require additional rental payments based upon restaurant sales volume. Contingent Rent is recognized each period as the liability is incurred or the asset is earned.

Lease cost for operating leases is recognized on a straight-line basis and includes the amortization of the ROU asset and interest expense related to the operating lease liability. Variable lease cost for operating leases includes Contingent Rent and payments for executory costs such as real estate taxes, insurance and common area maintenance, which are excluded from the measurement of the lease liability. Short-term lease cost for operating leases includes rental expense for leases with a term of less than 12 months. Lease costs are recorded in the condensed consolidated statements of operations based on the nature of the underlying lease as follows: (1) rental expense related to leases for Company-operated restaurants is recorded to “Cost of sales,” (2) rental expense for leased properties that are subsequently subleased to franchisees is recorded to “Franchise rental expense” and (3) rental expense related to leases for corporate offices and equipment is recorded to “General and administrative.”

Favorable and unfavorable lease amounts for operating leases where the Company is the lessor are recorded as components of “Other intangible assets” and “Other liabilities,” respectively. Favorable and unfavorable lease amounts are amortized on a straight-line basis over the term of the leases. When the expected term of a lease is determined to be shorter than the original amortization period, the favorable or unfavorable lease balance associated with the lease is adjusted to reflect the revised lease term.

Rental income and favorable and unfavorable lease amortization for operating leases on properties leased or subleased to franchisees is recorded to “Franchise rental income.” Lessees’ variable payments to the Company for executory costs under operating leases are recognized on a gross basis as “Franchise rental income” with a corresponding expense recorded to “Franchise rental expense.”

Finance Leases

Lease cost for finance leases includes the amortization of the ROU asset, which is amortized on a straight-line basis and recorded to “Depreciation and amortization,” and interest expense on the finance lease liability, which is calculated using the interest method and recorded to “Interest expense, net.”

Sales-Type and Direct Financing Leases

For sales-type and direct financing leases where the Company is the lessor, the Company records its investment in properties leased to franchisees on a net basis, which is comprised of the present value of the lease payments not yet received and the present value of the guaranteed and unguaranteed residual assets. The current and long-term portions of our net investment in sales-type and direct financing leases are included in “Accounts and notes receivable, net” and “Net investment in sales-type and direct financing leases,” respectively. Unearned income is recognized as interest income over the lease term and is included in “Interest expense, net.” Sales-type leases result in the recognition of gain or loss at the commencement of the lease, which is recorded to “Other operating income, net.” The gain or loss recognized upon commencement of the lease is directly affected by the Company’s estimate of the amount to be derived from the guaranteed and unguaranteed residual assets at the end of the lease term. The Company’s main component of this estimate is the expected fair value of the underlying assets, primarily the fair value of land. Lessees’ variable payments to the Company for executory costs under sales-type and direct financing leases are recognized on a gross basis as “Franchise rental income” with a corresponding expense recorded to “Franchise rental expense.”

Significant Assumptions and Judgments

Management makes certain estimates and assumptions regarding each new lease and sublease agreement, renewal and amendment, including, but not limited to, property values, market rents, property lives, discount rates and probable term, all of which can impact (1) the classification and accounting for a lease or sublease as operating or finance, including sales-type and direct financing, (2) the Rent Holiday and escalations in payment that are taken into consideration when calculating Straight-Line Rent, (3) the term over which leasehold improvements for each restaurant are amortized and (4) the values and lives of adjustments to the initial ROU asset where the Company is the lessee, or favorable and unfavorable leases where the Company is the lessor. The amount of depreciation and amortization, interest and rent expense and income reported would vary if different estimates and assumptions were used.

Company as Lessee

The components of lease cost are as follows:



	Three Months Ended		Nine Months Ended
	September 29, 2019		September 29, 2019
Finance lease cost:
Amortization of finance lease assets	$	3,201	$	7,949
Interest on finance lease liabilities	10,116		26,808
	13,317		34,757
Operating lease cost	23,358		67,087
Variable lease cost (a)	15,435		44,910
Short-term lease cost	1,141		3,420
Total operating lease cost (b)	39,934		115,417
Total lease cost	$	53,251	$	150,174

_______________


(a)	The three and nine months ended September 29, 2019 includes expenses for executory costs of $9,908 and $29,211, respectively, for which the Company is reimbursed by sublessees.


(b)	The three and nine months ended September 29, 2019 includes $32,342 and $92,815, respectively, recorded to “Franchise rental expense” for leased properties that are subsequently leased to franchisees and $6,892 and $20,492, respectively, recorded to “Cost of sales” for leases for Company-operated restaurants.

