UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒						QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~October~~April 2, ~~2022~~2023


☐						TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________ to _______________

Commission file number: 1-2207

THE WENDY’S COMPANY

(Exact name of registrant as specified in its charter)


Delaware		38-0471180
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

One Dave Thomas Blvd.
Dublin,	Ohio	43017
(Address of principal executive offices)		(Zip Code)

(614) 764-3100

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $.10 par value	WEN	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

There were ~~213,026,982~~210,736,503 shares of The Wendy’s Company common stock outstanding as of ~~November 2, 2022.~~May 3, 2023.

THE WENDY’S COMPANY AND SUBSIDIARIES

INDEX TO FORM 10-Q


			Page
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements			4
Unaudited Condensed Consolidated Balance Sheets as of ~~October~~April 2 , ~~2022~~202 3 and January ~~2, 2022~~1 , 202 3			4
Unaudited Condensed Consolidated Statements of Operations for the three ~~and~~ ~~nine~~ months ended April ~~October~~ 2, ~~2022~~202 3 and ~~October~~April 3, 20 32 ~~, 2021~~2			5
Unaudited Condensed Consolidated Statements of Comprehensive Income for the three ~~and~~ ~~nine~~ months ended ~~October 2,~~April ~~2022~~2, 202 3 and ~~October~~ April 3 , ~~2021~~20 2 2			6
Unaudited Condensed Consolidated Statements of Stockholders’ Equity for the three ~~and~~ ~~nine~~ months ended ~~October~~April 2, 2 023 2 ~~, 2022~~ and ~~October~~April 3, 20 32 ~~, 2021~~2			7
Unaudited Condensed Consolidated Statements of Cash Flows for the n ~~ine~~three months ended ~~October~~April 2, 202 23 ~~, 2022~~ and ~~October~~April 3 , ~~2021~~20 2 2			98
Notes to Condensed Consolidated Financial Statements			109
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			2724
Item 3. Quantitative and Qualitative Disclosures about Market Risk			4338
Item 4. Controls and Procedures			4338

PART II: OTHER INFORMATION			4539
Item 1. Legal Proceedings			4740
Item 1A. Risk Factors			4741
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			4841
Item 6. Exhibits			4942
Signatures			5043

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

THE WENDY’S COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In Thousands Except Par Value)


		October 2, 2022		January 2, 2022			April 2, 2023		January 1, 2023
ASSETS	ASSETS	(Unaudited)				ASSETS	(Unaudited)
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	731,801	$	249,438	Cash and cash equivalents	$	676,469	$	745,889
Restricted cash	Restricted cash	34,363		27,535		Restricted cash	36,348		35,203
Accounts and notes receivable, net	Accounts and notes receivable, net	142,447		119,540		Accounts and notes receivable, net	136,343		116,426
Inventories	Inventories	6,578		5,934		Inventories	6,452		7,129
Prepaid expenses and other current assets	Prepaid expenses and other current assets	28,795		30,584		Prepaid expenses and other current assets	29,952		26,963
Advertising funds restricted assets	Advertising funds restricted assets	150,662		159,818		Advertising funds restricted assets	117,839		126,673
Total current assets	Total current assets	1,094,646		592,849		Total current assets	1,003,403		1,058,283
Properties	Properties	882,283		906,867		Properties	885,089		895,778
Finance lease assets	Finance lease assets	237,517		244,279		Finance lease assets	229,736		234,570
Operating lease assets	Operating lease assets	765,688		812,620		Operating lease assets	741,258		754,498
Goodwill	Goodwill	772,984		775,278		Goodwill	773,095		773,088
Other intangible assets	Other intangible assets	1,252,198		1,280,791		Other intangible assets	1,239,572		1,248,800
Investments	Investments	45,482		49,870		Investments	42,082		46,028
Net investment in sales-type and direct financing leases	Net investment in sales-type and direct financing leases	310,576		299,707		Net investment in sales-type and direct financing leases	314,763		317,337
Other assets	Other assets	163,615		139,130		Other assets	179,030		170,962
Total assets	Total assets	$	5,524,989	$	5,101,391	Total assets	$	5,408,028	$	5,499,344

LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY					LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Current portion of long-term debt	Current portion of long-term debt	$	29,250	$	24,250	Current portion of long-term debt	$	29,250	$	29,250
Current portion of finance lease liabilities	Current portion of finance lease liabilities	17,585		15,513		Current portion of finance lease liabilities	18,744		18,316
Current portion of operating lease liabilities	Current portion of operating lease liabilities	47,481		47,315		Current portion of operating lease liabilities	48,754		48,120
Accounts payable	Accounts payable	34,667		41,163		Accounts payable	45,338		43,996
Accrued expenses and other current liabilities	Accrued expenses and other current liabilities	130,202		140,783		Accrued expenses and other current liabilities	133,848		116,010
Advertising funds restricted liabilities	Advertising funds restricted liabilities	159,231		157,901		Advertising funds restricted liabilities	123,597		132,307
Total current liabilities	Total current liabilities	418,416		426,925		Total current liabilities	399,531		387,999
Long-term debt	Long-term debt	2,827,493		2,356,416		Long-term debt	2,786,493		2,822,196
Long-term finance lease liabilities	Long-term finance lease liabilities	567,472		559,587		Long-term finance lease liabilities	567,849		571,877
Long-term operating lease liabilities	Long-term operating lease liabilities	804,632		853,328		Long-term operating lease liabilities	777,395		792,051
Deferred income taxes	Deferred income taxes	276,089		267,710		Deferred income taxes	272,553		270,421
Deferred franchise fees	Deferred franchise fees	91,669		88,102		Deferred franchise fees	88,161		90,231
Other liabilities	Other liabilities	101,839		112,918		Other liabilities	96,489		98,849
Total liabilities	Total liabilities	5,087,610		4,664,986		Total liabilities	4,988,471		5,033,624
Commitments and contingencies	Commitments and contingencies					Commitments and contingencies
Stockholders’ equity:	Stockholders’ equity:					Stockholders’ equity:
Common stock, $0.10 par value; 1,500,000 shares authorized; 470,424 shares issued; 212,945 and 215,849 shares outstanding, respectively		47,042		47,042
Common stock, $0.10 par value; 1,500,000 shares authorized; 470,424 shares issued; 211,701 and 213,101 shares outstanding, respectively						Common stock, $0.10 par value; 1,500,000 shares authorized; 470,424 shares issued; 211,701 and 213,101 shares outstanding, respectively	47,042		47,042
Additional paid-in capital	Additional paid-in capital	2,930,388		2,898,633		Additional paid-in capital	2,941,138		2,937,885
Retained earnings	Retained earnings	400,111		344,198		Retained earnings	401,445		414,749
Common stock held in treasury, at cost; 257,479 and 254,575 shares, respectively		(2,871,442)		(2,805,268)
Common stock held in treasury, at cost; 258,723 and 257,323 shares, respectively						Common stock held in treasury, at cost; 258,723 and 257,323 shares, respectively	(2,906,050)		(2,869,780)
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(68,720)		(48,200)		Accumulated other comprehensive loss	(64,018)		(64,176)
Total stockholders’ equity	Total stockholders’ equity	437,379		436,405		Total stockholders’ equity	419,557		465,720
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	5,524,989	$	5,101,391	Total liabilities and stockholders’ equity	$	5,408,028	$	5,499,344

See accompanying notes to condensed consolidated financial statements.

Table of Contents

THE WENDY’S COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In Thousands Except Per Share Amounts)


		Three Months Ended				Nine Months Ended					Three Months Ended
		October 2, 2022		October 3, 2021		October 2, 2022		October 3, 2021			April 2, 2023		April 3, 2022
		(Unaudited)									(Unaudited)
Revenues:	Revenues:									Revenues:
Sales	Sales	$	228,786	$	171,078	$	668,930	$	553,660	Sales	$	227,949	$	209,275
Franchise royalty revenue and fees	Franchise royalty revenue and fees	141,733		138,755		414,145		398,246		Franchise royalty revenue and fees	141,677		128,976
Franchise rental income	Franchise rental income	58,463		62,446		174,944		182,190		Franchise rental income	57,807		57,871
Advertising funds revenue	Advertising funds revenue	103,587		97,976		300,976		289,699		Advertising funds revenue	101,374		92,521
		532,569		470,255		1,558,995		1,423,795			528,807		488,643
Costs and expenses:	Costs and expenses:									Costs and expenses:
Cost of sales	Cost of sales	196,168		146,436		578,506		457,440		Cost of sales	196,536		185,053
Franchise support and other costs	Franchise support and other costs	12,728		10,509		34,456		27,080		Franchise support and other costs	13,260		11,816
Franchise rental expense	Franchise rental expense	31,687		34,424		92,699		101,058		Franchise rental expense	30,629		28,936
Advertising funds expense	Advertising funds expense	108,269		108,529		317,042		310,642		Advertising funds expense	101,661		97,800
General and administrative	General and administrative	62,523		62,840		186,506		178,576		General and administrative	62,276		62,346
Depreciation and amortization (exclusive of amortization of cloud computing arrangements shown separately below)	Depreciation and amortization (exclusive of amortization of cloud computing arrangements shown separately below)	34,252		30,940		100,911		93,243		Depreciation and amortization (exclusive of amortization of cloud computing arrangements shown separately below)	33,472		33,231
Amortization of cloud computing arrangements	Amortization of cloud computing arrangements	888		—		888		—		Amortization of cloud computing arrangements	1,582		—
System optimization gains, net	System optimization gains, net	(452)		(1,437)		(4,138)		(32,719)		System optimization gains, net	(5)		(3,534)
Reorganization and realignment costs	Reorganization and realignment costs	8		345		628		7,381		Reorganization and realignment costs	6,808		464
Impairment of long-lived assets	Impairment of long-lived assets	206		566		2,682		1,831		Impairment of long-lived assets	376		616
Other operating income, net	Other operating income, net	(11,843)		(3,092)		(20,482)		(10,800)		Other operating income, net	(2,266)		(2,966)
		434,434		390,060		1,289,698		1,133,732			444,329		413,762
Operating profit	Operating profit	98,135		80,195		269,297		290,063		Operating profit	84,478		74,881
Interest expense, net	Interest expense, net	(31,916)		(26,000)		(90,406)		(82,990)		Interest expense, net	(31,705)		(26,365)
Loss on early extinguishment of debt	Loss on early extinguishment of debt	—		—		—		(17,917)		Loss on early extinguishment of debt	(1,266)		—
Investment income, net		—		—		2,107		6
Investment (loss) income, net										Investment (loss) income, net	(3,562)		2,111
Other income, net	Other income, net	2,910		171		4,355		455		Other income, net	7,336		207
Income before income taxes	Income before income taxes	69,129		54,366		185,353		189,617		Income before income taxes	55,281		50,834
Provision for income taxes	Provision for income taxes	(18,587)		(13,195)		(49,258)		(41,356)		Provision for income taxes	(15,460)		(13,432)
Net income	Net income	$	50,542	$	41,171	$	136,095	$	148,261	Net income	$	39,821	$	37,402

Net income per share:
Basic		$	.24	$	.19	$	.64	$	.67
Diluted		.24		.18		.63		.66
Basic and diluted net income per share										Basic and diluted net income per share	$	.19	$	.17

See accompanying notes to condensed consolidated financial statements.

Table of Contents

THE WENDY’S COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In Thousands)


		Three Months Ended				Nine Months Ended					Three Months Ended
		October 2, 2022		October 3, 2021		October 2, 2022		October 3, 2021			April 2, 2023		April 3, 2022
		(Unaudited)									(Unaudited)
Net income	Net income	$	50,542	$	41,171	$	136,095	$	148,261	Net income	$	39,821	$	37,402
Other comprehensive (loss) income:
Other comprehensive income:										Other comprehensive income:
Foreign currency translation adjustment	Foreign currency translation adjustment	(14,183)		(4,659)		(20,520)		908		Foreign currency translation adjustment	158		1,118
Other comprehensive (loss) income		(14,183)		(4,659)		(20,520)		908
Other comprehensive income										Other comprehensive income	158		1,118
Comprehensive income	Comprehensive income	$	36,359	$	36,512	$	115,575	$	149,169	Comprehensive income	$	39,979	$	38,520

See accompanying notes to condensed consolidated financial statements.

