Leases

12 Months Ended

Dec. 31, 2023

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 December 31, 2023, Wendy’s and its franchisees operated 7,240 Wendy’s restaurants. Of the 415 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 145 restaurants and held leases covering the land and building for 112 restaurants. Wendy’s also owned 488 and leased 1,179 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 for 2023, 2022 and 2021 are as follows:


	Year Ended
	2023		2022		2021
Finance lease cost:
Amortization of finance lease assets	$	16,061	$	15,440	$	13,992
Interest on finance lease liabilities	42,624		42,918		41,419
	58,685		58,358		55,411
Operating lease cost	85,138		86,050		89,283
Variable lease cost (a)	66,859		64,473		63,853
Short-term lease cost	5,864		5,439		5,102
Total operating lease cost (b)	157,861		155,962		158,238
Total lease cost	$	216,546	$	214,320	$	213,649

_______________

(a)Includes expenses for executory costs of $39,456, $38,749, and $39,646 for 2023, 2022 and 2021, respectively, for which the Company is reimbursed by sublessees.

(b)Includes $125,180, $123,924 and $132,158 for 2023, 2022 and 2021, respectively, recorded to “Franchise rental expense” for leased properties that are subsequently leased to franchisees. Also includes $30,538, $29,648 and $23,558 for 2023, 2022 and 2021, 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:


	Year Ended
	2023		2022		2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from finance leases	$	42,624	$	42,979	$	42,277
Operating cash flows from operating leases	86,972		88,372		91,930
Financing cash flows from finance leases	21,588		17,312		13,640
Right-of-use assets obtained in exchange for lease obligations:
Finance lease liabilities	20,243		34,478		82,032
Operating lease liabilities	12,659		24,742		58,770

The following table includes supplemental information related to leases:


	Year End
	December 31, 2023			January 1, 2023
Weighted-average remaining lease term (years):
Finance leases	14.3			15.1
Operating leases	12.6			13.7

Weighted average discount rate:
Finance leases	8.52		%	8.66		%
Operating leases	4.93		%	4.90		%

Supplemental balance sheet information:
Finance lease assets, gross	$	318,951		$	310,686
Accumulated amortization	(90,015)			(76,116)
Finance lease assets	228,936			234,570
Operating lease assets	705,615			754,498

The following table illustrates the Company’s future minimum rental payments for non-cancelable leases as of December 31, 2023:


	Finance Leases				Operating Leases
Fiscal Year	Company-Operated		Franchise and Other		Company-Operated		Franchise and Other
2024	$	6,904	$	55,492	$	22,052	$	64,636
2025	7,104		56,121		22,048		64,432
2026	7,249		57,817		22,500		63,967
2027	7,293		58,702		22,439		63,678
2028	7,350		59,919		22,223		63,869
Thereafter	78,045		563,716		169,965		469,484
Total minimum payments	$	113,945	$	851,767	$	281,227	$	790,066
Less interest	(36,660)		(340,035)		(71,529)		(211,071)
Present value of minimum lease payments (a) (b)	$	77,285	$	511,732	$	209,698	$	578,995

_______________

(a)The present value of minimum finance lease payments of $20,250 and $568,767 are included in “Current portion of finance lease liabilities” and “Long-term finance lease liabilities,” respectively.

(b)The present value of minimum operating lease payments of $49,353 and $739,340 are included in “Current portion of operating lease liabilities” and “Long-term operating lease liabilities,” respectively.

Leases, Company as Lessor

Company as Lessor

The components of lease income for 2023, 2022 and 2021 are as follows:


	Year Ended
	2023		2022		2021
Sales-type and direct-financing leases:
Selling profit	$	2,466	$	2,981	$	4,244
Interest income (a)	31,412		31,298		30,648

Operating lease income	163,927		170,633		173,442
Variable lease income	66,241		63,832		63,213
Franchise rental income (b)	$	230,168	$	234,465	$	236,655

_______________

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

(b)Includes sublease income of $170,112, $175,053 and $174,327 recognized during 2023, 2022 and 2021, respectively. Sublease income includes lessees’ variable payments to the Company for executory costs of $39,350, $38,733 and $39,650 for 2023, 2022 and 2021, respectively.

The following table illustrates the Company’s future minimum rental receipts for non-cancelable leases and subleases as of December 31, 2023:


	Sales-Type and Direct Financing Leases				Operating Leases
Fiscal Year	Subleases		Owned Properties		Subleases		Owned Properties
2024	$	38,890	$	2,087	$	106,470	$	54,946
2025	37,826		2,194		106,616		55,549
2026	39,136		2,364		106,840		57,308
2027	39,719		2,244		107,263		56,954
2028	40,684		1,999		107,652		56,741
Thereafter	399,480		25,730		783,633		542,967
Total future minimum receipts	595,735		36,618		$	1,318,474	$	824,465
Unearned interest income	(288,461)		(19,449)
Net investment in sales-type and direct financing leases (a)	$	307,274	$	17,169

_______________

(a)The present value of minimum sales-type and direct financing rental receipts of $10,779 and $313,664 are included in “Accounts and notes receivable, net” and “Net investment in sales-type and direct financing leases,” respectively. The present value of minimum sales-type and direct financing rental receipts includes a net investment in unguaranteed residual assets of $590.

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


	Year End
	December 31, 2023		January 1, 2023
Land	$	260,125	$	260,650
Buildings and improvements	296,242		291,659
Restaurant equipment	1,701		1,701
	558,068		554,010
Accumulated depreciation and amortization	(198,429)		(187,269)
	$	359,639	$	366,741