The following table includes supplemental cash flow and non-cash information related to leases:



	Nine Months Ended
	September 29, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from finance leases	$	29,683
Operating cash flows from operating leases	69,277
Financing cash flows from finance leases	5,178
Right-of-use assets obtained in exchange for lease obligations:
Finance lease liabilities	34,084
Operating lease liabilities	8,212

The following table includes supplemental information related to leases:



	September 29, 2019
Weighted-average remaining lease term (years):
Finance leases	17.3
Operating leases	15.5

Weighted average discount rate:
Finance leases	10.03	%
Operating leases	5.10	%

The following table illustrates the Company’s future minimum rental payments for non-cancelable leases as of September 29, 2019:



	Finance Leases						Operating Leases
Fiscal Year	Company-Operated			Franchise and Other			Company-Operated			Franchise and Other
2019 (a)	$	707		$	12,759		$	5,001		$	17,602
2020	2,862			45,340			19,921			70,690
2021	2,973			46,826			19,733			70,540
2022	3,023			47,830			19,421			70,696
2023	2,975			49,504			19,400			70,655
Thereafter	39,104			704,276			201,762			827,387
Total minimum payments	$	51,644		$	906,535		$	285,238		$	1,127,570
Less interest	(23,407		)	(452,484		)	(88,577		)	(369,544		)
Present value of minimum lease payments (b) (c)	$	28,237		$	454,051		$	196,661		$	758,026

_______________


(a)	Represents future minimum rental payments for non-cancelable leases for the remainder of 2019.


(b)	The present value of minimum finance lease payments of $10,584 and $471,704 are included in “Current portion of finance lease liabilities” and “Long-term finance lease liabilities,” respectively.


(c)	The present value of minimum operating lease payments of $43,474 and $911,213 are included in “Current portion of operating lease liabilities” and “Long-term operating lease liabilities,” respectively.

The following table illustrates the Company’s future minimum rental payments for non-cancelable leases as of December 30, 2018:



	Finance Leases						Operating Leases
Fiscal Year	Company-Operated			Franchise and Other			Company-Operated		Franchise and Other
2019	$	1,962		$	45,125		$	20,174	$	75,703
2020	1,978			43,969			20,052		73,320
2021	2,082			45,522			19,820		73,167
2022	2,114			46,573			19,530		73,300
2023	2,084			48,109			19,430		73,377
Thereafter	23,558			676,139			203,073		854,964
Total minimum payments	$	33,778		$	905,437		$	302,079	$	1,223,831
Less interest	(16,874		)	(466,705		)
Present value of minimum lease payments (a)	$	16,904		$	438,732

_______________


(a)	The present value of minimum finance lease payments of $8,405 and $447,231 are included in “Current portion of finance lease liabilities” and “Long-term finance lease liabilities,” respectively.

Company as Lessor

The components of lease income are as follows:



	Three Months Ended			Nine Months Ended
	September 29, 2019			September 29, 2019
Sales-type and direct-financing leases:
Selling (loss) profit	$	(97	)	$	1,874
Interest income	7,240			19,045

Operating lease income	$	44,892		$	134,056
Variable lease income	15,026			42,875
Franchise rental income (a)	$	59,918		$	176,931

_______________


(a)	Includes sublease income of $44,821 and $130,763 recognized during the three and nine months ended September 29, 2019, respectively, of which $9,683 and $28,894, respectively, represents lessees’ variable payments to the Company for executory costs.

The following table illustrates the Company’s future minimum rental receipts for non-cancelable leases and subleases as of September 29, 2019:



	Sales-Type and Direct Financing Leases						Operating Leases
Fiscal Year	Subleases			Owned Properties			Subleases		Owned Properties
2019 (a)	$	6,953		$	489		$	27,614	$	13,129
2020	28,528			2,036			111,227		52,912
2021	29,668			2,068			111,946		54,700
2022	30,342			2,148			113,017		56,173
2023	31,381			2,192			114,021		56,378
Thereafter	486,141			27,115			1,339,940		861,865
Total future minimum receipts	613,013			36,048			$	1,817,765	$	1,095,157
Unearned interest income	(376,192		)	(19,472		)
Net investment in sales-type and direct financing leases (b)	$	236,821		$	16,576

_______________


(a)	Represents future minimum rental receipts for non-cancelable leases for the remainder of 2019.


(b)	The present value of minimum direct financing rental receipts of $2,795 and $250,602 are included in “Accounts and notes receivable, net” and “Net investment in sales-type and direct financing leases,” respectively. The present value of minimum direct financing rental receipts includes a net investment in unguaranteed residual assets of $195.