Table of Contents

THE WENDY’S COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In Thousands)


		Common Stock			Additional Paid-In Capital				Retained Earnings		Common Stock Held in Treasury				Accumulated Other Comprehensive Loss		Total				Common Stock				Additional Paid-In Capital				Retained Earnings		Common Stock Held in Treasury		Accumulated Other Comprehensive Loss		Total

				(Unaudited)																			(Unaudited)
Balance at January 2, 2022		$	47,042				$	2,898,633					$	344,198					$	(2,805,268)			$	(48,200)			$	436,405
Balance at January 1, 2023																				Balance at January 1, 2023	$	47,042			$	2,937,885			$	414,749	$	(2,869,780)	$	(64,176)	$	465,720
Net income	Net income	—			—				37,402		—				—		37,402			Net income	—				—				39,821		—		—		39,821
Other comprehensive income	Other comprehensive income	—			—				—		—				1,118		1,118			Other comprehensive income	—				—				—		—		158		158
Cash dividends		—			—				(26,911)		—				—		(26,911)
Repurchases of common stock, including accelerated share repurchase		—			18,750				—		(18,750)				—		—
Share-based compensation		—			6,348				—		—				—		6,348
Common stock issued upon exercises of stock options		—			237				—		1,354				—		1,591
Common stock issued upon vesting of restricted shares		—			(1,989)				—		459				—		(1,530)
Other		—			63				(8)		57				—		112
Balance at April 3, 2022		$	47,042		$	2,922,042			$	354,681	$	(2,822,148)			$	(47,082)	$	454,535
Net income		—			—				48,151		—				—		48,151
Other comprehensive loss		—			—				—		—				(7,455)		(7,455)
Cash dividends	Cash dividends	—			—				(26,635)		—				—		(26,635)			Cash dividends	—				—				(53,103)		—		—		(53,103)
Repurchases of common stock	Repurchases of common stock	—			—				—		(51,950)				—		(51,950)			Repurchases of common stock	—				—				—		(38,810)		—		(38,810)
Share-based compensation	Share-based compensation	—			6,122				—		—				—		6,122			Share-based compensation	—				4,609				—		—		—		4,609
Common stock issued upon exercises of stock options	Common stock issued upon exercises of stock options	—			(300)				—		399				—		99			Common stock issued upon exercises of stock options	—				808				—		1,808		—		2,616
Common stock issued upon vesting of restricted shares	Common stock issued upon vesting of restricted shares	—			(1,178)				—		1,073				—		(105)			Common stock issued upon vesting of restricted shares	—				(2,222)				—		678		—		(1,544)
Other	Other	—			53				(10)		58				—		101			Other	—				58				(22)		54		—		90
Balance at July 3, 2022		$	47,042		$	2,926,739			$	376,187	$	(2,872,568)			$	(54,537)	$	422,863
Net income		—			—				50,542		—				—		50,542
Other comprehensive loss		—			—				—		—				(14,183)		(14,183)
Cash dividends		—			—				(26,607)		—				—		(26,607)
Balance at April 2, 2023																				Balance at April 2, 2023	$	47,042			$	2,941,138			$	401,445	$	(2,906,050)	$	(64,018)	$	419,557

Share-based compensation		—			5,027				—		—				—		5,027
Common stock issued upon exercises of stock options		—			450				—		241				—		691
Common stock issued upon vesting of restricted shares		—			(1,876)				—		817				—		(1,059)
Other		—			48				(11)		68				—		105
Balance at October 2, 2022		$	47,042		$	2,930,388			$	400,111	$	(2,871,442)			$	(68,720)	$	437,379

~~See accompanying notes to condensed consolidated financial statements.~~

~~Table of Contents~~

~~THE WENDY’S COMPANY AND SUBSIDIARIES~~

~~CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY—CONTINUED~~

~~(In Thousands)~~


		Common Stock			Additional Paid-In Capital				Retained Earnings		Common Stock Held in Treasury				Accumulated Other Comprehensive Loss		Total

				(Unaudited)
Balance at January 3, 2021		$	47,042				$	2,899,276					$	238,674					$	(2,585,755)			$	(49,641)			$	549,596
Balance at January 2, 2022																				Balance at January 2, 2022	$	47,042			$	2,898,633			$	344,198	$	(2,805,268)	$	(48,200)	$	436,405
Net income	Net income	—			—				41,366		—				—		41,366			Net income	—				—				37,402		—		—		37,402
Other comprehensive income	Other comprehensive income	—			—				—		—				2,220		2,220			Other comprehensive income	—				—				—		—		1,118		1,118
Cash dividends	Cash dividends	—			—				(20,156)		—				—		(20,156)			Cash dividends	—				—				(26,911)		—		—		(26,911)
Repurchases of common stock		—			—				—		(56,084)				—		(56,084)
Repurchases of common stock, including accelerated share repurchase																				Repurchases of common stock, including accelerated share repurchase	—				18,750				—		(18,750)		—		—
Share-based compensation	Share-based compensation	—			5,151				—		—				—		5,151			Share-based compensation	—				6,348				—		—		—		6,348
Common stock issued upon exercises of stock options	Common stock issued upon exercises of stock options	—			(20)				—		683				—		663			Common stock issued upon exercises of stock options	—				237				—		1,354		—		1,591
Common stock issued upon vesting of restricted shares	Common stock issued upon vesting of restricted shares	—			(2,996)				—		817				—		(2,179)			Common stock issued upon vesting of restricted shares	—				(1,989)				—		459		—		(1,530)
Other	Other	—			49				(5)		44				—		88			Other	—				63				(8)		57		—		112
Balance at April 4, 2021		$	47,042		$	2,901,460			$	259,879	$	(2,640,295)			$	(47,421)	$	520,665
Net income		—			—				65,724		—				—		65,724
Other comprehensive income		—			—				—		—				3,347		3,347
Cash dividends		—			—				(22,123)		—				—		(22,123)
Repurchases of common stock		—			—				—		(27,291)				—		(27,291)
Share-based compensation		—			5,882				—		—				—		5,882
Common stock issued upon exercises of stock options		—			850				—		23,466				—		24,316
Common stock issued upon vesting of restricted shares		—			(959)				—		714				—		(245)
Other		—			41				(5)		45				—		81
Balance at July 4, 2021		$	47,042		$	2,907,274			$	303,475	$	(2,643,361)			$	(44,074)	$	570,356
Net income		—			—				41,171		—				—		41,171
Other comprehensive loss		—			—				—		—				(4,659)		(4,659)
Cash dividends		—			—				(26,684)		—				—		(26,684)
Repurchases of common stock		—			—				—		(43,857)				—		(43,857)
Share-based compensation		—			5,702				—		—				—		5,702
Common stock issued upon exercises of stock options		—			351				—		1,465				—		1,816
Common stock issued upon vesting of restricted shares		—			(1,835)				—		642				—		(1,193)
Other		—			60				(6)		48				—		102
Balance at October 3, 2021		$	47,042		$	2,911,552			$	317,956	$	(2,685,063)			$	(48,733)	$	542,754
Balance at April 3, 2022																				Balance at April 3, 2022	$	47,042			$	2,922,042			$	354,681	$	(2,822,148)	$	(47,082)	$	454,535

See accompanying notes to condensed consolidated financial statements.

Table of Contents

THE WENDY’S COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)


		Nine Months Ended					Three Months Ended
		October 2, 2022		October 3, 2021			April 2, 2023		April 3, 2022
		(Unaudited)					(Unaudited)
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income	Net income	$	136,095	$	148,261	Net income	$	39,821	$	37,402
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization (exclusive of amortization of cloud computing arrangements shown separately below)	Depreciation and amortization (exclusive of amortization of cloud computing arrangements shown separately below)	100,911		93,243		Depreciation and amortization (exclusive of amortization of cloud computing arrangements shown separately below)	33,472		33,231
Amortization of cloud computing arrangements	Amortization of cloud computing arrangements	888		—		Amortization of cloud computing arrangements	1,582		—
Share-based compensation	Share-based compensation	17,497		16,735		Share-based compensation	4,609		6,348
Impairment of long-lived assets	Impairment of long-lived assets	2,682		1,831		Impairment of long-lived assets	376		616
Deferred income tax	Deferred income tax	10,214		(25)		Deferred income tax	2,302		4,527
Non-cash rental expense, net	Non-cash rental expense, net	26,164		28,421		Non-cash rental expense, net	9,012		6,874
Change in operating lease liabilities	Change in operating lease liabilities	(34,241)		(34,220)		Change in operating lease liabilities	(11,718)		(11,615)
Net receipt of deferred vendor incentives		1,884		1,906
Net (recognition) receipt of deferred vendor incentives						Net (recognition) receipt of deferred vendor incentives	(1,197)		7,711
System optimization gains, net	System optimization gains, net	(4,138)		(32,719)		System optimization gains, net	(5)		(3,534)
Distributions received from joint ventures, net of equity in earnings	Distributions received from joint ventures, net of equity in earnings	3,468		3,561		Distributions received from joint ventures, net of equity in earnings	394		898
Long-term debt-related activities, net	Long-term debt-related activities, net	5,746		23,043		Long-term debt-related activities, net	3,419		1,717
Cloud computing arrangements expenditures	Cloud computing arrangements expenditures	(22,685)		(5,619)		Cloud computing arrangements expenditures	(6,643)		(4,656)
Changes in operating assets and liabilities and other, net	Changes in operating assets and liabilities and other, net	(61,846)		32,255		Changes in operating assets and liabilities and other, net	(22,449)		(58,537)
Net cash provided by operating activities	Net cash provided by operating activities	182,639		276,673		Net cash provided by operating activities	52,975		20,982
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Capital expenditures	Capital expenditures	(50,036)		(43,401)		Capital expenditures	(12,240)		(12,496)
Franchise development fund	Franchise development fund	(2,484)		—		Franchise development fund	(218)		(955)
Acquisitions		—		4,879

Dispositions	Dispositions	3,731		52,657		Dispositions	287		263

Notes receivable, net	Notes receivable, net	2,713		907		Notes receivable, net	110		141
Net cash (used in) provided by investing activities		(46,076)		15,042
Net cash used in investing activities						Net cash used in investing activities	(12,061)		(13,047)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Proceeds from long-term debt	Proceeds from long-term debt	500,000		1,100,000		Proceeds from long-term debt	—		500,000
Repayments of long-term debt	Repayments of long-term debt	(19,437)		(955,782)		Repayments of long-term debt	(39,122)		(6,063)
Repayments of finance lease liabilities	Repayments of finance lease liabilities	(13,411)		(9,021)		Repayments of finance lease liabilities	(4,398)		(4,076)
Deferred financing costs	Deferred financing costs	(10,232)		(20,873)		Deferred financing costs	—		(10,209)
Repurchases of common stock	Repurchases of common stock	(51,950)		(125,656)		Repurchases of common stock	(36,727)		—
Dividends	Dividends	(80,153)		(68,963)		Dividends	(53,103)		(26,911)
Proceeds from stock option exercises	Proceeds from stock option exercises	2,668		27,204		Proceeds from stock option exercises	2,881		1,591
Payments related to tax withholding for share-based compensation	Payments related to tax withholding for share-based compensation	(2,980)		(4,390)		Payments related to tax withholding for share-based compensation	(1,809)		(1,530)
Net cash provided by (used in) financing activities		324,505		(57,481)
Net cash provided by operations before effect of exchange rate changes on cash		461,068		234,234
Net cash (used in) provided by financing activities						Net cash (used in) provided by financing activities	(132,278)		452,802
Net cash (used in) provided by operations before effect of exchange rate changes on cash						Net cash (used in) provided by operations before effect of exchange rate changes on cash	(91,364)		460,737
Effect of exchange rate changes on cash	Effect of exchange rate changes on cash	(7,176)		177		Effect of exchange rate changes on cash	129		305
Net increase in cash, cash equivalents and restricted cash		453,892		234,411
Net (decrease) increase in cash, cash equivalents and restricted cash						Net (decrease) increase in cash, cash equivalents and restricted cash	(91,235)		461,042
Cash, cash equivalents and restricted cash at beginning of period	Cash, cash equivalents and restricted cash at beginning of period	366,966		418,241		Cash, cash equivalents and restricted cash at beginning of period	831,801		366,966
Cash, cash equivalents and restricted cash at end of period	Cash, cash equivalents and restricted cash at end of period	$	820,858	$	652,652	Cash, cash equivalents and restricted cash at end of period	$	740,566	$	828,008

See accompanying notes to condensed consolidated financial statements.

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THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

(1) Basis of Presentation

The accompanying unaudited condensed consolidated financial statements (the “Financial Statements”) of The Wendy’s Company (“The Wendy’s Company” and, together with its subsidiaries, the “Company,” “we,” “us” or “our”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and, therefore, do not include all information and footnotes required by GAAP for complete financial statements. In our opinion, the Financial Statements contain all adjustments of a normal recurring nature necessary to present fairly our financial position as of ~~October~~April 2, ~~2022,~~2023 and the results of our operations ~~for the three and nine months ended October 2, 2022 and October 3, 2021~~ and cash flows for the ~~nine~~three months ended ~~October~~April 2, ~~2022~~2023 and ~~October~~April 3, ~~2021.~~2022. The results of operations for the ~~nine~~three months ended ~~October~~April 2, ~~2022~~2023 are not necessarily indicative of the results to be expected for the full ~~2022~~2023 fiscal year. The Financial Statements should be read in conjunction with the audited consolidated financial statements for The Wendy’s Company and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended January ~~2, 2022~~1, 2023 (the “Form 10-K”).

In March 2020, the World Health Organization declared the novel strain of coronavirus (“COVID-19”) a global pandemic. We continue to monitor the dynamic nature of the COVID-19 pandemic on our business, results and financial condition; however, we cannot predict the ultimate duration, scope or severity of the COVID-19 pandemic or its ultimate impact on our results of operations, financial condition and prospects.

