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Leases | 9 Months Ended
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Oct. 03, 2021
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 October 3, 2021, Wendy’s and its franchisees operated 6,891 Wendy’s restaurants. Of the 313 Company-operated Wendy’s restaurants, Wendy’s owned the land and building for 136 restaurants, owned the building and held long-term land leases for 117 restaurants and held leases covering the land and building for 60 restaurants. Wendy’s also owned 510 and leased 1,275 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 |  | Nine Months Ended
| October 3, 2021 |  | September 27, 2020 |  | October 3, 2021 |  | September 27, 2020
Finance lease cost: |  |  |  |  |  |  |
Amortization of finance lease assets | $ | 3,543 |  |  | $ | 3,471 |  |  | $ | 10,302 |  |  | $ | 9,995 |
Interest on finance lease liabilities | 10,371 |  |  | 10,244 |  |  | 30,931 |  |  | 30,462 |
| 13,914 |  |  | 13,715 |  |  | 41,233 |  |  | 40,457 |
Operating lease cost | 22,388 |  |  | 23,170 |  |  | 68,761 |  |  | 68,304 |
Variable lease cost (a) | 16,635 |  |  | 15,548 |  |  | 48,406 |  |  | 43,766 |
Short-term lease cost | 1,125 |  |  | 1,006 |  |  | 3,721 |  |  | 3,327 |
Total operating lease cost (b) | 40,148 |  |  | 39,724 |  |  | 120,888 |  |  | 115,397 |
Total lease cost | $ | 54,062 |  |  | $ | 53,439 |  |  | $ | 162,121 |  |  | $ | 155,854 |
_______________ (a)Includes expenses for executory costs of $10,016 and $9,326 for the three months ended October 3, 2021 and September 27, 2020, respectively, and $30,166 and $28,526 for the nine months ended October 3, 2021 and September 27, 2020, respectively, for which the Company is reimbursed by sublessees. (b)Includes $34,396 and $32,421 for the three months ended October 3, 2021 and September 27, 2020, respectively, and $101,011 and $92,975 for the nine months ended October 3, 2021 and September 27, 2020, respectively, recorded to “Franchise rental expense” for leased properties that are subsequently leased to franchisees. Also includes $5,213 and $6,651 for the three months ended October 3, 2021 and September 27, 2020, respectively, and $18,005 and $20,315 for the nine months ended October 3, 2021 and September 27, 2020, 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
| October 3, 2021 |  | September 27, 2020
Cash paid for amounts included in the measurement of lease liabilities: |  |  |
Operating cash flows from finance leases | $ | 31,608 |  |  | $ | 28,689 |
Operating cash flows from operating leases | 69,476 |  |  | 62,026 |
Financing cash flows from finance leases | 9,021 |  |  | 5,850 |
Right-of-use assets obtained in exchange for lease obligations: |  |  |
Finance lease liabilities | 43,277 |  |  | 24,617 |
Operating lease liabilities | 11,404 |  |  | 12,149 |
The following table includes supplemental information related to leases:
| October 3, 2021 |  | January 3, 2021
Weighted-average remaining lease term (years): |  |  |
Finance leases | 15.8 |  | 16.2
Operating leases | 14.2 |  | 14.6
Weighted average discount rate: |  |  |
Finance leases | 9.19 | % |  | 9.54 | %
Operating leases | 5.01 | % |  | 5.06 | %
Supplemental balance sheet information: |  |  |
Finance lease assets, gross | $ | 271,075 |  |  | $ | 261,308 |
Accumulated amortization | (60,415) |  |  | (55,155) |
Finance lease assets | 210,660 |  |  | 206,153 |
Operating lease assets | 783,986 |  |  | 821,480 |
The following table illustrates the Company’s future minimum rental payments for non-cancelable leases as of October 3, 2021:
| Finance Leases |  | Operating Leases
Fiscal Year | Company-Operated |  | Franchise and Other |  | Company-Operated |  | Franchise and Other
2021 (a) (b) | $ | 1,398 |  |  | $ | 13,934 |  |  | $ | 3,504 |  |  | $ | 18,313 |
2022 | 3,699 |  |  | 51,912 |  |  | 14,412 |  |  | 73,572 |
2023 | 3,644 |  |  | 53,569 |  |  | 14,726 |  |  | 73,226 |
2024 | 3,712 |  |  | 54,001 |  |  | 14,738 |  |  | 73,145 |
2025 | 3,787 |  |  | 54,496 |  |  | 14,633 |  |  | 72,829 |
Thereafter | 46,140 |  |  | 682,798 |  |  | 141,258 |  |  | 732,276 |
Total minimum payments | $ | 62,380 |  |  | $ | 910,710 |  |  | $ | 203,271 |  |  | $ | 1,043,361 |
Less interest | (22,694) |  |  | (405,706) |  |  | (58,455) |  |  | (312,148) |
Present value of minimum lease payments (c) (d) | $ | 39,686 |  |  | $ | 505,004 |  |  | $ | 144,816 |  |  | $ | 731,213 |