The following table illustrates the Company’s future minimum rental receipts for non-cancelable leases and subleases as of December 30, 2018:



	Sales-Type and Direct Financing Leases						Operating Leases
Fiscal Year	Subleases			Owned Properties			Subleases		Owned Properties
2019	$	26,239		$	1,937		$	113,180	$	52,527
2020	26,859			2,006			113,578		53,066
2021	27,904			2,043			114,447		54,615
2022	28,563			2,119			115,552		56,092
2023	29,512			2,159			116,463		56,284
Thereafter	448,851			26,404			1,372,646		858,755
Total future minimum receipts	587,928			36,668			$	1,945,866	$	1,131,339
Unearned interest income	(377,046		)	(20,338		)
Net investment in sales-type and direct financing leases (a)	$	210,882		$	16,330

_______________


(a)	The present value of minimum direct financing rental receipts of $735 and $226,477 are included in “Accounts and notes receivable, net” and “Net investment in sales-type and direct financing leases,” respectively.

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



	September 29, 2019
Land	$	281,744
Buildings and improvements	310,936
Restaurant equipment	1,726
	594,406
Accumulated depreciation and amortization	(153,379		)
	$	441,027

Leases

Nature of Leases

Determination of Whether a Contract Contains a Lease

ROU Model and Determination of Lease Term

Operating Leases

Finance Leases

Sales-Type and Direct Financing Leases

Significant Assumptions and Judgments

Company as Lessee

The components of lease cost are as follows:



	Three Months Ended		Nine Months Ended
	September 29, 2019		September 29, 2019
Finance lease cost:
Amortization of finance lease assets	$	3,201	$	7,949
Interest on finance lease liabilities	10,116		26,808
	13,317		34,757
Operating lease cost	23,358		67,087
Variable lease cost (a)	15,435		44,910
Short-term lease cost	1,141		3,420
Total operating lease cost (b)	39,934		115,417
Total lease cost	$	53,251	$	150,174

_______________


(a)	The three and nine months ended September 29, 2019 includes expenses for executory costs of $9,908 and $29,211, respectively, for which the Company is reimbursed by sublessees.


(b)	The three and nine months ended September 29, 2019 includes $32,342 and $92,815, respectively, recorded to “Franchise rental expense” for leased properties that are subsequently leased to franchisees and $6,892 and $20,492, respectively, recorded to “Cost of sales” for leases for Company-operated restaurants.

The following table includes supplemental cash flow and non-cash information related to leases:



	Nine Months Ended
	September 29, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from finance leases	$	29,683
Operating cash flows from operating leases	69,277
Financing cash flows from finance leases	5,178
Right-of-use assets obtained in exchange for lease obligations:
Finance lease liabilities	34,084
Operating lease liabilities	8,212

The following table includes supplemental information related to leases:



	September 29, 2019
Weighted-average remaining lease term (years):
Finance leases	17.3
Operating leases	15.5

Weighted average discount rate:
Finance leases	10.03	%
Operating leases	5.10	%

The following table illustrates the Company’s future minimum rental payments for non-cancelable leases as of September 29, 2019:



	Finance Leases						Operating Leases
Fiscal Year	Company-Operated			Franchise and Other			Company-Operated			Franchise and Other
2019 (a)	$	707		$	12,759		$	5,001		$	17,602
2020	2,862			45,340			19,921			70,690
2021	2,973			46,826			19,733			70,540
2022	3,023			47,830			19,421			70,696
2023	2,975			49,504			19,400			70,655
Thereafter	39,104			704,276			201,762			827,387
Total minimum payments	$	51,644		$	906,535		$	285,238		$	1,127,570
Less interest	(23,407		)	(452,484		)	(88,577		)	(369,544		)
Present value of minimum lease payments (b) (c)	$	28,237		$	454,051		$	196,661		$	758,026

_______________


(a)	Represents future minimum rental payments for non-cancelable leases for the remainder of 2019.


(b)	The present value of minimum finance lease payments of $10,584 and $471,704 are included in “Current portion of finance lease liabilities” and “Long-term finance lease liabilities,” respectively.


(c)	The present value of minimum operating lease payments of $43,474 and $911,213 are included in “Current portion of operating lease liabilities” and “Long-term operating lease liabilities,” respectively.

The following table illustrates the Company’s future minimum rental payments for non-cancelable leases as of December 30, 2018:



	Finance Leases						Operating Leases
Fiscal Year	Company-Operated			Franchise and Other			Company-Operated		Franchise and Other
2019	$	1,962		$	45,125		$	20,174	$	75,703
2020	1,978			43,969			20,052		73,320
2021	2,082			45,522			19,820		73,167
2022	2,114			46,573			19,530		73,300
2023	2,084			48,109			19,430		73,377
Thereafter	23,558			676,139			203,073		854,964
Total minimum payments	$	33,778		$	905,437		$	302,079	$	1,223,831
Less interest	(16,874		)	(466,705		)
Present value of minimum lease payments (a)	$	16,904		$	438,732

_______________


(a)	The present value of minimum finance lease payments of $8,405 and $447,231 are included in “Current portion of finance lease liabilities” and “Long-term finance lease liabilities,” respectively.