The principal 100% owned subsidiary of the Company is Wendy’s International, LLC and its subsidiaries (“Wendy’s”). The Company manages and internally reports its business in the following segments: (1) Wendy’s U.S., (2) Wendy’s International and (3) Global Real Estate & Development. See Note 1817 for further information.

We report on a fiscal year consisting of 52 or 53 weeks ending on the Sunday closest to or on December 31. All ~~three- and nine-month~~three-month periods presented herein contain 13 ~~weeks and 39 weeks, respectively.~~weeks. All references to years, quarters and months relate to fiscal periods rather than calendar periods.

Our significant interim accounting policies include the recognition of advertising funds expense in proportion to advertising funds revenue.

~~Reclassifications~~

Beginning in 2022, the Company has reclassified payments for cloud computing arrangements to “Cloud computing arrangements expenditures,” which were previously recorded to “Changes in operating assets and liabilities and other, net.” The prior period amounts in the condensed consolidated statement of cash flows reflect the reclassification of these cash flows to conform to the current year presentation. There was no impact to “Net cash provided by operating activities.”

~~The following table illustrates the reclassifications made to the condensed consolidated statement of cash flows for the nine months ended October 3, 2021:~~

As Previously Reported Reclassifications As Currently Reported
Cloud computing arrangements expenditures $ — $ (5,619) $ (5,619)
Changes in operating assets and liabilities and other, net 26,636 5,619 32,255

~~Table of Contents~~

~~THE WENDY’S COMPANY AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(In Thousands Except Per Share Amounts)~~

(2) Revenue

Disaggregation of Revenue

The following tables disaggregate revenue by segment and source:


		Wendy’s U.S.		Wendy’s International		Global Real Estate & Development		Total			Wendy’s U.S.		Wendy’s International		Global Real Estate & Development		Total
Three Months Ended October 2, 2022
Three Months Ended April 2, 2023										Three Months Ended April 2, 2023
Sales at Company-operated restaurants	Sales at Company-operated restaurants	$	225,245	$	3,541	$	—	$	228,786	Sales at Company-operated restaurants	$	222,632	$	5,317	$	—	$	227,949
Franchise royalty revenue	Franchise royalty revenue	108,780		15,777		—		124,557		Franchise royalty revenue	106,339		15,811		—		122,150
Franchise fees	Franchise fees	15,294		1,257		625		17,176		Franchise fees	17,272		1,523		732		19,527
Franchise rental income	Franchise rental income	—		—		58,463		58,463		Franchise rental income	—		—		57,807		57,807
Advertising funds revenue	Advertising funds revenue	96,615		6,972		—		103,587		Advertising funds revenue	94,745		6,629		—		101,374
Total revenues	Total revenues	$	445,934	$	27,547	$	59,088	$	532,569	Total revenues	$	440,988	$	29,280	$	58,539	$	528,807

Nine Months Ended October 2, 2022

Three Months Ended April 3, 2022										Three Months Ended April 3, 2022
Sales at Company-operated restaurants	Sales at Company-operated restaurants	$	659,649	$	9,281	$	—	$	668,930	Sales at Company-operated restaurants	$	206,501	$	2,774	$	—	$	209,275
Franchise royalty revenue	Franchise royalty revenue	315,572		45,743		—		361,315		Franchise royalty revenue	97,920		13,825		—		111,745
Franchise fees	Franchise fees	46,685		3,695		2,450		52,830		Franchise fees	15,405		1,271		555		17,231
Franchise rental income	Franchise rental income	��		—		174,944		174,944		Franchise rental income	—		—		57,871		57,871
Advertising funds revenue	Advertising funds revenue	281,779		19,197		—		300,976		Advertising funds revenue	87,485		5,036		—		92,521
Total revenues	Total revenues	$	1,303,685	$	77,916	$	177,394	$	1,558,995	Total revenues	$	407,311	$	22,906	$	58,426	$	488,643

Three Months Ended October 3, 2021
Sales at Company-operated restaurants		$	169,961	$	1,117	$	—	$	171,078
Franchise royalty revenue		102,603		13,918		—		116,521
Franchise fees		19,759		1,144		1,331		22,234
Franchise rental income		—		—		62,446		62,446
Advertising funds revenue		91,481		6,495		—		97,976
Total revenues		$	383,804	$	22,674	$	63,777	$	470,255

Nine Months Ended October 3, 2021
Sales at Company-operated restaurants		$	552,297	$	1,363	$	—	$	553,660
Franchise royalty revenue		305,373		39,048		—		344,421
Franchise fees		46,020		4,041		3,764		53,825
Franchise rental income		—		—		182,190		182,190
Advertising funds revenue		271,911		17,788		—		289,699
Total revenues		$	1,175,601	$	62,240	$	185,954	$	1,423,795

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THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

Contract Balances

The following table provides information about receivables and contract liabilities (deferred franchise fees) from contracts with customers:


		October 2, 2022 (a)		January 2, 2022 (a)			April 2, 2023 (a)		January 1, 2023 (a)
Receivables, which are included in “Accounts and notes receivable, net” (b)	Receivables, which are included in “Accounts and notes receivable, net” (b)	$	68,936	$	49,168	Receivables, which are included in “Accounts and notes receivable, net” (b)	$	55,588	$	54,497
Receivables, which are included in “Advertising funds restricted assets”	Receivables, which are included in “Advertising funds restricted assets”	68,251		65,497		Receivables, which are included in “Advertising funds restricted assets”	65,735		70,422
Deferred franchise fees (c)	Deferred franchise fees (c)	100,136		97,186		Deferred franchise fees (c)	97,694		99,208

_______________

(a)Excludes funds collected from the sale of gift cards, which are primarily reimbursed to franchisees upon redemption at franchised restaurants and do not ultimately result in the recognition of revenue in the Company’s condensed consolidated statements of operations.

(b)Includes receivables related to “Sales” and “Franchise royalty revenue and fees.”

(c)Deferred franchise fees are included in “Accrued expenses and other current liabilities” and “Deferred franchise fees” and totaled ~~$8,467~~$9,533 and ~~$91,669,~~$88,161, respectively, as of ~~October~~April 2, ~~2022,~~2023, and ~~$9,084~~$8,977 and ~~$88,102,~~$90,231, respectively, as of January ~~2, 2022.~~1, 2023.

Significant changes in deferred franchise fees are as follows:


		Nine Months Ended					Three Months Ended
		October 2, 2022		October 3, 2021			April 2, 2023		April 3, 2022
Deferred franchise fees at beginning of period	Deferred franchise fees at beginning of period	$	97,186	$	97,785	Deferred franchise fees at beginning of period	$	99,208	$	97,186
Revenue recognized during the period	Revenue recognized during the period	(7,193)		(14,001)		Revenue recognized during the period	(2,814)		(2,283)
New deferrals due to cash received and other	New deferrals due to cash received and other	10,143		15,273		New deferrals due to cash received and other	1,300		3,526
Deferred franchise fees at end of period	Deferred franchise fees at end of period	$	100,136	$	99,057	Deferred franchise fees at end of period	$	97,694	$	98,429

Anticipated Future Recognition of Deferred Franchise Fees

The following table reflects the estimated franchise fees to be recognized in the future related to performance obligations that are unsatisfied at the end of the period:


Estimate for fiscal year:	Estimate for fiscal year:			Estimate for fiscal year:
2022 (a)		$	5,026
2023		6,518
2023 (a)				2023 (a)	$	8,037
2024	2024	6,342		2024	5,850
2025	2025	6,171		2025	5,684
2026	2026	6,065		2026	5,577
2027				2027	5,486
Thereafter	Thereafter	70,014		Thereafter	67,060
		$	100,136		$	97,694

_______________

(a)Represents franchise fees expected to be recognized for the remainder of ~~2022,~~2023, which includes development-related franchise fees expected to be recognized over a duration of one year or less.

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THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

(3) ~~Acquisitions~~

~~The Company completed no significant acquisitions of restaurants from franchisees during the nine months ended October 2, 2022 and October 3, 2021.~~

During the fourth quarter of 2021, the Company acquired 93 restaurants from a franchisee for total net cash consideration of $127,948. The fair values of the identifiable net assets related to the acquisition were provisional amounts as of January 2, 2022, pending final purchase accounting adjustments. The Company finalized the purchase price allocation during the three months ended April 3, 2022, which resulted in no adjustments to the fair values of the identifiable net assets related to the acquisition.

~~(4)~~ System Optimization Gains, Net

The Company’s system optimization initiative ~~includes~~included a shift from Company-operated restaurants to franchised restaurants over time, through acquisitions and dispositions, as well as facilitating franchisee-to-franchisee restaurant transfers (“Franchise Flips”). As of January 1, 2017, the Company ~~completed~~achieved its plan to reduce its ongoing Company-operated restaurant ownership to approximately 5% of the total system. While the Company has no plans to move its ownership away from approximately 5% of the total system, the Company expects to continue to optimize the Wendy’s system through Franchise Flips, as well as evaluating strategic acquisitions of franchised restaurants and strategic dispositions of Company-operated restaurants to existing and new franchisees, to further strengthen the franchisee base and drive new restaurant ~~development and accelerate reimages.~~development. During the ~~nine~~three months ended ~~October 2,~~April 3, 2022, ~~and October 3, 2021,~~ the Company facilitated ~~54 and 34~~five Franchise ~~Flips, respectively. Additionally, during~~Flips. During the ~~nine~~three months ended ~~October~~April 2, ~~2022,~~2023, the Company completed the sale of one Company-operated restaurant to a franchisee and, during the nine months ended October 3, 2021, the Company completed the sale of 47 Company-operated restaurants in New York (including Manhattan) to franchisees.facilitated no Franchise Flips.

Gains and losses recognized on dispositions are recorded to “System optimization gains, net” in our condensed consolidated statements of operations. Costs related to acquisitions and dispositions under our system optimization initiative are recorded to “Reorganization and realignment ~~costs,~~costs.” ~~which are further described in Note 5.~~ All other costs incurred related to facilitating Franchise Flips are recorded to “Franchise support and other costs.”

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

Three Months Ended Nine Months Ended
October 2,
2022 October 3,
2021 October 2,
2022 October 3,
2021
Number of restaurants sold to franchisees 1 — 1 47
Proceeds from sales of restaurants (a) $ 79 $ — $ 79 $ 50,518
Net assets sold (b) (141) — (141) (16,939)
Goodwill related to sales of restaurants — — — (4,847)
Net unfavorable leases (c) (360) — (360) (2,939)
Gain on sales-type leases — — — 7,156
Other (d) 6 — 6 (2,148)
(416) — (416) 30,801
Post-closing adjustments on sales of restaurants (e) — 5 3,522 520
(Loss) gain on sales of restaurants, net (416) 5 3,106 31,321
Gain on sales of other assets, net (f) 868 1,432 1,032 1,398
System optimization gains, net $ 452 $ 1,437 $ 4,138 $ 32,719


	Three Months Ended
	April 2, 2023		April 3, 2022
Post-closing adjustments on sales of restaurants (a)	$	—	$	3,447
Gain on sales of other assets, net (b)	5		87
System optimization gains, net	$	5	$	3,534

_______________

(a)Represents the recognition of deferred gains as a result of the resolution of certain contingencies related to the extension of lease terms for restaurants previously sold to franchisees.

(b)During the three months ended April 2, 2023 and April 3, 2022, the Company received net cash proceeds of $287 and $168, respectively, primarily from the sale of surplus and other properties.

The Company also received cash proceeds of $95 during the three months ended April 3, 2022 related to a note receivable issued in connection with the sale of the Manhattan Company-operated restaurants.

Assets Held for Sale

As of April 2, 2023 and January 1, 2023, the Company had assets held for sale of $1,379 and $1,661, respectively, primarily consisting of surplus properties. Assets held for sale are included in “Prepaid expenses and other current assets.”

(4) Reorganization and Realignment Costs

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


	Three Months Ended
	April 2, 2023		April 3, 2022
Organizational redesign	$	6,737	$	—

Other reorganization and realignment plans	71		464
Reorganization and realignment costs	$	6,808	$	464

Table of Contents

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

~~(a)~~In addition to the proceeds noted herein, the Company received cash proceeds of $126 and $284 during the three and nine months ended October 2, 2022, respectively, and $26 during the three and nine months ended October 3, 2021 related to a note receivable issued in connection with the sale of the Manhattan Company-operated restaurants.Organizational Redesign

~~(b)Net assets sold consisted primarily~~In February 2023, the Board of ~~equipment.~~

~~(c)During~~Directors approved a plan to redesign the ~~nine months ended October 3, 2021,~~Company’s organizational structure to better support the Company recorded favorable lease assets of $3,799 and unfavorable lease liabilities of $6,738 as a result of leasing and/or subleasing land, buildings and/or leasehold improvements to franchisees, in connection with the saleexecution of the ~~New York Company-operated restaurants (including Manhattan)~~Company’s long-term growth strategy by maximizing organizational efficiency and streamlining decision making (the “Organizational Redesign Plan”).

