Reorganization and Realignment Costs

6 Months Ended

Jul. 03, 2022

Restructuring and Related Activities [Abstract]

Reorganization and Realignment Costs

Reorganization and Realignment Costs

The following is a summary of the initiatives included in “Reorganization and realignment costs:”

	Three Months Ended				Six Months Ended
	July 3, 2022		July 4, 2021		July 3, 2022		July 4, 2021
System optimization initiative	$	134	$	897	$	541	$	5,575
Other reorganization and realignment plans	22		1,205		79		1,461
Reorganization and realignment costs	$	156	$	2,102	$	620	$	7,036

System Optimization Initiative

The Company recognizes costs related to acquisitions and dispositions under its system optimization initiative. During the six months ended July 3, 2022, the Company recognized costs totaling $541, which were primarily comprised of professional fees and other costs associated with the Company’s acquisition of 93 franchise-operated restaurants in Florida during the fourth quarter of 2021. During the six months ended July 4, 2021, the Company recognized costs totaling $5,575, which were primarily comprised of the write-off of certain lease assets and lease termination fees associated with the bankruptcy sale process of NPC Quality Burgers, Inc. (“NPC”). As previously announced, NPC, formerly the Company’s largest franchisee, filed for chapter 11 bankruptcy in July 2020 and completed a process during the three months ended April 4, 2021 under which all of NPC’s Wendy’s restaurants were sold to Wendy’s approved franchisees. The Company expects to recognize a gain of approximately $700, primarily related to the write-off of certain NPC-related lease liabilities, upon final termination of the leases.

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

	Three Months Ended				Six Months Ended				Total Incurred Since Inception
	July 3, 2022		July 4, 2021		July 3, 2022		July 4, 2021
Severance and related employee costs	$	—	$	661	$	—	$	661	$	18,898
Professional fees	80		504		374		739		24,051
Other (a)	37		—		133		1,354		7,751
	117		1,165		507		2,754		50,700
Accelerated depreciation and amortization (b)	—		—		—		—		25,398
NPC lease termination costs (c)	17		(268)		34		2,821		2,890
Share-based compensation (d)	—		—		—		—		5,013
Total system optimization initiative	$	134	$	897	$	541	$	5,575	$	84,001

_______________

(a)The six months ended July 4, 2021 includes transaction fees of $1,350 associated with the NPC bankruptcy sale process.

(b)Primarily includes accelerated amortization of previously acquired franchise rights related to the Company-operated restaurants in territories that have been sold to franchisees in connection with our system optimization initiative.

(c)The six months ended July 4, 2021 includes the write-off of lease assets of $1,341 and lease termination fees paid of $1,480.

(d)Represents incremental share-based compensation resulting from the modification of stock options and performance-based awards in connection with the termination of employees under our system optimization initiative.

The tables below present a rollforward of our accruals for our system optimization initiative, which were included in “Accrued expenses and other current liabilities” as of January 3, 2021.

	Balance January 2, 2022		Charges		Payments		Balance July 3, 2022
Professional fees	$	—	$	374	$	(374)	$	—
Other	—		133		(133)		—
	$	—	$	507	$	(507)	$	—

	Balance January 3, 2021		Charges		Payments		Balance July 4, 2021
Severance and related employee costs	$	—	$	661	$	(661)	$	—
Professional fees	1,230		739		(1,969)		—
Other	—		1,354		(1,354)		—
	$	1,230	$	2,754	$	(3,984)	$	—

Other Reorganization and Realignment Plans

Costs incurred under the Company’s other reorganization and realignment plans were not material during the six months ended July 3, 2022 and July 4, 2021. The Company does not expect to incur any material additional costs under these plans.