Company as Lessor

The components of lease income are as follows:



	Three Months Ended			Nine Months Ended
	September 29, 2019			September 29, 2019
Sales-type and direct-financing leases:
Selling (loss) profit	$	(97	)	$	1,874
Interest income	7,240			19,045

Operating lease income	$	44,892		$	134,056
Variable lease income	15,026			42,875
Franchise rental income (a)	$	59,918		$	176,931

_______________


(a)	Includes sublease income of $44,821 and $130,763 recognized during the three and nine months ended September 29, 2019, respectively, of which $9,683 and $28,894, respectively, represents lessees’ variable payments to the Company for executory costs.

The following table illustrates the Company’s future minimum rental receipts for non-cancelable leases and subleases as of September 29, 2019:



	Sales-Type and Direct Financing Leases						Operating Leases
Fiscal Year	Subleases			Owned Properties			Subleases		Owned Properties
2019 (a)	$	6,953		$	489		$	27,614	$	13,129
2020	28,528			2,036			111,227		52,912
2021	29,668			2,068			111,946		54,700
2022	30,342			2,148			113,017		56,173
2023	31,381			2,192			114,021		56,378
Thereafter	486,141			27,115			1,339,940		861,865
Total future minimum receipts	613,013			36,048			$	1,817,765	$	1,095,157
Unearned interest income	(376,192		)	(19,472		)
Net investment in sales-type and direct financing leases (b)	$	236,821		$	16,576

_______________


(a)	Represents future minimum rental receipts for non-cancelable leases for the remainder of 2019.


(b)	The present value of minimum direct financing rental receipts of $2,795 and $250,602 are included in “Accounts and notes receivable, net” and “Net investment in sales-type and direct financing leases,” respectively. The present value of minimum direct financing rental receipts includes a net investment in unguaranteed residual assets of $195.

The following table illustrates the Company’s future minimum rental receipts for non-cancelable leases and subleases as of December 30, 2018:



	Sales-Type and Direct Financing Leases						Operating Leases
Fiscal Year	Subleases			Owned Properties			Subleases		Owned Properties
2019	$	26,239		$	1,937		$	113,180	$	52,527
2020	26,859			2,006			113,578		53,066
2021	27,904			2,043			114,447		54,615
2022	28,563			2,119			115,552		56,092
2023	29,512			2,159			116,463		56,284
Thereafter	448,851			26,404			1,372,646		858,755
Total future minimum receipts	587,928			36,668			$	1,945,866	$	1,131,339
Unearned interest income	(377,046		)	(20,338		)
Net investment in sales-type and direct financing leases (a)	$	210,882		$	16,330

_______________


(a)	The present value of minimum direct financing rental receipts of $735 and $226,477 are included in “Accounts and notes receivable, net” and “Net investment in sales-type and direct financing leases,” respectively.

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



	September 29, 2019
Land	$	281,744
Buildings and improvements	310,936
Restaurant equipment	1,726
	594,406
Accumulated depreciation and amortization	(153,379		)
	$	441,027

Leases

Nature of Leases

Determination of Whether a Contract Contains a Lease

ROU Model and Determination of Lease Term

Operating Leases

Finance Leases

Sales-Type and Direct Financing Leases

Significant Assumptions and Judgments

Company as Lessee

The components of lease cost are as follows:



	Three Months Ended		Nine Months Ended
	September 29, 2019		September 29, 2019
Finance lease cost:
Amortization of finance lease assets	$	3,201	$	7,949
Interest on finance lease liabilities	10,116		26,808
	13,317		34,757
Operating lease cost	23,358		67,087
Variable lease cost (a)	15,435		44,910
Short-term lease cost	1,141		3,420
Total operating lease cost (b)	39,934		115,417
Total lease cost	$	53,251	$	150,174

_______________


(a)	The three and nine months ended September 29, 2019 includes expenses for executory costs of $9,908 and $29,211, respectively, for which the Company is reimbursed by sublessees.


(b)	The three and nine months ended September 29, 2019 includes $32,342 and $92,815, respectively, recorded to “Franchise rental expense” for leased properties that are subsequently leased to franchisees and $6,892 and $20,492, respectively, recorded to “Cost of sales” for leases for Company-operated restaurants.