~~(d)The nine months ended October 3, 2021 include a deferred gain of $3,500 as a result of certain contingencies related to the extension of lease terms.~~

~~(e)Represents the recognition of deferred gains as~~ As a result of the ~~resolution~~Organizational Redesign Plan, the Company expects to hold its general and administrative expense in 2023 and 2024 relatively flat compared with 2022. The Company expects to incur total costs of ~~certain contingencies~~approximately $11,000 to $13,000 related to the ~~extension of lease terms for restaurants previously sold to franchisees.~~

~~(f)~~Organizational Redesign Plan. During the three ~~and nine~~ months ended ~~October~~April 2, 2022, the Company received net cash proceeds of $2,510 and $3,368, respectively, primarily from the sale of surplus and other properties. During the three and nine months ended October 3, 2021, the Company received net cash proceeds of $2,100 and $2,113, respectively, primarily from the sale of surplus and other properties.

~~Assets Held for Sale~~

As of October 2, 2022 and January 2, 2022, the Company had assets held for sale of $2,100 and $3,541, respectively, primarily consisting of surplus properties. Assets held for sale are included in “Prepaid expenses and other current assets.”

~~(5) Reorganization and Realignment Costs~~

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

Three Months Ended Nine Months Ended
October 2,
2022 October 3,
2021 October 2,
2022 October 3,
2021
System optimization initiative $ 7 $ 295 $ 548 $ 5,870
Other reorganization and realignment plans 1 50 80 1,511
Reorganization and realignment costs $ 8 $ 345 $ 628 $ 7,381

~~System Optimization Initiative~~

~~The Company recognizes costs related to acquisitions and dispositions under its system optimization initiative. During the nine months ended October 2, 2022,~~2023, the Company recognized costs totaling ~~$548,~~$6,737, which ~~were~~ primarily ~~comprised of professional fees~~included severance and ~~other~~related employee costs associated with the Company’s acquisition of 93 franchise-operated restaurants in Florida during the fourth quarter of 2021. During the nine months ended October 3, 2021, the Company recognized costs totaling $5,870, 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.share-based compensation. The Company expects to ~~recognize a gain~~incur additional costs aggregating approximately $4,000 to $6,000, comprised of (1) severance and related employee costs of approximately $2,500, (2) recruitment and relocation costs of approximately $900, (3) third-party and other costs of approximately $700 ~~primarily~~and (4) share-based compensation of approximately $1,200. The Company expects costs related to the ~~write-off of certain NPC-related lease liabilities, upon final termination~~Organizational Redesign Plan to continue into 2026, with approximately three-fourths of the ~~leases.~~total costs to be recognized during 2023.

~~Table of Contents~~

~~THE WENDY’S COMPANY AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(In Thousands Except Per Share Amounts)~~

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

Three Months Ended Nine Months Ended Total
Incurred Since Inception
October 2,
2022 October 3,
2021 October 2,
2022 October 3,
2021
Severance and related employee costs $ — $ — $ — $ 661 $ 18,898
Professional fees (28) 277 346 1,016 24,023
Other (a) 18 — 151 1,354 7,769
(10) 277 497 3,031 50,690
Accelerated depreciation and amortization (b) — — — — 25,398
NPC lease termination costs (c) 17 18 51 2,839 2,907
Share-based compensation (d) — — — — 5,013
Total system optimization initiative $ 7 $ 295 $ 548 $ 5,870 $ 84,008


	Three Months Ended
	April 2, 2023
Severance and related employee costs	$	5,539
Recruitment and relocation costs	78
Third-party and other costs	345
	5,962
Share-based compensation (a)	775
Total organizational redesign	$	6,737

_______________

(a)~~The nine months ended October 3, 2021 includes transaction fees~~Primarily represents the accelerated recognition 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 nine months ended October 3, 2021 includes the write-off of lease assets of $1,359 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 Organizational Redesign Plan.

~~The tables below present a rollforward~~As of ~~our~~April 2, 2023, the accruals for ~~our system optimization initiative, which were~~the Organizational Redesign Plan are included in “Accrued expenses and other current liabilities” asand “Other liabilities” and totaled $4,650 and $431, respectively. The table below presents a rollforward of ~~January 3, 2021.~~our accruals for the Organizational Redesign Plan.

Balance
January 2,
2022 Charges Payments Balance
October 2,
2022
Professional fees $ — $ 346 $ (346) $ —
Other — 151 (151) —
$ — $ 497 $ (497) $ —

Balance
January 3,
2021 Charges Payments Balance
October 3,
2021
Severance and related employee costs $ — $ 661 $ (661) $ —
Professional fees 1,230 1,016 (2,246) —
Other — 1,354 (1,354) —
$ 1,230 $ 3,031 $ (4,261) $ —


	Balance January 1, 2023		Charges		Payments		Balance April 2, 2023
Severance and related employee costs	$	—	$	5,539	$	(741)	$	4,798
Recruitment and relocation costs	—		78		(78)		—
Third-party and other costs	—		345		(62)		283
	$	—	$	5,962	$	(881)	$	5,081

Other Reorganization and Realignment Plans

Costs incurred under the Company’s other reorganization and realignment plans were not material during the ~~nine~~three months ended ~~October~~April 2, ~~2022~~2023 and ~~October~~April 3, ~~2021.~~2022. The Company does not expect to incur any material additional costs under these plans.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

~~(6)~~(5) Investments

The following is a summary of the carrying value of our investments:


		October 2, 2022		January 2, 2022			April 2, 2023		January 1, 2023
Equity method investments	Equity method investments	$	33,375	$	39,870	Equity method investments	$	33,537	$	33,921
Other investments in equity securities	Other investments in equity securities	12,107		10,000		Other investments in equity securities	8,545		12,107
		$	45,482	$	49,870		$	42,082	$	46,028

Equity Method Investments

Wendy’s has a 50% share in a partnership in a Canadian restaurant real estate joint venture (“TimWen”) with a subsidiary of Restaurant Brands International Inc., a quick-service restaurant company that owns the Tim Hortons® brand (Tim Hortons is a registered trademark of Tim Hortons USA Inc.). In addition, the Company has a 20% share in a joint venture in Brazil (the “Brazil JV”). The Company has significant influence over these investees. Such investments are accounted for using the equity method, under which our results of operations include our share of the income (loss) of the investees in “Other operating income, net.”

Presented below is activity related to our investment in TimWen and the Brazil JV included in our condensed consolidated financial statements:


		Nine Months Ended					Three Months Ended
		October 2, 2022		October 3, 2021			April 2, 2023		April 3, 2022
Balance at beginning of period	Balance at beginning of period	$	39,870	$	44,574	Balance at beginning of period	$	33,921	$	39,870

Equity in earnings for the period	Equity in earnings for the period	9,091		8,005		Equity in earnings for the period	2,783		2,508
Amortization of purchase price adjustments (a)	Amortization of purchase price adjustments (a)	(2,163)		(2,392)		Amortization of purchase price adjustments (a)	(684)		(731)
		6,928		5,613			2,099		1,777
Distributions received	Distributions received	(10,396)		(9,174)		Distributions received	(2,493)		(2,675)
Foreign currency translation adjustment included in “Other comprehensive (loss) income” and other		(3,027)		343
Foreign currency translation adjustment included in “Other comprehensive income” and other						Foreign currency translation adjustment included in “Other comprehensive income” and other	10		374
Balance at end of period	Balance at end of period	$	33,375	$	41,356	Balance at end of period	$	33,537	$	39,346

_______________

(a)Purchase price adjustments that impacted the carrying value of the Company’s investment in TimWen are being amortized over the average original aggregate life of 21 years.

Other Investments in Equity Securities

During 2021, the Company made an investment in equity securities of ~~$10,000. During~~$10,000 and, during the ~~nine~~three months ended ~~October 2,~~April 3, 2022, ~~the Company~~ recognized a gain of $2,107 as a result of an observable price change for a similar investment of the same issuer. During the three months ended April 2, 2023, the Company recorded an impairment charge of $3,562 for the difference between the estimated fair value and the carrying value of the investment. The Company will continue to monitor its investment in equity securities and it is possible that additional impairment charges will be recorded in future periods if there are further declines in fair value of the investment.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

~~(7)~~(6) Long-Term Debt

Long-term debt consisted of the following:


		October 2, 2022		January 2, 2022			April 2, 2023		January 1, 2023
Series 2022-1 Class A-2 Notes:	Series 2022-1 Class A-2 Notes:					Series 2022-1 Class A-2 Notes:
4.236% Series 2022-1 Class A-2-I Notes, anticipated repayment date 2029	4.236% Series 2022-1 Class A-2-I Notes, anticipated repayment date 2029	$	99,750	$	—	4.236% Series 2022-1 Class A-2-I Notes, anticipated repayment date 2029	$	99,250	$	99,500
4.535% Series 2022-1 Class A-2-II Notes, anticipated repayment date 2032	4.535% Series 2022-1 Class A-2-II Notes, anticipated repayment date 2032	399,000		—		4.535% Series 2022-1 Class A-2-II Notes, anticipated repayment date 2032	397,000		398,000
Series 2021-1 Class A-2 Notes:	Series 2021-1 Class A-2 Notes:					Series 2021-1 Class A-2 Notes:
2.370% Series 2021-1 Class A-2-I Notes, anticipated repayment date 2029	2.370% Series 2021-1 Class A-2-I Notes, anticipated repayment date 2029	444,375		447,750		2.370% Series 2021-1 Class A-2-I Notes, anticipated repayment date 2029	442,125		443,250
2.775% Series 2021-1 Class A-2-II Notes, anticipated repayment date 2031	2.775% Series 2021-1 Class A-2-II Notes, anticipated repayment date 2031	641,875		646,750		2.775% Series 2021-1 Class A-2-II Notes, anticipated repayment date 2031	638,625		640,250
Series 2019-1 Class A-2 Notes:	Series 2019-1 Class A-2 Notes:					Series 2019-1 Class A-2 Notes:
3.783% Series 2019-1 Class A-2-I Notes, anticipated repayment date 2026	3.783% Series 2019-1 Class A-2-I Notes, anticipated repayment date 2026	365,000		368,000		3.783% Series 2019-1 Class A-2-I Notes, anticipated repayment date 2026	363,000		364,000
4.080% Series 2019-1 Class A-2-II Notes, anticipated repayment date 2029	4.080% Series 2019-1 Class A-2-II Notes, anticipated repayment date 2029	410,625		414,000		4.080% Series 2019-1 Class A-2-II Notes, anticipated repayment date 2029	408,375		409,500
Series 2018-1 Class A-2 Notes:	Series 2018-1 Class A-2 Notes:					Series 2018-1 Class A-2 Notes:
3.884% Series 2018-1 Class A-2-II Notes, anticipated repayment date 2028	3.884% Series 2018-1 Class A-2-II Notes, anticipated repayment date 2028	452,438		456,000		3.884% Series 2018-1 Class A-2-II Notes, anticipated repayment date 2028	450,063		451,250
7% debentures, due in 2025(a)	7% debentures, due in 2025(a)	86,070		85,175		7% debentures, due in 2025(a)	56,264		86,369
Unamortized debt issuance costs	Unamortized debt issuance costs	(42,390)		(37,009)		Unamortized debt issuance costs	(38,959)		(40,673)
		2,856,743		2,380,666			2,815,743		2,851,446
Less amounts payable within one year	Less amounts payable within one year	(29,250)		(24,250)		Less amounts payable within one year	(29,250)		(29,250)
Total long-term debt	Total long-term debt	$	2,827,493	$	2,356,416	Total long-term debt	$	2,786,493	$	2,822,196

_______________

~~Senior Notes~~

(a)

Wendy’s ~~Funding, LLC,~~7% debentures are unsecured and were reduced to fair value in connection with the Wendy’s Merger. The fair value adjustment is being accreted and the related charge included in “Interest expense, net” until the debentures mature. During the three months ended April 2, 2023, Wendy’s repurchased $31,571 in principal of its 7% debentures at par value. As a ~~limited-purpose, bankruptcy-remote, wholly-owned indirect subsidiary~~result, the Company recognized a loss on early extinguishment of ~~The Wendy’s Company, is the master issuer (the “Master Issuer”)~~debt of outstanding senior secured notes under a securitized financing facility that was entered into in June 2015. On April 1, 2022, the Master Issuer completed a financing transaction with respect to this facility under which the Master Issuer issued fixed rate senior secured notes in the following 2022-1 series: Class A-2-I with an initial principal amount of $100,000 and Class A-2-II with an initial principal amount of $400,000 (collectively, the “Series 2022-1 Class A-2 Notes”). Interest and principal payments on the Series 2022-1 Class A-2 Notes are payable on a quarterly basis. The legal final maturity date of the Series 2022-1 Class A-2 Notes is March 2052. If the Master Issuer has not repaid or refinanced the Series 2022-1 Class A-2 Notes prior to their respective anticipated repayment dates, additional interest will accrue pursuant to the indenture governing the Series 2022-1 Class A-2 Notes. The Series 2022-1 Class A-2 Notes have scheduled principal payments of $2,500 in 2022 (of which $1,250 was paid$1,266 during the three months ended ~~October~~April 2, ~~2022), $5,000 annually from 2023 through 2028, $97,500 in 2029, $4,000 annually from 2030 through 2031 and $362,000 in 2032.~~2023.

