Leases

3 Months Ended

Apr. 03, 2022

Leases [Abstract]

Leases, Company as Lessee

Leases

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 April 3, 2022, Wendy’s and its franchisees operated 7,016 Wendy’s restaurants. Of the 408 Company-operated Wendy’s restaurants, Wendy’s owned the land and building for 158 restaurants, owned the building and held long-term land leases for 140 restaurants and held leases covering the land and building for 110 restaurants. Wendy’s also owned 486 and leased 1,221 properties that were either leased or subleased principally to franchisees. The Company also leases restaurant, office and transportation equipment.

Company as Lessee

The components of lease cost are as follows:

	Three Months Ended
	April 3, 2022		April 4, 2021
Finance lease cost:
Amortization of finance lease assets	$	4,064	$	3,508
Interest on finance lease liabilities	10,645		10,293
	14,709		13,801
Operating lease cost	20,661		23,361
Variable lease cost (a)	14,803		15,188
Short-term lease cost	1,433		1,326
Total operating lease cost (b)	36,897		39,875
Total lease cost	$	51,606	$	53,676

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(a)Includes expenses for executory costs of $9,608 and $10,063 for the three months ended April 3, 2022 and April 4, 2021, respectively, for which the Company is reimbursed by sublessees.

(b)Includes $28,925 and $32,552 for the three months ended April 3, 2022 and April 4, 2021, respectively, recorded to “Franchise rental expense” for leased properties that are subsequently leased to franchisees. Also includes $7,294 and $6,681 for the three months ended April 3, 2022 and April 4, 2021, respectively, recorded to “Cost of sales” for leases for Company-operated restaurants.

Leases, Company as Lessor

Company as Lessor

The components of lease income are as follows:

	Three Months Ended
	April 3, 2022		April 4, 2021
Sales-type and direct-financing leases:
Selling profit	$	480	$	1,912
Interest income (a)	7,740		7,489
Operating lease income	43,314		44,122
Variable lease income	14,557		14,754
Franchise rental income (b)	$	57,871	$	58,876

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(a)Included in “Interest expense, net.”

(b)Includes sublease income of $43,165 and $43,250 recognized during the three months ended April 3, 2022 and April 4, 2021, respectively. Sublease income includes lessees’ variable payments to the Company for executory costs of $9,535 and $9,874 for the three months ended April 3, 2022 and April 4, 2021, respectively.