The following table includes supplemental cash flow and non-cash information related to leases:



	Nine Months Ended
	September 29, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from finance leases	$	29,683
Operating cash flows from operating leases	69,277
Financing cash flows from finance leases	5,178
Right-of-use assets obtained in exchange for lease obligations:
Finance lease liabilities	34,084
Operating lease liabilities	8,212

The following table includes supplemental information related to leases:



	September 29, 2019
Weighted-average remaining lease term (years):
Finance leases	17.3
Operating leases	15.5

Weighted average discount rate:
Finance leases	10.03	%
Operating leases	5.10	%

The following table illustrates the Company’s future minimum rental payments for non-cancelable leases as of September 29, 2019:



	Finance Leases						Operating Leases
Fiscal Year	Company-Operated			Franchise and Other			Company-Operated			Franchise and Other
2019 (a)	$	707		$	12,759		$	5,001		$	17,602
2020	2,862			45,340			19,921			70,690
2021	2,973			46,826			19,733			70,540
2022	3,023			47,830			19,421			70,696
2023	2,975			49,504			19,400			70,655
Thereafter	39,104			704,276			201,762			827,387
Total minimum payments	$	51,644		$	906,535		$	285,238		$	1,127,570
Less interest	(23,407		)	(452,484		)	(88,577		)	(369,544		)
Present value of minimum lease payments (b) (c)	$	28,237		$	454,051		$	196,661		$	758,026

_______________


(a)	Represents future minimum rental payments for non-cancelable leases for the remainder of 2019.


(b)	The present value of minimum finance lease payments of $10,584 and $471,704 are included in “Current portion of finance lease liabilities” and “Long-term finance lease liabilities,” respectively.


(c)	The present value of minimum operating lease payments of $43,474 and $911,213 are included in “Current portion of operating lease liabilities” and “Long-term operating lease liabilities,” respectively.

The following table illustrates the Company’s future minimum rental payments for non-cancelable leases as of December 30, 2018:



	Finance Leases						Operating Leases
Fiscal Year	Company-Operated			Franchise and Other			Company-Operated		Franchise and Other
2019	$	1,962		$	45,125		$	20,174	$	75,703
2020	1,978			43,969			20,052		73,320
2021	2,082			45,522			19,820		73,167
2022	2,114			46,573			19,530		73,300
2023	2,084			48,109			19,430		73,377
Thereafter	23,558			676,139			203,073		854,964
Total minimum payments	$	33,778		$	905,437		$	302,079	$	1,223,831
Less interest	(16,874		)	(466,705		)
Present value of minimum lease payments (a)	$	16,904		$	438,732

_______________


(a)	The present value of minimum finance lease payments of $8,405 and $447,231 are included in “Current portion of finance lease liabilities” and “Long-term finance lease liabilities,” respectively.

Company as Lessor

The components of lease income are as follows:



	Three Months Ended			Nine Months Ended
	September 29, 2019			September 29, 2019
Sales-type and direct-financing leases:
Selling (loss) profit	$	(97	)	$	1,874
Interest income	7,240			19,045

Operating lease income	$	44,892		$	134,056
Variable lease income	15,026			42,875
Franchise rental income (a)	$	59,918		$	176,931

_______________


(a)	Includes sublease income of $44,821 and $130,763 recognized during the three and nine months ended September 29, 2019, respectively, of which $9,683 and $28,894, respectively, represents lessees’ variable payments to the Company for executory costs.

The following table illustrates the Company’s future minimum rental receipts for non-cancelable leases and subleases as of September 29, 2019:



	Sales-Type and Direct Financing Leases						Operating Leases
Fiscal Year	Subleases			Owned Properties			Subleases		Owned Properties
2019 (a)	$	6,953		$	489		$	27,614	$	13,129
2020	28,528			2,036			111,227		52,912
2021	29,668			2,068			111,946		54,700
2022	30,342			2,148			113,017		56,173
2023	31,381			2,192			114,021		56,378
Thereafter	486,141			27,115			1,339,940		861,865
Total future minimum receipts	613,013			36,048			$	1,817,765	$	1,095,157
Unearned interest income	(376,192		)	(19,472		)
Net investment in sales-type and direct financing leases (b)	$	236,821		$	16,576

_______________


(a)	Represents future minimum rental receipts for non-cancelable leases for the remainder of 2019.


(b)	The present value of minimum direct financing rental receipts of $2,795 and $250,602 are included in “Accounts and notes receivable, net” and “Net investment in sales-type and direct financing leases,” respectively. The present value of minimum direct financing rental receipts includes a net investment in unguaranteed residual assets of $195.

The following table illustrates the Company’s future minimum rental receipts for non-cancelable leases and subleases as of December 30, 2018:



	Sales-Type and Direct Financing Leases						Operating Leases
Fiscal Year	Subleases			Owned Properties			Subleases		Owned Properties
2019	$	26,239		$	1,937		$	113,180	$	52,527
2020	26,859			2,006			113,578		53,066
2021	27,904			2,043			114,447		54,615
2022	28,563			2,119			115,552		56,092
2023	29,512			2,159			116,463		56,284
Thereafter	448,851			26,404			1,372,646		858,755
Total future minimum receipts	587,928			36,668			$	1,945,866	$	1,131,339
Unearned interest income	(377,046		)	(20,338		)
Net investment in sales-type and direct financing leases (a)	$	210,882		$	16,330

_______________


(a)	The present value of minimum direct financing rental receipts of $735 and $226,477 are included in “Accounts and notes receivable, net” and “Net investment in sales-type and direct financing leases,” respectively.