The Series 2022-1 Class A-2 Notes are secured by a security interest in substantially all of the assets of the Master Issuer and certain other limited-purpose, bankruptcy-remote, wholly-owned indirect subsidiaries of the Company that act as guarantors, except for certain real estate assets and subject to certain limitations. The Series 2022-1 Class A-2 Notes are subject to substantially the same series of covenants and restrictions as the Company’s outstanding Series 2021-1 Class A-2 Notes, Series 2019-1 Class A-2 Notes and Series 2018-1 Class A-2 Notes.

Under the securitized financing facility, the Master Issuer has issued outstanding Series 2021-1 Variable Funding Senior Secured Notes, Class A-1 (the “Class A-1 Notes”), which allow for the drawing of up to $300,000 on a revolving basis using various credit instruments, including a letter of credit facility. No amounts were borrowed under the Class A-1 Notes during the nine months ended October 2, 2022.

During the nine months ended October 2, 2022, the Company incurred debt issuance costs of $10,232 in connection with the issuance of the Series 2022-1 Class A-2 Notes. The debt issuance costs will be amortized to “Interest expense, net” through the anticipated repayment dates of the Series 2022-1 Class A-2 Notes utilizing the effective interest rate method.

~~Table of Contents~~

~~THE WENDY’S COMPANY AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(In Thousands Except Per Share Amounts)~~

~~(8)~~(7) Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Valuation techniques under the accounting guidance related to fair value measurements are based on observable and unobservable inputs. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect our market assumptions. These inputs are classified into the following hierarchy:

•Level 1 Inputs - Quoted prices for identical assets or liabilities in active markets.

•Level 2 Inputs - Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

•Level 3 Inputs - Pricing inputs are unobservable for the assets or liabilities and include situations where there is little, if any, market activity for the assets or liabilities. The inputs into the determination of fair value require significant management judgment or estimation.

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THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

Financial Instruments

The following table presents the carrying amounts and estimated fair values of the Company’s financial instruments:


		October 2, 2022				January 2, 2022						April 2, 2023				January 1, 2023
		Carrying Amount		Fair Value		Carrying Amount		Fair Value		Fair Value Measurements		Carrying Amount		Fair Value		Carrying Amount		Fair Value		Fair Value Measurements
Financial assets	Financial assets										Financial assets
Cash equivalents	Cash equivalents	$	504,850	$	504,850	$	—	$	—	Level 1	Cash equivalents	$	491,577	$	491,577	$	560,682	$	560,682	Level 1
Other investments in equity securities (a)	Other investments in equity securities (a)	12,107		12,107		10,000		10,000		Level 2	Other investments in equity securities (a)	8,545		8,545		12,107		12,107		Level 2

Financial liabilities(b)	Financial liabilities(b)										Financial liabilities(b)
Series 2022-1 Class A-2-I Notes ~~(b)~~	Series 2022-1 Class A-2-I Notes ~~(b)~~	99,750		90,374		—		—		Level 2	Series 2022-1 Class A-2-I Notes ~~(b)~~	99,250		92,322		99,500		89,401		Level 2
Series 2022-1 Class A-2-II Notes ~~(b)~~	Series 2022-1 Class A-2-II Notes ~~(b)~~	399,000		354,152		—		—		Level 2	Series 2022-1 Class A-2-II Notes ~~(b)~~	397,000		362,183		398,000		349,444		Level 2
Series 2021-1 Class A-2-I Notes ~~(b)~~	Series 2021-1 Class A-2-I Notes ~~(b)~~	444,375		360,966		447,750		439,283		Level 2	Series 2021-1 Class A-2-I Notes ~~(b)~~	442,125		370,987		443,250		357,304		Level 2
Series 2021-1 Class A-2-II Notes ~~(b)~~	Series 2021-1 Class A-2-II Notes ~~(b)~~	641,875		501,946		646,750		642,352		Level 2	Series 2021-1 Class A-2-II Notes ~~(b)~~	638,625		517,350		640,250		499,011		Level 2
Series 2019-1 Class A-2-I Notes ~~(b)~~	Series 2019-1 Class A-2-I Notes ~~(b)~~	365,000		336,348		368,000		381,579		Level 2	Series 2019-1 Class A-2-I Notes ~~(b)~~	363,000		341,184		364,000		334,334		Level 2
Series 2019-1 Class A-2-II Notes ~~(b)~~	Series 2019-1 Class A-2-II Notes ~~(b)~~	410,625		365,744		414,000		439,792		Level 2	Series 2019-1 Class A-2-II Notes ~~(b)~~	408,375		373,908		409,500		361,875		Level 2
Series 2018-1 Class A-2-II Notes ~~(b)~~	Series 2018-1 Class A-2-II Notes ~~(b)~~	452,438		408,325		456,000		473,693		Level 2	Series 2018-1 Class A-2-II Notes ~~(b)~~	450,063		416,758		451,250		405,809		Level 2
7% debentures, due in 2025 ~~(b)~~	7% debentures, due in 2025 ~~(b)~~	86,070		90,000		85,175		101,142		Level 2	7% debentures, due in 2025 ~~(b)~~	56,264		58,283		86,369		92,367		Level 2

_______________

(a)The fair value of our other investments in equity securities is based on our review of information provided by the investment manager, which, isas of April 2, 2023, was based on a valuation performed by the investment manager and, as of January 1, 2023, was based on an observable price ~~changes~~change in an orderly ~~transactions~~transaction for a similar investment of the same issuer.

(b)The fair values were based on quoted market prices in markets that are not considered active markets.

The carrying amounts of cash, accounts payable and accrued expenses approximate fair value due to the short-term nature of those items. The carrying amounts of accounts and notes receivable, net (both current and non-current) approximate fair value due to the effect of the related allowance for doubtful accounts. Our cash equivalents are the only financial assets measured and recorded at fair value on a recurring basis.

~~Table of Contents~~

~~THE WENDY’S COMPANY AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(In Thousands Except Per Share Amounts)~~

Non-Recurring Fair Value Measurements

Assets and liabilities remeasured to fair value on a non-recurring basis resulted in impairment that we have recorded to “Impairment of long-lived assets” in our condensed consolidated statements of operations.

Total impairment losses may reflect the impact of remeasuring long-lived assets held and used (including land, buildings, leasehold improvements, favorable lease assets and right-of-use assets) to fair value as a result of (1) the deterioration in operating performance of certain Company-operated restaurants and (2) the Company’s decision to lease and/or sublease the land and/or buildings to franchisees in connection with the sale or anticipated sale of restaurants, including any subsequent lease modifications. The fair values of long-lived assets held and used presented in the tables below represent the remaining carrying value and were estimated based on either discounted cash flows of future anticipated lease and sublease income or discounted cash flows of future anticipated Company-operated restaurant performance.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

Total impairment losses may also include the impact of remeasuring long-lived assets held for sale. The fair values of long-lived assets held for sale presented in the tables below represent the remaining carrying value and were estimated based on current market values. See Note 98 for further information on impairment of our long-lived assets.


				Fair Value Measurements									Fair Value Measurements
		October 2, 2022		Level 1		Level 2		Level 3			April 2, 2023		Level 1		Level 2		Level 3
Held and used	Held and used	$	850	$	—	$	—	$	850	Held and used	$	603	$	—	$	—	$	603
Held for sale	Held for sale	1,133		—		—		1,133		Held for sale	475		—		—		475
Total	Total	$	1,983	$	—	$	—	$	1,983	Total	$	1,078	$	—	$	—	$	1,078


				Fair Value Measurements									Fair Value Measurements
		January 2, 2022		Level 1		Level 2		Level 3			January 1, 2023		Level 1		Level 2		Level 3
Held and used	Held and used	$	1,618	$	—	$	—	$	1,618	Held and used	$	4,590	$	—	$	—	$	4,590
Held for sale	Held for sale	371		—		—		371		Held for sale	1,314		—		—		1,314
Total	Total	$	1,989	$	—	$	—	$	1,989	Total	$	5,904	$	—	$	—	$	5,904

~~(9)~~(8) Impairment of Long-Lived Assets

The Company records impairment charges as a result of (1) the deterioration in operating performance of certain Company-operated restaurants, (2) the Company’s decision to lease and/or sublease properties to franchisees in connection with the sale or anticipated sale of Company-operated restaurants, including any subsequent lease modifications, and (3) closing Company-operated restaurants and classifying such surplus properties as held for sale.

The following is a summary of impairment losses recorded, which represent the excess of the carrying amount over the fair value of the affected assets and are included in “Impairment of long-lived assets:”


		Three Months Ended				Nine Months Ended					Three Months Ended
		October 2, 2022		October 3, 2021		October 2, 2022		October 3, 2021			April 2, 2023		April 3, 2022
Company-operated restaurants	Company-operated restaurants	$	159	$	566	$	2,234	$	1,500	Company-operated restaurants	$	350	$	367
Restaurants leased or subleased to franchisees	Restaurants leased or subleased to franchisees	—		—		194		189		Restaurants leased or subleased to franchisees	—		194
Surplus properties	Surplus properties	47		—		254		142		Surplus properties	26		55
		$	206	$	566	$	2,682	$	1,831		$	376	$	616

(9) Income Taxes

The Company’s effective tax rate for the three months ended April 2, 2023 and April 3, 2022 was 28.0% and 26.4%, respectively. The Company’s effective tax rate varied from the U.S. federal statutory rate of 21% for the three months ended April 2, 2023 primarily due to a one-time adjustment to our foreign deferred income taxes related to prior periods and state income taxes, including discrete changes to state deferred income taxes.

There were no significant changes to the unrecognized tax benefits or related interest and penalties for the three months ended April 2, 2023. During the next twelve months, we believe it is reasonably possible the Company will reduce unrecognized tax benefits by up to $582 due to lapses of statutes of limitations.

The current portion of refundable income taxes was $4,357 and $3,236 as of April 2, 2023 and January 1, 2023, respectively, and is included in “Accounts and notes receivable, net.” There were no long-term refundable income taxes as of April 2, 2023 and January 1, 2023.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

(10) ~~Income Taxes~~

The Company’s effective tax rate for the three months ended October 2, 2022 and October 3, 2021 was 26.9% and 24.3%, respectively. The Company’s effective tax rate varied from the U.S. federal statutory rate of 21% for the three months ended October 2, 2022 primarily due to state income taxes, including discrete changes to state deferred income taxes, and tax effects of our foreign operations.

The Company’s effective tax rate for the nine months ended October 2, 2022 and October 3, 2021 was 26.6% and 21.8%, respectively. The Company’s effective tax rate varied from the U.S. federal statutory rate of 21% for the nine months ended October 2, 2022 primarily due to state income taxes, including discrete changes to state deferred income taxes.

Unrecognized tax benefits for the Company decreased $1,225 and $1,175 during the three and nine months ended October 2, 2022, respectively. The decrease was primarily related to a state tax law change and the lapse of statutes of limitations during the third quarter of 2022. During the next twelve months, we believe it is reasonably possible the Company will reduce unrecognized tax benefits by up to $308 due to lapses of statutes of limitations.

The current portion of refundable income taxes was $7,136 and $11,901 as of October 2, 2022 and January 2, 2022, respectively, and is included in “Accounts and notes receivable, net.” There were no long-term refundable income taxes as of October 2, 2022 and January 2, 2022.

~~(11)~~ Net Income Per Share

The calculation of basic and diluted net income per share was as follows:


		Three Months Ended				Nine Months Ended					Three Months Ended
		October 2, 2022		October 3, 2021		October 2, 2022		October 3, 2021			April 2, 2023		April 3, 2022
Net income	Net income	$	50,542	$	41,171	$	136,095	$	148,261	Net income	$	39,821	$	37,402

Common stock:	Common stock:									Common stock:
Weighted average basic shares outstanding	Weighted average basic shares outstanding	212,805		222,373		214,032		222,527		Weighted average basic shares outstanding	212,547		215,619
Dilutive effect of stock options and restricted shares	Dilutive effect of stock options and restricted shares	1,796		2,685		1,971		3,201		Dilutive effect of stock options and restricted shares	2,482		2,548
Weighted average diluted shares outstanding	Weighted average diluted shares outstanding	214,601		225,058		216,003		225,728		Weighted average diluted shares outstanding	215,029		218,167

Net income per share:
Basic		$	.24	$	.19	$	.64	$	.67
Diluted		$	.24	$	.18	$	.63	$	.66
Basic and diluted net income per share										Basic and diluted net income per share	$	.19	$	.17

Basic net income per share for the three ~~and nine~~ months ended ~~October~~April 2, ~~2022~~2023 and ~~October~~April 3, ~~2021~~2022 was computed by dividing net income amounts by the weighted average number of shares of common stock outstanding. Diluted net income per share was computed by dividing net income by the weighted average number of basic shares outstanding plus the potential common share effect of dilutive stock options and restricted shares. We excluded potential common shares of ~~4,298~~4,532 and ~~4,377~~3,295 for the three ~~and nine~~ months ended ~~October~~April 2, ~~2022, respectively,~~2023 and ~~2,746 and 2,147 for the three and nine months ended October~~April 3, ~~2021,~~2022, respectively, from our diluted net income per share calculation as they would have had anti-dilutive effects.

