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(24) Guarantees and Other Commitments and Contingencies | 12 Months Ended
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Jan. 01, 2012
Guarantees and Other Commitments and Contingencies [Abstract] |
Guarantees and Other Commitments and Contingecies | Guarantees and Other Commitments and Contingencies Guarantees and Contingent Liabilities Equipment for Systemwide Core Menu Initiative In order to facilitate the purchase and related installation of equipment by franchisees required to implement a systemwide core menu initiative, Wendy’s initiated incentive programs for franchisees, including the partial subsidy of interest rates and a guarantee program. As of January 1, 2012, Wendy’s potential recourse for the loans related to this guarantee program amounted to $1,635 and Wendy’s has accrued liabilities under these initiatives of approximately $315. Breakfast Expansion In order to encourage franchisees to participate in the breakfast daypart, Wendy’s has established the following programs:
• | Wendy’s will continue to lease equipment to certain franchisees that are participating in the breakfast program. At the time breakfast becomes a required program, the franchisees will be required to purchase the equipment from Wendy’s based on its then book value plus installation costs. The total amount of expenditures for equipment (including installation) leased to franchisees is expected to be no more than $4,500.
• | Additionally, Wendy’s is providing loans to certain franchisees for the purchase and installation of equipment required to implement the breakfast program. The loans are expected to not exceed $25 per restaurant, carry no interest charge and be repayable in full 24 months after the installation is completed. Wendy’s will fund a maximum of $20,000 of these loans for early adopters of the breakfast program.
As of January 1, 2012, Wendy’s has purchased equipment with a current net book value of approximately $2,559 that has been leased to franchisees and has made loans of $2,625 under the above breakfast program. The above programs also have the following additional features:
• | For the first three years of an early adopting franchisee’s participation in the breakfast program, a portion of franchise royalties (on a sliding scale) will not be payable to Wendy’s but will be required to be reinvested in local advertising and promotions for the breakfast program. Based on franchisee participation in the breakfast program, Wendy’s estimates the royalties not to be received under this program will approximate $4,415 over the three year period through the second quarter of 2015.
• | Contributions otherwise due to The Wendy’s National Advertising Program, Inc. (“Wendy’s National Advertising Program”) based on breakfast sales will not be made but will be required to be reinvested in local advertising and promotions for the breakfast program until Wendy’s National Advertising Program begins to purchase national advertising for the breakfast programs.
Other Loan Guarantees Wendy’s previously provided loan guarantees to various lenders on behalf of franchisees entering into pooled debt facility arrangements for new store development and equipment financing. Wendy’s has accrued a liability for the fair value of these guarantees, the calculation for which was based upon a weighed average risk percentage established at the inception of each program which has been adjusted for a history of defaults. Wendy’s potential recourse for the aggregate amount of these loans amounted to $12,071 as of January 1, 2012. There remains an unamortized carrying amount of $1,118 included in “Other liabilities” as of January 1, 2012 with respect to these loan guarantees. Japan Joint Venture Guarantee In 2012, Wendy’s Restaurants (1) provided a guarantee to a lender to the Japan joint venture for which our joint venture partner has agreed to reimburse and otherwise indemnify us for his 51% share of the guarantee and (2) has agreed to reimburse and otherwise indemnify our joint venture partner for our 49% share of the guarantee by our joint venture partner of a line of credit granted by a different lender to the Japan joint venture to fund working capital requirements. Our portion of these contingent obligations totals approximately $2,900 (¥220,800) based upon current rates of exchange. The fair value of our guarantees is immaterial. The Companies anticipate that additional guarantees of up to $5,000 may be necessary in 2012. North America Incentive Program In order to promote new unit development, Wendy’s has established a franchisee assistance program for its North American franchisees that provides for reduced technical assistance fees and a sliding scale of royalties for the first two years of operation for qualifying locations opened between April 1, 2011 and December 31, 2013. While we are unable to project the number of locations to be opened under this program, we do not expect the effect on current or future franchise revenues to be material. Lease Guarantees Wendy’s has guaranteed the performance of certain leases and other obligations primarily from former company-owned restaurant locations now operated by franchisees amounting to $46,502 as of January 1, 2012. These leases extend through 2048. We have not received any notice of default related to these leases as of January 1, 2012. In the event of default by a franchise owner, Wendy’s generally retains the right to acquire possession of the related restaurant locations. Wendy’s is contingently liable for certain other leases which have been assigned to unrelated third parties who have indemnified Wendy’s against future liabilities amounting to $8,029 as of January 1, 2012. These leases expire on various dates, through 2021. Wendy’s Canadian subsidiary has established a lease guarantee program to promote new franchisee unit development for up to an aggregate of C$5,000 for periods of up to five years. Franchisees pay the Canadian subsidiary a nominal fee for the guarantee. As of January 1, 2012, the Canadian subsidiary had guaranteed C$249 under this program. Insurance Wendy’s is self-insured for most workers’ compensation losses and purchases insurance for general liability and automotive liability losses all subject to $500 per occurrence self-retention limits. Wendy’s determines its liability for claims incurred but not reported for the insurance liabilities on an actuarial basis. Wendy’s is self-insured for health care claims for eligible participating employees subject to certain deductibles and limitations, and determines its liability for health care claims incurred but not reported based on historical claims runoff data. Letters of Credit As of January 1, 2012, Wendy’s Restaurants has outstanding letters of credit with various parties of $20,657, which are included in The Wendy’s Company’s outstanding letters of credit of $21,326. We do not expect any material loss to result from these letters of credit. Purchase and Capital Commitments Beverage Agreements Wendy’s has entered into a beverage agreement with a beverage vendor to provide fountain beverage products and certain marketing support funding to the Companies and their franchisees. This agreement requires minimum purchases of fountain beverage syrup (“Syrup”) by the Companies and their franchisees at certain preferred prices until the total contractual gallon volume usage has been reached. In addition, this agreement provides for an annual advance to be paid to us based on the vendor’s expectation of annual Syrup usage of the Companies, which is amortized over annual usage. Beverage purchases made by the Companies under this agreement during 2011, 2010 and 2009 were approximately $20,464, $21,273 and $20,425, respectively. Future purchases by the Companies under these beverage purchase requirements are estimated to be approximately $20,464 per year over the next five years. Based on current preferred prices and the current ratio of sales at company-owned restaurants to franchised restaurants, the total remaining Companies’ beverage requirements are approximately $150,677 over the remaining life of the contracts. As of January 1, 2012, $646 is due to beverage vendors and included in “Accounts payable” principally for annual estimated payments that exceeded usage. Capital Expenditures Commitments As of January 1, 2012, the Companies have $26,319 of outstanding commitments for capital expenditures expected to be paid in 2012.

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- Definition The entire disclosure for each guarantee obligation, or each group of similar guarantee obligations, including (a) the nature of the guarantee, including its term, how it arose, and the events or circumstances that would require the guarantor to perform under the guarantee; (b) the maximum potential amount of future payments (undiscounted) the guarantor could be required to make under the guarantee; (c) the current carrying amount of the liability, if any, for the guarantor's obligations under the guarantee; and (d) the nature of any recourse provisions under the guarantee, and any assets held either as collateral or by third parties, and any relevant related party disclosure. Excludes disclosures about product warranties. + References No definition available. + Details
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