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



	September 29, 2019
Land	$	281,744
Buildings and improvements	310,936
Restaurant equipment	1,726
	594,406
Accumulated depreciation and amortization	(153,379		)
	$	441,027

Leases

Nature of Leases

Determination of Whether a Contract Contains a Lease

ROU Model and Determination of Lease Term

Operating Leases

Finance Leases

Sales-Type and Direct Financing Leases

Significant Assumptions and Judgments

Company as Lessee

The components of lease cost are as follows:



	Three Months Ended		Nine Months Ended
	September 29, 2019		September 29, 2019
Finance lease cost:
Amortization of finance lease assets	$	3,201	$	7,949
Interest on finance lease liabilities	10,116		26,808
	13,317		34,757
Operating lease cost	23,358		67,087
Variable lease cost (a)	15,435		44,910
Short-term lease cost	1,141		3,420
Total operating lease cost (b)	39,934		115,417
Total lease cost	$	53,251	$	150,174

_______________


(a)	The three and nine months ended September 29, 2019 includes expenses for executory costs of $9,908 and $29,211, respectively, for which the Company is reimbursed by sublessees.


(b)	The three and nine months ended September 29, 2019 includes $32,342 and $92,815, respectively, recorded to “Franchise rental expense” for leased properties that are subsequently leased to franchisees and $6,892 and $20,492, respectively, recorded to “Cost of sales” for leases for Company-operated restaurants.

The following table includes supplemental cash flow and non-cash information related to leases:



	Nine Months Ended
	September 29, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from finance leases	$	29,683
Operating cash flows from operating leases	69,277
Financing cash flows from finance leases	5,178
Right-of-use assets obtained in exchange for lease obligations:
Finance lease liabilities	34,084
Operating lease liabilities	8,212

The following table includes supplemental information related to leases:



	September 29, 2019
Weighted-average remaining lease term (years):
Finance leases	17.3
Operating leases	15.5

Weighted average discount rate:
Finance leases	10.03	%
Operating leases	5.10	%

The following table illustrates the Company’s future minimum rental payments for non-cancelable leases as of September 29, 2019:



	Finance Leases						Operating Leases
Fiscal Year	Company-Operated			Franchise and Other			Company-Operated			Franchise and Other
2019 (a)	$	707		$	12,759		$	5,001		$	17,602
2020	2,862			45,340			19,921			70,690
2021	2,973			46,826			19,733			70,540
2022	3,023			47,830			19,421			70,696
2023	2,975			49,504			19,400			70,655
Thereafter	39,104			704,276			201,762			827,387
Total minimum payments	$	51,644		$	906,535		$	285,238		$	1,127,570
Less interest	(23,407		)	(452,484		)	(88,577		)	(369,544		)
Present value of minimum lease payments (b) (c)	$	28,237		$	454,051		$	196,661		$	758,026

_______________


(a)	Represents future minimum rental payments for non-cancelable leases for the remainder of 2019.


(b)	The present value of minimum finance lease payments of $10,584 and $471,704 are included in “Current portion of finance lease liabilities” and “Long-term finance lease liabilities,” respectively.


(c)	The present value of minimum operating lease payments of $43,474 and $911,213 are included in “Current portion of operating lease liabilities” and “Long-term operating lease liabilities,” respectively.

The following table illustrates the Company’s future minimum rental payments for non-cancelable leases as of December 30, 2018:



	Finance Leases						Operating Leases
Fiscal Year	Company-Operated			Franchise and Other			Company-Operated		Franchise and Other
2019	$	1,962		$	45,125		$	20,174	$	75,703
2020	1,978			43,969			20,052		73,320
2021	2,082			45,522			19,820		73,167
2022	2,114			46,573			19,530		73,300
2023	2,084			48,109			19,430		73,377
Thereafter	23,558			676,139			203,073		854,964
Total minimum payments	$	33,778		$	905,437		$	302,079	$	1,223,831
Less interest	(16,874		)	(466,705		)
Present value of minimum lease payments (a)	$	16,904		$	438,732

_______________


(a)	The present value of minimum finance lease payments of $8,405 and $447,231 are included in “Current portion of finance lease liabilities” and “Long-term finance lease liabilities,” respectively.

Company as Lessor

The components of lease income are as follows:



	Three Months Ended			Nine Months Ended
	September 29, 2019			September 29, 2019
Sales-type and direct-financing leases:
Selling (loss) profit	$	(97	)	$	1,874
Interest income	7,240			19,045

Operating lease income	$	44,892		$	134,056
Variable lease income	15,026			42,875
Franchise rental income (a)	$	59,918		$	176,931

_______________


(a)	Includes sublease income of $44,821 and $130,763 recognized during the three and nine months ended September 29, 2019, respectively, of which $9,683 and $28,894, respectively, represents lessees’ variable payments to the Company for executory costs.