~~Table of Contents~~

~~THE WENDY’S COMPANY AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(In Thousands Except Per Share Amounts)~~

~~(12)~~(11) Stockholders’ Equity

Dividends

During ~~each of~~ the first ~~second~~quarter of 2023 and ~~third quarters of~~ 2022, ~~the Company paid quarterly dividends per share of $.125. During the first, second and third quarters of 2021,~~ the Company paid dividends per share of ~~$.09, $.10~~$.25 and ~~$.12,~~$.125, respectively.

Repurchases of Common Stock

In ~~February 2022,~~January 2023, our Board of Directors authorized a repurchase program for up to ~~$100,000~~$500,000 of our common stock through February 28, ~~2023,~~2027, when and if market conditions warrant and to the extent legally permissible (the ~~“February 2022~~“January 2023 Authorization”). ~~On April 1, 2022,~~In connection with the ~~Company’s Board~~January 2023 Authorization, the remaining portion of ~~Directors approved an increase of $150,000 to~~ the previous February 2022 ~~Authorization, resulting in an aggregate~~ authorization offor $250,000 ~~that continues to expire on February 28, 2023.~~was canceled. During the ~~nine~~three months ended ~~October~~April 2, ~~2022,~~2023, the Company repurchased ~~2,759~~1,794 shares under the ~~February 2022~~January 2023 Authorization with an aggregate purchase price of ~~$51,911,~~$38,785, of which $2,083 was accrued as of April 2, 2023, and excluding commissions of ~~$39.~~$25. As of ~~October~~April 2, ~~2022,~~2023, the Company had ~~$198,089~~$461,215 of availability remaining under ~~its February 2022 authorization.~~the January 2023 Authorization. Subsequent to ~~October~~April 2, ~~2022~~2023 through ~~November 2, 2022, no~~May 3, 2023, the Company repurchased 1,074 shares ~~were repurchased~~ under the ~~February 2022 Authorization.~~January 2023 Authorization with an aggregate purchase price of $23,597, excluding commissions of $15.

In February 2020, our Board of Directors authorized a repurchase program for up to $100,000 of our common stock through February 28, 2021, when and if market conditions warranted and to the extent legally permissible (the “February 2020 Authorization”). In July 2020, the Company’s Board of Directors approved an extension of the February 2020 Authorization by one year, through February 28, 2022. In addition, ~~in May 2021, August 2021 and November 2021,~~ the Board of Directors approved increases ~~of $50,000, $70,000 and $80,000, respectively,~~totaling $200,000 to the February 2020 Authorization, resulting in an aggregate authorization of $300,000 that continued to expire on February 28, 2022. In November 2021, the Company entered into an accelerated share repurchase agreement (the “2021 ASR Agreement”) with a third-party financial institution to repurchase common stock as part of the February 2020 Authorization. Under the 2021 ASR Agreement, the Company paid the financial institution an initial purchase price of $125,000 in cash and received an initial delivery of 4,910 shares of common stock, representing an estimated 85% of the total shares expected to be delivered under the 2021 ASR Agreement. In February 2022, the Company completed the 2021 ASR Agreement and received an additional 715 shares of common stock. The total number of shares of common stock ultimately purchased by the Company under the 2021 ASR Agreement was based on the average of the daily volume-weighted average prices of the common stock during the term of the 2021 ASR Agreement, less an agreed upon discount. In total, 5,625 shares were delivered under the 2021 ASR Agreement

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

at an average purchase price of $22.22 per share. With the completion of the 2021 ASR Agreement in February 2022 as described above, the Company completed the February 2020 Authorization.

During the nine months ended October 3, 2021, the Company repurchased 5,876 shares under the February 2020 Authorization with an aggregate purchase price of $127,150, of which $2,299 was accrued at October 3, 2021, and excluding commissions of $82.

Accumulated Other Comprehensive Loss

The following table provides a rollforward of accumulated other comprehensive loss, which is entirely comprised of foreign currency translation:


		Nine Months Ended					Three Months Ended
		October 2, 2022		October 3, 2021			April 2, 2023		April 3, 2022
Balance at beginning of period	Balance at beginning of period	$	(48,200)	$	(49,641)	Balance at beginning of period	$	(64,176)	$	(48,200)
Foreign currency translation	Foreign currency translation	(20,520)		908		Foreign currency translation	158		1,118
Balance at end of period	Balance at end of period	$	(68,720)	$	(48,733)	Balance at end of period	$	(64,018)	$	(47,082)

~~Table of Contents~~

~~THE WENDY’S COMPANY AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(In Thousands Except Per Share Amounts)~~

~~(13)~~(12) 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~~April 2, ~~2022,~~2023, Wendy’s and its franchisees operated ~~7,080~~7,095 Wendy’s restaurants. Of the ~~412~~414 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 ~~142~~145 restaurants and held leases covering the land and building for ~~112~~111 restaurants. Wendy’s also owned ~~489~~486 and leased ~~1,205~~1,192 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					Three Months Ended
		October 2, 2022		October 3, 2021		October 2, 2022		October 3, 2021			April 2, 2023		April 3, 2022
Finance lease cost:	Finance lease cost:									Finance lease cost:
Amortization of finance lease assets	Amortization of finance lease assets	$	4,053	$	3,543	$	12,223	$	10,302	Amortization of finance lease assets	$	4,063	$	4,064
Interest on finance lease liabilities	Interest on finance lease liabilities	10,717		10,371		32,055		30,931		Interest on finance lease liabilities	10,750		10,645
		14,770		13,914		44,278		41,233			14,813		14,709
Operating lease cost	Operating lease cost	21,929		22,388		64,914		68,761		Operating lease cost	21,449		20,661
Variable lease cost (a)	Variable lease cost (a)	16,367		16,635		47,626		48,406		Variable lease cost (a)	16,081		14,803
Short-term lease cost	Short-term lease cost	1,116		1,125		3,954		3,721		Short-term lease cost	1,506		1,433
Total operating lease cost (b)	Total operating lease cost (b)	39,412		40,148		116,494		120,888		Total operating lease cost (b)	39,036		36,897
Total lease cost	Total lease cost	$	54,182	$	54,062	$	160,772	$	162,121	Total lease cost	$	53,849	$	51,606

_______________

(a)Includes expenses for executory costs of ~~$8,943~~$9,848 and ~~$10,016~~$9,608 for the three months ended ~~October~~April 2, ~~2022~~2023 and ~~October~~April 3, ~~2021, respectively, and $27,796 and $30,166 for the nine months ended October 2,~~ 2022, ~~and October 3, 2021,~~ respectively, for which the Company is reimbursed by sublessees.

(b)Includes ~~$31,559~~$30,598 and ~~$34,396~~$28,925 for the three months ended ~~October~~April 2, ~~2022~~2023 and ~~October~~April 3, ~~2021, respectively, and $92,555 and $101,011 for the nine months ended October 2,~~ 2022, ~~and October 3, 2021,~~ respectively, recorded to “Franchise rental expense” for leased properties that are subsequently leased to franchisees. Also includes ~~$7,357~~$7,865 and ~~$5,213~~$7,294 for the three months ended ~~October~~April 2, ~~2022~~2023 and ~~October~~April 3, ~~2021, respectively, and $22,130 and $18,005 for the nine months ended October 2,~~ 2022, ~~and October 3, 2021,~~ respectively, recorded to “Cost of sales” for leases for Company-operated restaurants.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

Company as Lessor

The components of lease income are as follows:


		Three Months Ended				Nine Months Ended					Three Months Ended
		October 2, 2022		October 3, 2021		October 2, 2022		October 3, 2021			April 2, 2023		April 3, 2022
Sales-type and direct-financing leases:	Sales-type and direct-financing leases:									Sales-type and direct-financing leases:
Selling profit	Selling profit	$	711	$	705	$	2,868	$	4,244	Selling profit	$	129	$	480
Interest income (a)	Interest income (a)	7,784		7,786		23,277		22,861		Interest income (a)	7,862		7,740

Operating lease income	Operating lease income	42,351		45,834		127,839		134,312		Operating lease income	42,156		43,314
Variable lease income	Variable lease income	16,112		16,612		47,105		47,878		Variable lease income	15,651		14,557
Franchise rental income (b)	Franchise rental income (b)	$	58,463	$	62,446	$	174,944	$	182,190	Franchise rental income (b)	$	57,807	$	57,871

_______________

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

(b)Includes sublease income of ~~$43,540~~$42,951 and ~~$46,102~~$43,165 recognized during the three months ended ~~October~~April 2, ~~2022~~2023 and ~~October~~April 3, ~~2021, respectively, and $130,394 and $134,597 recognized during the nine months ended October 2,~~ 2022, ~~and October 3, 2021,~~ respectively. Sublease income includes lessees’ variable payments to the Company for executory costs of ~~$8,947~~$9,778 and ~~$10,087~~$9,535 for the three months ended ~~October~~April 2, ~~2022~~2023 and ~~October~~April 3, ~~2021, respectively, and $27,732 and $30,156 for the nine months ended October 2,~~ 2022, ~~and October 3, 2021,~~ respectively.

~~(14)~~(13) Supplemental Cash Flow Information

The following table includes supplemental non-cash investing and financing activities:


		Nine Months Ended					Three Months Ended
		October 2, 2022		October 3, 2021			April 2, 2023		April 3, 2022
Supplemental non-cash investing and financing activities:	Supplemental non-cash investing and financing activities:					Supplemental non-cash investing and financing activities:
Capital expenditures included in accounts payable	Capital expenditures included in accounts payable	$	7,232	$	4,363	Capital expenditures included in accounts payable	$	9,119	$	6,522
Finance leases	Finance leases	24,212		43,277		Finance leases	333		7,207

The following table includes a reconciliation of cash, cash equivalents and restricted cash:

October 2,
2022 January 2,
2022
Reconciliation of cash, cash equivalents and restricted cash at end of period:
Cash and cash equivalents $ 731,801 $ 249,438
Restricted cash 34,363 27,535
Restricted cash, included in Advertising funds restricted assets 54,694 89,993
Total cash, cash equivalents and restricted cash $ 820,858 $ 366,966

~~Franchise Development Fund~~

In August 2021, the Company announced the creation of a $100,000 strategic build to suit development fund to drive additional new restaurant growth. The Company expects the development fund to drive approximately 80 to 90 new franchise restaurants from 2022 to 2025. Capital expenditures related to the fund are included in “Franchise development fund” in the condensed consolidated statements of cash flows.


	April 2, 2023		January 1, 2023
Reconciliation of cash, cash equivalents and restricted cash at end of period:
Cash and cash equivalents	$	676,469	$	745,889
Restricted cash	36,348		35,203
Restricted cash, included in Advertising funds restricted assets	27,749		50,709
Total cash, cash equivalents and restricted cash	$	740,566	$	831,801

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(In Thousands Except Per Share Amounts)

~~(15)~~(14) Transactions with Related Parties

Except as described below, the Company did not have any significant changes in or transactions with its related parties during the current fiscal period since those reported in the Form 10-K.

TimWen Lease and Management Fee Payments

A wholly-owned subsidiary of Wendy’s leases restaurant facilities from TimWen, which are then subleased to franchisees for the operation of Wendy’s/Tim Hortons combo units in Canada. ~~During the nine months ended October 2, 2022 and October 3, 2021,~~ Wendy’s paid TimWen ~~$15,148~~$4,673 and ~~$13,994, respectively,~~$4,350 under these lease ~~agreements.~~agreements during the three months ended April 2, 2023 and April 3, 2022, respectively, which has been recorded to “Franchise rental expense.” In addition, TimWen paid Wendy’s a management fee under the TimWen joint venture agreement of ~~$166~~$60 and ~~$165~~$54 during the ~~nine~~three months ended ~~October~~April 2, ~~2022~~2023 and ~~October~~April 3, ~~2021,~~2022, respectively, which has been included as a reduction to “General and administrative.”

Transactions with Yellow Cab

Certain family members and affiliates of Mr. Nelson Peltz, our Chairman, and Mr. Peter May, our Senior Vice Chairman, as well as Mr. Matthew Peltz, our Vice Chairman, hold indirect, minority ownership interests in Yellow Cab Holdings, LLC (“Yellow Cab”) and operating companies managed by Yellow Cab, a Wendy’s franchisee, that as of ~~October~~April 2, ~~2022~~2023 owned and operated 8483 Wendy’s restaurants. During the ~~nine~~three months ended ~~October~~April 2, ~~2022~~2023 and ~~October~~April 3, ~~2021,~~2022, the Company recognized ~~$9,942~~$3,610 and ~~$7,016,~~$3,067, respectively, in royalty, advertising fund, lease and other income from Yellow Cab and related entities. As of ~~October~~April 2, ~~2022~~2023 and January ~~2, 2022, $987~~1, 2023, $1,271 and ~~$974,~~$1,125, respectively, was due from Yellow Cab for such income, which is included in “Accounts and notes receivable, net” and “Advertising funds restricted assets.”

Transactions with AMC

~~(16)~~

In February 2023, Ms. Kristin Dolan, a director of the Company, was appointed as the Chief Executive Officer of AMC Networks Inc. (“AMC”). During the three months ended April 2, 2023, the Company purchased $419 of advertising time from a subsidiary of AMC. As of April 2, 2023, approximately $450 was due to AMC for advertising time, which is included in “Advertising funds restricted liabilities.”