_______________ (a)Represents future minimum rental payments for non-cancelable leases for the remainder of 2021. (b)In addition to the 2021 future minimum rental payments, the Company expects to pay $1,038 primarily during 2021 related to rent deferrals obtained due to the COVID-19 pandemic. The related payable is included in “Accrued expenses and other current liabilities.” (c)The present value of minimum finance lease payments of $15,915 and $528,775 are included in “Current portion of finance lease liabilities” and “Long-term finance lease liabilities,” respectively. (d)The present value of minimum operating lease payments of $45,541 and $830,488 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 are as follows:
| Three Months Ended |  | Nine Months Ended
| October 3, 2021 |  | September 27, 2020 |  | October 3, 2021 |  | September 27, 2020
Sales-type and direct-financing leases: |  |  |  |  |  |  |
Selling profit | $ | 705 |  |  | $ | 182 |  |  | $ | 4,244 |  |  | $ | 1,379 |
Interest income (a) | 7,786 |  |  | 7,296 |  |  | 22,861 |  |  | 21,804 |
Operating lease income | 45,834 |  |  | 43,510 |  |  | 134,312 |  |  | 130,514 |
Variable lease income | 16,612 |  |  | 15,211 |  |  | 47,878 |  |  | 42,920 |
Franchise rental income (b) | $ | 62,446 |  |  | $ | 58,721 |  |  | $ | 182,190 |  |  | $ | 173,434 |
_______________ (a)Included in “Interest expense, net.” (b)Includes sublease income of $46,102 and $43,122 for the three months ended October 3, 2021 and September 27, 2020, respectively, and $134,597 and $126,653 for the nine months ended October 3, 2021 and September 27, 2020, respectively. Sublease income includes lessees’ variable payments to the Company for executory costs of $10,087 and $9,379 for the three months ended October 3, 2021 and September 27, 2020, respectively, and $30,156 and $28,538 for the nine months ended October 3, 2021 and September 27, 2020, respectively. The following table illustrates the Company’s future minimum rental receipts for non-cancelable leases and subleases as of October 3, 2021:
| Sales-Type and Direct Financing Leases |  | Operating Leases
Fiscal Year | Subleases |  | Owned Properties |  | Subleases |  | Owned Properties
2021 (a) (b) | $ | 8,409 |  |  | $ | 1,407 |  |  | $ | 28,841 |  |  | $ | 13,942 |
2022 | 34,188 |  |  | 2,610 |  |  | 116,068 |  |  | 56,305 |
2023 | 35,247 |  |  | 2,656 |  |  | 116,795 |  |  | 56,614 |
2024 | 37,248 |  |  | 2,667 |  |  | 116,962 |  |  | 57,720 |
2025 | 36,149 |  |  | 2,784 |  |  | 116,443 |  |  | 58,323 |
Thereafter | 479,695 |  |  | 32,057 |  |  | 1,172,444 |  |  | 748,781 |
Total future minimum receipts | 630,936 |  |  | 44,181 |  |  | $ | 1,667,553 |  |  | $ | 991,685 |
Unearned interest income | (341,031) |  |  | (21,892) |  |  |  |  |
Net investment in sales-type and direct financing leases (c) | $ | 289,905 |  |  | $ | 22,289 |  |  |  |  |
_______________ (a)Represents future minimum rental receipts for non-cancelable leases for the remainder of 2021. (b)In addition to the 2021 future minimum rental receipts, the Company expects to collect $273 primarily during 2021 related to its offer to franchisees to defer base rent payments in response to the COVID-19 pandemic. The related receivable is included in “Accounts and notes receivable, net.” (c)The present value of minimum sales-type and direct financing rental receipts of $6,952 and $305,242 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 $535. Properties owned by the Company and leased to franchisees and other third parties under operating leases include:
| October 3, 2021 |  | January 3, 2021
Land | $ | 280,767 |  |  | $ | 279,956 |
Buildings and improvements | 307,593 |  |  | 309,605 |
Restaurant equipment | 1,701 |  |  | 1,701 |
| 590,061 |  |  | 591,262 |
Accumulated depreciation and amortization | (179,439) |  |  | (170,722) |
| $ | 410,622 |  |  | $ | 420,540 |

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- Definition The entire disclosure for operating leases of lessee. Includes, but is not limited to, description of operating lease and maturity analysis of operating lease liability. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 842 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=77888251 + Details
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