The following table illustrates the Company’s future minimum rental receipts for non-cancelable leases and subleases as of September 29, 2019:



	Sales-Type and Direct Financing Leases						Operating Leases
Fiscal Year	Subleases			Owned Properties			Subleases		Owned Properties
2019 (a)	$	6,953		$	489		$	27,614	$	13,129
2020	28,528			2,036			111,227		52,912
2021	29,668			2,068			111,946		54,700
2022	30,342			2,148			113,017		56,173
2023	31,381			2,192			114,021		56,378
Thereafter	486,141			27,115			1,339,940		861,865
Total future minimum receipts	613,013			36,048			$	1,817,765	$	1,095,157
Unearned interest income	(376,192		)	(19,472		)
Net investment in sales-type and direct financing leases (b)	$	236,821		$	16,576

_______________


(a)	Represents future minimum rental receipts for non-cancelable leases for the remainder of 2019.


(b)	The present value of minimum direct financing rental receipts of $2,795 and $250,602 are included in “Accounts and notes receivable, net” and “Net investment in sales-type and direct financing leases,” respectively. The present value of minimum direct financing rental receipts includes a net investment in unguaranteed residual assets of $195.

The following table illustrates the Company’s future minimum rental receipts for non-cancelable leases and subleases as of December 30, 2018:



	Sales-Type and Direct Financing Leases						Operating Leases
Fiscal Year	Subleases			Owned Properties			Subleases		Owned Properties
2019	$	26,239		$	1,937		$	113,180	$	52,527
2020	26,859			2,006			113,578		53,066
2021	27,904			2,043			114,447		54,615
2022	28,563			2,119			115,552		56,092
2023	29,512			2,159			116,463		56,284
Thereafter	448,851			26,404			1,372,646		858,755
Total future minimum receipts	587,928			36,668			$	1,945,866	$	1,131,339
Unearned interest income	(377,046		)	(20,338		)
Net investment in sales-type and direct financing leases (a)	$	210,882		$	16,330

_______________


(a)	The present value of minimum direct financing rental receipts of $735 and $226,477 are included in “Accounts and notes receivable, net” and “Net investment in sales-type and direct financing leases,” respectively.

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



	September 29, 2019
Land	$	281,744
Buildings and improvements	310,936
Restaurant equipment	1,726
	594,406
Accumulated depreciation and amortization	(153,379		)
	$	441,027

Leases

Nature of Leases

Determination of Whether a Contract Contains a Lease

ROU Model and Determination of Lease Term

Operating Leases

Finance Leases

Sales-Type and Direct Financing Leases

Significant Assumptions and Judgments

Company as Lessee

The components of lease cost are as follows:



	Three Months Ended		Nine Months Ended
	September 29, 2019		September 29, 2019
Finance lease cost:
Amortization of finance lease assets	$	3,201	$	7,949
Interest on finance lease liabilities	10,116		26,808
	13,317		34,757
Operating lease cost	23,358		67,087
Variable lease cost (a)	15,435		44,910
Short-term lease cost	1,141		3,420
Total operating lease cost (b)	39,934		115,417
Total lease cost	$	53,251	$	150,174

_______________


(a)	The three and nine months ended September 29, 2019 includes expenses for executory costs of $9,908 and $29,211, respectively, for which the Company is reimbursed by sublessees.


(b)	The three and nine months ended September 29, 2019 includes $32,342 and $92,815, respectively, recorded to “Franchise rental expense” for leased properties that are subsequently leased to franchisees and $6,892 and $20,492, respectively, recorded to “Cost of sales” for leases for Company-operated restaurants.

The following table includes supplemental cash flow and non-cash information related to leases:



	Nine Months Ended
	September 29, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from finance leases	$	29,683
Operating cash flows from operating leases	69,277
Financing cash flows from finance leases	5,178
Right-of-use assets obtained in exchange for lease obligations:
Finance lease liabilities	34,084
Operating lease liabilities	8,212

The following table includes supplemental information related to leases:



	September 29, 2019
Weighted-average remaining lease term (years):
Finance leases	17.3
Operating leases	15.5

Weighted average discount rate:
Finance leases	10.03	%
Operating leases	5.10	%

The following table illustrates the Company’s future minimum rental payments for non-cancelable leases as of September 29, 2019:



	Finance Leases						Operating Leases
Fiscal Year	Company-Operated			Franchise and Other			Company-Operated			Franchise and Other
2019 (a)	$	707		$	12,759		$	5,001		$	17,602
2020	2,862			45,340			19,921			70,690
2021	2,973			46,826			19,733			70,540
2022	3,023			47,830			19,421			70,696
2023	2,975			49,504			19,400			70,655
Thereafter	39,104			704,276			201,762			827,387
Total minimum payments	$	51,644		$	906,535		$	285,238		$	1,127,570
Less interest	(23,407		)	(452,484		)	(88,577		)	(369,544		)
Present value of minimum lease payments (b) (c)	$	28,237		$	454,051		$	196,661		$	758,026

_______________


(a)	Represents future minimum rental payments for non-cancelable leases for the remainder of 2019.