(15) Guarantees and Other Commitments and Contingencies

Except as described below, the Company did not have any significant changes in guarantees and other commitments and contingencies during the current fiscal period since those reported in the Form 10-K. Refer to the Form 10-K for further information regarding the Company’s additional commitments and obligations.

Franchisee Image Activation Incentive Programs

To promote new restaurant development, Wendy’s has provided franchisees with certain incentive programs for qualifying new restaurants. In February 2023, Wendy’s announced a new restaurant development incentive program in the U.S. and Canada that provides for waivers of royalty, national advertising and technical assistance fees for up to the first three years of operation for qualifying new restaurants (referred to as the “Pacesetter” program). Wendy’s previously offered and will continue to offer a restaurant development incentive program that provides for reductions in royalty and national advertising fees for up to the first two years of operation for qualifying new restaurants (referred to as the “Groundbreaker” program). Wendy’s U.S. and Canadian franchisees may elect either the Pacesetter program or the Groundbreaker program when committing to new multi-unit development agreements or adding incremental commitments to existing development agreements. Wendy’s also provides franchisees with the option of an early 20-year or 25-year renewal of their franchise agreement upon completion of reimaging utilizing certain approved Image Activation reimage designs.

Lease Guarantees

Wendy’s has guaranteed the performance of certain leases and other obligations, primarily from former Company-operated restaurant locations now operated by franchisees, amounting to ~~$94,075~~$99,392 as of ~~October~~April 2, ~~2022.~~2023. These leases extend through 2045. We have had no judgments against us as guarantor of these leases as of ~~October~~April 2, ~~2022.~~2023. In the event of default by a franchise owner where Wendy’s is called upon to perform under its guarantee, Wendy’s has the ability to pursue repayment from the ~~franchise owner. The liability recorded for our probable exposure associated with these lease guarantees was not material as of October 2, 2022.~~

~~Letters of Credit~~

As of October 2, 2022, the Company had outstanding letters of credit with various parties totaling $28,619. Substantially all of the outstanding letters of credit include amounts outstanding against the 2021-1 Class A-1 Notes. See Note 7 for further information. We do not expect any material loss to result from these letters of credit.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

~~(17)~~franchise owner. The liability recorded for our probable exposure associated with these lease guarantees was not material as of April 2, 2023.

Letters of Credit

As of April 2, 2023, the Company had outstanding letters of credit with various parties totaling $28,861. Substantially all of the outstanding letters of credit include amounts outstanding against the 2021-1 Variable Funding Senior Secured Notes, Class A-1. We do not expect any material loss to result from these letters of credit.

(16) Legal and Environmental Matters

The Company is involved in litigation and claims incidental to our business. We provide accruals for such litigation and claims when ~~payment~~we determine it is probable that a liability has been incurred and the loss is reasonably estimable. ~~We believe we have~~The Company believes it has adequate accruals for all of our legal and environmental matters. We cannot estimate the aggregate possible range of loss for our existing litigation and claims ~~for~~due to various reasons, including, but not limited to, many proceedings being in preliminary stages, with various motions either yet to be submitted or pending, discovery yet to occur ~~and/or~~and significant factual matters unresolved. In addition, most cases seek an indeterminate amount of damages and many involve multiple parties. Predicting the outcomes of settlement discussions or judicial or arbitral decisions is thus inherently difficult and future developments could cause these actions or claims, individually or in aggregate, to have a material adverse effect on the Company’s financial condition, results of operations, or cash flows of a particular reporting period.

~~We previously described certain legal proceedings in the Form 10-K. Except as set forth below, there were no material developments in those legal proceedings as of October 2, 2022.~~

Certain of the Company’s present and former directors have been named in two putative stockholder derivative complaints arising out of the cybersecurity incidents that affected certain of our franchisees in 2015 and 2016. The first case, brought by James Graham in the U.S. District Court for the Southern District of Ohio (the “Graham Case”), asserts claims of breach of fiduciary duty, waste of corporate assets, unjust enrichment and gross mismanagement, and additionally names one non-director executive officer of the Company. The second case, brought by Thomas Caracci in the U.S. District Court for the Southern District of Ohio (the “Caracci Case”), asserts claims of breach of fiduciary duty and violations of Section 14(a) and Rule 14a-9 of the Securities Exchange Act of 1934. Collectively, the plaintiffs seek a judgment on behalf of the Company for all damages incurred or that will be incurred as a result of the alleged wrongful acts or omissions, a judgment ordering disgorgement of all profits, benefits, and other compensation obtained by the named individual defendants, a judgment directing the Company to reform its governance and internal procedures, attorneys’ fees and other costs. The Graham Case and the Caracci Case were consolidated and on December 31, 2018, the court issued an order naming Graham and his counsel as lead in the case. On January 31, 2019, Graham filed a consolidated verified stockholder derivative complaint with the court. On January 24, 2020, the court issued an order granting preliminary approval of the settlement, which consists of certain corporate governance undertakings and the payment of plaintiffs’ attorneys’ fees and expenses up to $950 (covered by applicable insurance). On September 15, 2021, the court issued an order granting final approval of the settlement, with the final judgment entered on September 24, 2021. On October 20, 2021, Thomas Caracci filed a Notice of Appeal. On August 11, 2022, the U.S. Court of Appeals for the Sixth Circuit issued an opinion affirming the district court’s order.

~~(18)~~(17) Segment Information

Revenues by segment ~~were~~are as follows:


		Three Months Ended				Nine Months Ended					Three Months Ended
		October 2, 2022		October 3, 2021		October 2, 2022		October 3, 2021			April 2, 2023		April 3, 2022
Wendy’s U.S.	Wendy’s U.S.	$	445,934	$	383,804	$	1,303,685	$	1,175,601	Wendy’s U.S.	$	440,988	$	407,311
Wendy’s International	Wendy’s International	27,547		22,674		77,916		62,240		Wendy’s International	29,280		22,906
Global Real Estate & Development	Global Real Estate & Development	59,088		63,777		177,394		185,954		Global Real Estate & Development	58,539		58,426
Total revenues	Total revenues	$	532,569	$	470,255	$	1,558,995	$	1,423,795	Total revenues	$	528,807	$	488,643

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

The following table reconciles profit by segment to the Company’s consolidated income before income taxes:


		Three Months Ended				Nine Months Ended					Three Months Ended
		October 2, 2022		October 3, 2021		October 2, 2022		October 3, 2021			April 2, 2023		April 3, 2022
Wendy’s U.S. (a)	Wendy’s U.S. (a)	$	123,696	$	108,878	$	355,519	$	347,615	Wendy’s U.S. (a)	$	125,230	$	104,824
Wendy’s International (b)	Wendy’s International (b)	8,560		6,949		23,363		21,161		Wendy’s International (b)	7,446		5,453
Global Real Estate & Development	Global Real Estate & Development	25,905		27,027		80,795		79,849		Global Real Estate & Development	25,068		27,607
Total segment profit	Total segment profit	$	158,161	$	142,854	$	459,677	$	448,625	Total segment profit	157,744		137,884
Unallocated franchise support and other costs	Unallocated franchise support and other costs	(756)		(70)		(750)		(70)		Unallocated franchise support and other costs	—		6
Advertising funds deficit		(1,441)		(1,574)		(4,059)		(4,440)
Advertising funds surplus (deficit)										Advertising funds surplus (deficit)	1,106		(1,243)
Unallocated general and administrative (c)	Unallocated general and administrative (c)	(31,517)		(30,744)		(93,511)		(84,715)		Unallocated general and administrative (c)	(32,161)		(31,005)
Depreciation and amortization (exclusive of amortization of cloud computing arrangements shown separately below)	Depreciation and amortization (exclusive of amortization of cloud computing arrangements shown separately below)	(34,252)		(30,940)		(100,911)		(93,243)		Depreciation and amortization (exclusive of amortization of cloud computing arrangements shown separately below)	(33,472)		(33,231)
Amortization of cloud computing arrangements	Amortization of cloud computing arrangements	(888)		—		(888)		—		Amortization of cloud computing arrangements	(1,582)		—
System optimization gains, net	System optimization gains, net	452		1,437		4,138		32,719		System optimization gains, net	5		3,534
Reorganization and realignment costs	Reorganization and realignment costs	(8)		(345)		(628)		(7,381)		Reorganization and realignment costs	(6,808)		(464)
Impairment of long-lived assets	Impairment of long-lived assets	(206)		(566)		(2,682)		(1,831)		Impairment of long-lived assets	(376)		(616)
Unallocated other operating income, net	Unallocated other operating income, net	8,590		143		8,911		399		Unallocated other operating income, net	22		16
Interest expense, net	Interest expense, net	(31,916)		(26,000)		(90,406)		(82,990)		Interest expense, net	(31,705)		(26,365)
Loss on early extinguishment of debt	Loss on early extinguishment of debt	—		—		—		(17,917)		Loss on early extinguishment of debt	(1,266)		—
Investment income, net		—		—		2,107		6
Investment (loss) income, net										Investment (loss) income, net	(3,562)		2,111
Other income, net	Other income, net	2,910		171		4,355		455		Other income, net	7,336		207
Income before income taxes	Income before income taxes	$	69,129	$	54,366	$	185,353	$	189,617	Income before income taxes	$	55,281	$	50,834

_______________

(a)Wendy’s U.S. includes advertising ~~fund~~funds expense of ~~$2,779 and $8,101~~$2,556 for the three ~~and nine~~ months ended ~~October 2,~~April 3, 2022 ~~respectively, and $8,979 and $16,503 for the three and nine months ended October 3, 2021, respectively,~~ related to the Company’s funding of incremental advertising.

(b)Wendy’s International includes advertising ~~fund~~funds expense of ~~$1,002~~$548 and ~~$2,924~~$838 for the three ~~and nine~~ months ended ~~October~~April 2, 2023 and April 3, 2022, respectively, related to the Company’s funding of incremental advertising. In addition, Wendy’s International includes other international-related advertising ~~surplus (deficit)~~deficit of ~~$538~~$845 and ~~$(984)~~$642 for the three ~~and nine~~ months ended ~~October~~April 2, 2023 and April 3, 2022, respectively.

(c)Includes corporate overhead costs, such as employee compensation and related benefits.

~~(19)~~(18) New Accounting Standards

~~Financial Instruments~~Business Combinations

In ~~August 2020,~~October 2021, the Financial Accounting Standards Board (“FASB”) issued an amendment ~~that simplifies~~to improve the accounting for ~~certain financial instruments~~revenue contracts with ~~characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity.~~customers acquired in a business combination. The amendment ~~simplifies accounting for convertible instruments~~requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by ~~removing major separation models required under~~the acquirer on the acquisition date in accordance with current ~~accounting guidance. In addition,~~revenue recognition guidance as if the ~~amendment removes certain settlement conditions that are required for equity contracts to qualify for~~acquirer had originated the ~~derivative scope exception, which will permit more equity contracts to qualify for the exception, and also simplifies the diluted earnings per share calculation in certain areas.~~contracts. The Company adopted this amendment during the first quarter of ~~2022.~~2023. The adoption of this guidance did not have a material impact on our condensed consolidated financial statements.

Table of Contents

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

Common-Control Lease Arrangements

In March 2023, the FASB issued an update to amend certain lease accounting guidance that applies to arrangements between related parties under common control. The amendment requires a lessee in a common-control lease arrangement to amortize leasehold improvements that it owns over the useful life of the improvements to the common-control group, regardless of the lease term, if the lessee continues to control the use of the underlying asset through a lease. The standard is effective beginning with our 2024 fiscal year. The Company does not expect the guidance to have a material impact on our condensed consolidated financial statements.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Introduction

This “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of The Wendy’s Company (“The Wendy’s Company” and, together with its subsidiaries, the “Company,” “we,” “us,” or “our”) should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and the related notes included elsewhere within this report and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended January ~~2, 2022~~1, 2023 (the “Form 10-K”). There have been no material changes as of ~~October~~April 2, ~~2022~~2023 to the application of our critical accounting policies as described in Item 7 of the Form 10-K. Certain statements we make under this Item 2 constitute “forward-looking statements” under the Private Securities Litigation Reform Act of 1995. See “Special Note Regarding Forward-Looking Statements and Projections” in “Part II. Other Information” of this report. You should consider our forward-looking statements in light of the risks discussed in “Item 1A. Risk Factors” in “Part II. Other Information” of this report and our unaudited condensed consolidated financial statements, related notes and other financial information appearing elsewhere in this report, the Form 10-K and our other filings with the Securities and Exchange Commission (the “SEC”).

The Wendy’s Company is the parent company of its 100% owned subsidiary holding company, Wendy’s Restaurants, LLC (“Wendy’s Restaurants”). Wendy’s Restaurants is the parent company of Wendy’s International, LLC (formerly known as Wendy’s International, Inc). Wendy’s International, LLC is the indirect parent company of (1) Quality Is Our Recipe, LLC (“Quality”), which is the owner and franchisor of the Wendy’s restaurant system in the United States (the “U.S.”) and all international jurisdictions except for Canada, and (2) Wendy’s Restaurants of Canada Inc., which is the owner and franchisor of the Wendy’s restaurant system in Canada. As used herein, unless the context requires otherwise, the term “Company” refers to The Wendy’s Company and its direct and indirect subsidiaries, and “Wendy’s” refers to Quality when the context relates to the ownership or franchising of the Wendy’s restaurant system and to Wendy’s International, LLC when the context refers to the Wendy’s brand.