(b)	The present value of minimum finance lease payments of $10,584 and $471,704 are included in “Current portion of finance lease liabilities” and “Long-term finance lease liabilities,” respectively.


(c)	The present value of minimum operating lease payments of $43,474 and $911,213 are included in “Current portion of operating lease liabilities” and “Long-term operating lease liabilities,” respectively.

The following table illustrates the Company’s future minimum rental payments for non-cancelable leases as of December 30, 2018:



	Finance Leases						Operating Leases
Fiscal Year	Company-Operated			Franchise and Other			Company-Operated		Franchise and Other
2019	$	1,962		$	45,125		$	20,174	$	75,703
2020	1,978			43,969			20,052		73,320
2021	2,082			45,522			19,820		73,167
2022	2,114			46,573			19,530		73,300
2023	2,084			48,109			19,430		73,377
Thereafter	23,558			676,139			203,073		854,964
Total minimum payments	$	33,778		$	905,437		$	302,079	$	1,223,831
Less interest	(16,874		)	(466,705		)
Present value of minimum lease payments (a)	$	16,904		$	438,732

_______________


(a)	The present value of minimum finance lease payments of $8,405 and $447,231 are included in “Current portion of finance lease liabilities” and “Long-term finance lease liabilities,” respectively.

Company as Lessor

The components of lease income are as follows:



	Three Months Ended			Nine Months Ended
	September 29, 2019			September 29, 2019
Sales-type and direct-financing leases:
Selling (loss) profit	$	(97	)	$	1,874
Interest income	7,240			19,045

Operating lease income	$	44,892		$	134,056
Variable lease income	15,026			42,875
Franchise rental income (a)	$	59,918		$	176,931

_______________


(a)	Includes sublease income of $44,821 and $130,763 recognized during the three and nine months ended September 29, 2019, respectively, of which $9,683 and $28,894, respectively, represents lessees’ variable payments to the Company for executory costs.

The following table illustrates the Company’s future minimum rental receipts for non-cancelable leases and subleases as of September 29, 2019:



	Sales-Type and Direct Financing Leases						Operating Leases
Fiscal Year	Subleases			Owned Properties			Subleases		Owned Properties
2019 (a)	$	6,953		$	489		$	27,614	$	13,129
2020	28,528			2,036			111,227		52,912
2021	29,668			2,068			111,946		54,700
2022	30,342			2,148			113,017		56,173
2023	31,381			2,192			114,021		56,378
Thereafter	486,141			27,115			1,339,940		861,865
Total future minimum receipts	613,013			36,048			$	1,817,765	$	1,095,157
Unearned interest income	(376,192		)	(19,472		)
Net investment in sales-type and direct financing leases (b)	$	236,821		$	16,576

_______________


(a)	Represents future minimum rental receipts for non-cancelable leases for the remainder of 2019.


(b)	The present value of minimum direct financing rental receipts of $2,795 and $250,602 are included in “Accounts and notes receivable, net” and “Net investment in sales-type and direct financing leases,” respectively. The present value of minimum direct financing rental receipts includes a net investment in unguaranteed residual assets of $195.

The following table illustrates the Company’s future minimum rental receipts for non-cancelable leases and subleases as of December 30, 2018:



	Sales-Type and Direct Financing Leases						Operating Leases
Fiscal Year	Subleases			Owned Properties			Subleases		Owned Properties
2019	$	26,239		$	1,937		$	113,180	$	52,527
2020	26,859			2,006			113,578		53,066
2021	27,904			2,043			114,447		54,615
2022	28,563			2,119			115,552		56,092
2023	29,512			2,159			116,463		56,284
Thereafter	448,851			26,404			1,372,646		858,755
Total future minimum receipts	587,928			36,668			$	1,945,866	$	1,131,339
Unearned interest income	(377,046		)	(20,338		)
Net investment in sales-type and direct financing leases (a)	$	210,882		$	16,330

_______________


(a)	The present value of minimum direct financing rental receipts of $735 and $226,477 are included in “Accounts and notes receivable, net” and “Net investment in sales-type and direct financing leases,” respectively.

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



	September 29, 2019
Land	$	281,744
Buildings and improvements	310,936
Restaurant equipment	1,726
	594,406
Accumulated depreciation and amortization	(153,379		)
	$	441,027