Wendy’s is primarily engaged in the business of operating, developing and franchising a system of distinctive quick-service restaurants serving high quality food. Wendy’s opened its first restaurant in Columbus, Ohio in 1969. Today, Wendy’s is the second largest quick-service restaurant company in the hamburger sandwich segment in the U.S. based on traffic share, and the third largest globally with ~~7,080~~7,095 restaurants in the U.S. and 31 foreign countries and U.S. territories as of ~~October~~April 2, ~~2022.~~2023.

Each Wendy’s restaurant offers an extensive menu specializing in hamburger sandwiches and featuring filet of chicken breast sandwiches, which are prepared to order with the customer’s choice of toppings and condiments. Wendy’s menu also includes chicken nuggets, chili, french fries, baked potatoes, freshly prepared salads, soft drinks, Frosty® desserts and kids’ meals. In addition, Wendy’s restaurants sell a variety of promotional products on a limited time basis. Wendy’s also offers breakfast across the U.S. system and in Canada. Wendy’s breakfast menu features a variety of breakfast sandwiches such as the Breakfast Baconator®, and sides such as seasoned ~~potatoes, and a beverage platform that includes our vanilla and chocolate Frosty-ccino~~TM ~~iced coffee.~~potatoes.

The Company is comprised of the following segments: (1) Wendy’s U.S., (2) Wendy’s International and (3) Global Real Estate & Development. Wendy’s U.S. includes the operation and franchising of Wendy’s restaurants in the U.S. and derives its revenues from sales at Company-operated restaurants and royalties, fees and advertising fund collections from franchised restaurants. Wendy’s International includes the operation and franchising of Wendy’s restaurants in countries and territories other than the U.S. and derives its revenues from sales at Company-operated restaurants and royalties, fees and advertising fund collections from franchised restaurants. Global Real Estate & Development includes real estate activity for owned sites and sites leased from third parties, which are leased and/or subleased to franchisees, and also includes our share of the income of our TimWen real estate joint venture. In addition, Global Real Estate & Development earns fees from facilitating franchisee-to-franchisee restaurant transfers (“Franchise Flips”) and providing other development-related services to franchisees. In this “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” the Company reports on the segment profit for each of the three segments described above. The Company measures segment profit using segment adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”). Segment adjusted EBITDA excludes certain unallocated general and administrative expenses and other items that vary from period to period without correlation to the Company’s core operating performance. See “Results of Operations” below and Note 1817 to the Condensed Consolidated Financial Statements contained in Item 1 herein for segment financial information.

The Company’s fiscal reporting periods consist of 52 or 53 weeks ending on the Sunday closest to December 31. All ~~three- and nine-month~~three-month periods presented herein contain 13 ~~weeks and 39 weeks, respectively.~~weeks. All references to years, quarters and months relate to fiscal periods rather than calendar periods.

Executive Overview

Our Business

As of ~~October~~April 2, ~~2022,~~2023, the Wendy’s restaurant system was comprised of ~~7,080~~7,095 restaurants, with ~~5,997~~5,989 Wendy’s restaurants in operation in the U.S. Of the U.S. restaurants, 403 were operated by the Company and ~~5,594~~5,586 were operated by a total of ~~218~~217 franchisees. In addition, at ~~October~~April 2, ~~2022,~~2023, there were ~~1,083~~1,106 Wendy’s restaurants in operation in 31 foreign countries and U.S. territories. Of the international restaurants, ~~1,074~~1,095 were operated by a total of 106 franchisees and ~~nine~~11 were operated by the Company in the United Kingdom (the “U.K.”).

The revenues from our restaurant business are derived from two principal sources: (1) sales at Company-operated restaurants and (2) franchise-related revenues, including royalties, national advertising funds contributions, rents and franchise fees received from Wendy’s franchised restaurants. Company-operated restaurants comprised approximately 5% of the total Wendy’s system as of ~~October~~April 2, ~~2022.~~2023.

Wendy’s operating results are impacted by a number of external factors, including commodity costs, labor costs, intense price competition, unemployment and consumer spending levels, general economic and market trends and weather. ~~The COVID-19 pandemic has had and may continue to have the effect of heightening the impact of many of these factors.~~

Wendy’s long-term growth opportunities include ~~investing in~~delivering accelerated global growth through (1) ~~building our breakfast daypart,~~driving strong same-restaurant sales momentum across all dayparts, (2) accelerating our implementation of consumer-facing digital platforms and technologies and (3) expanding the Company’s footprint through global restaurant expansion.

Key Business Measures

We track our results of operations and manage our business using the following key business measures, which includes a non-GAAP financial measure:

•Same-Restaurant Sales - We report same-restaurant sales commencing after new restaurants have been open for 15 continuous months and as soon as reimaged restaurants reopen. Restaurants temporarily closed for more than one week are excluded from same-restaurant sales. The table summarizing same-restaurant sales below in “Results of Operations” provides the same-restaurant sales percent changes.

•Restaurant Margin - We define restaurant margin as sales from Company-operated restaurants less cost of sales divided by sales from Company-operated restaurants. Cost of sales includes food and paper, restaurant labor and occupancy, advertising and other operating costs. Cost of sales excludes certain costs that support restaurant operations that are not allocated to individual restaurants, which are included in “General and administrative.” Cost of sales also excludes depreciation and amortization expense and impairment of long-lived assets. Therefore, as restaurant margin as presented excludes certain costs as described above, its usefulness may be limited and may not be comparable to other similarly titled measures of other companies in our industry.

Restaurant margin is influenced by factors such as price increases, the effectiveness of our advertising and marketing initiatives, featured products, product mix, fluctuations in food and labor costs, restaurant openings, remodels and closures and the level of our fixed and semi-variable costs.

•Systemwide Sales - Systemwide sales is a non-GAAP financial measure, which includes sales by both Company-operated restaurants and franchised restaurants. Franchised restaurants’ sales are reported by our franchisees and represent their revenues from sales at franchised Wendy’s restaurants. The Company’s consolidated financial statements do not include sales by franchised restaurants to their customers. The Company’s royalty and advertising funds revenues are computed as percentages of sales made by Wendy’s franchisees. As a result, sales by Wendy’s franchisees have a direct effect on the Company’s royalty and advertising funds revenues and profitability.

The Company calculates same-restaurant sales and systemwide sales growth on a constant currency basis. Constant currency results exclude the impact of foreign currency translation and are derived by translating current year results at prior

year average exchange rates. The Company believes excluding the impact of foreign currency translation provides better year over year comparability.

Same-restaurant sales and systemwide sales exclude sales from Argentina ~~and Venezuela~~ due to ~~the~~that country’s highly inflationary ~~economies of those countries.~~economy. The Company considers economies that have had cumulative inflation in excess of 100% over a three-year period as highly inflationary.

The Company believes its presentation of same-restaurant sales, restaurant margin and systemwide sales provide a meaningful perspective of the underlying operating performance of the Company’s current business and enables investors to better understand and evaluate the Company’s historical and prospective operating performance. The Company believes that these metrics are important supplemental measures of operating performance because they highlight trends in the Company’s business that may not otherwise be apparent when relying solely on GAAP financial measures. The Company believes investors, analysts and other interested parties use these metrics in evaluating issuers and that the presentation of these measures facilitates a comparative assessment of the Company’s operating performance. With respect to same-restaurant sales and systemwide sales, the Company also believes that the data is useful in assessing consumer demand for the Company’s products and the overall success of the Wendy’s brand.

The non-GAAP financial measure discussed above does not replace the presentation of the Company’s financial results in accordance with GAAP. Because all companies do not calculate non-GAAP financial measures in the same way, this measure as used by other companies may not be consistent with the way the Company calculates such measure.

~~Third~~First Quarter Financial Highlights

•Revenue increased ~~13.3%~~8.2% to ~~$532.6~~$528.8 million in the ~~third~~first quarter of ~~2022~~2023 compared ~~to $470.3~~with $488.6 million in the ~~third~~first quarter of ~~2021;~~2022;

•Global same-restaurant sales increased ~~6.9%~~8.0%, U.S. same-restaurant sales increased ~~6.4%~~7.2% and international same-restaurant sales increased ~~10.8%~~13.9% compared towith the ~~third~~first quarter of ~~2021;~~2022. On a two-year basis, global same-restaurant sales increased 10.4%;

•Global Company-operated restaurant margin was ~~14.3%~~13.8% in the ~~third~~first quarter of ~~2022, a decrease~~2023, an increase of 10220 basis points compared towith the ~~third~~first quarter of ~~2021;~~2022; and

•Net income increased ~~22.8%~~6.4% to ~~$50.5~~$39.8 million in the ~~third~~first quarter of ~~2022~~2023 compared ~~to $41.2~~with $37.4 million in the ~~third~~first quarter of ~~2021.~~2022.

~~Year-to-Date Financial Highlights~~

•~~Revenue increased 9.5% to $1.6 billion in the first nine months of 2022 compared to $1.4 billion in the first nine months of 2021;~~

•Global ~~same-restaurant sales increased 4.4%, U.S. same-restaurant sales increased 3.3% and international same-restaurant sales increased 13.3% compared to the first nine months of 2021;~~

•~~Company-operated restaurant margin was 13.5% in the first nine months of 2022, a decrease of 390 basis points from the first nine months of 2021; and~~

•~~Net income decreased 8.2% to $136.1 million in the first nine months of 2022 compared to $148.3 million in the first nine months of 2021.~~

~~Breakfast~~Same-Restaurant Sales

Wendy’s long-term growth opportunities include ~~investing~~driving strong same-restaurant sales momentum across all dayparts through our ownable core products, exciting menu innovation, compelling value offerings and improvements in ~~accelerated global growth, which includes building upon~~speed and consistency in our ~~breakfast daypart. Since the launch of breakfast across the U.S. system in March 2020, systemwide~~restaurants. Global same-restaurant sales have benefited from this new daypart, with average weekly U.S. breakfast sales representing approximately $2,600 per restaurant during the nine months ended October 2, 2022. The Company launched breakfast in Canada in May 2022, which has increased the percentage of global systemwide restaurants serving breakfast to approximately 95%. The Company expects to fund a total of $16.0 million of incremental advertising during 2022 to support the breakfast daypart, which the Company expects will continue to drive trial and acceleration of the Company’s breakfast offering8.0% in the ~~U.S.~~first quarter of 2023 and ~~Canada.~~

increased 10.4% on a two-year basis.

Digital

Wendy’s long-term growth opportunities include accelerated implementation of consumer-facing digital platforms and technologies. The Company has invested significant resources to focus on consumer-facing technology, including activating mobile ordering via Wendy’s mobile app, launching the Wendy’s Rewards loyalty program in the U.S. and Canada and establishing delivery agreements with third-party vendors. ~~The Company’s digital business represented approximately 10.1% of global systemwide sales during the nine months ended October 2, 2022.~~ The Company is also partnering with key technology providers to help execute our digital, restaurant technology and enterprise technology initiatives and support our technology innovation and growth. The Company’s digital business represented approximately 12.4% and 10.6% of global systemwide sales during the three months ended April 2, 2023 and April 3, 2022, respectively.

New Restaurant Development

Wendy’s long-term growth opportunities include expanding the Company’s footprint through global restaurant expansion. To promote new restaurant development, the Company has provided franchisees with certain incentive programs for qualifying new ~~restaurants, including~~restaurants. In February 2023, the Company announced a new restaurant development incentive program in the U.S. and Canada that provides for waivers of royalty, national advertising and technical assistance ~~fee waivers and reductions in royalty and national advertising payments.~~fees for up to the first three years of operation for qualifying new restaurants. In addition, the Company has development agreements in place with a number of

franchisees that contractually obligate such franchisees to open additional Wendy’s restaurants over a specified timeframe. ~~During the nine months ended October~~Global restaurant counts as of April 2, ~~2022, the Company and its franchisees added 131 net new restaurants across the Wendy’s system.~~2023 were flat compared with January 1, 2023.

~~During~~Organizational Redesign

In February 2023, the ~~first nine months~~Board of ~~2022,~~Directors approved a plan to redesign the ~~Company reevaluated its development plans resulting in a reduction in its expected net new restaurant~~Company’s organizational structure to better support the execution of the Company’s long-term growth ~~primarily related to non-traditional restaurants.~~strategy by maximizing organizational efficiency and streamlining decision making (the “Organizational Redesign Plan”). As a result of the Organizational Redesign Plan, the Company ~~now expects net new restaurant growth of 2.0% to 2.5% in 2022 and~~ expects to ~~reach 8,000~~hold its general and administrative expense in 2023 and 2024 relatively flat compared with 2022. The Company expects to ~~8,500 systemwide restaurants by~~incur total costs of approximately $11 million to $13 million related to the ~~end~~Organizational Redesign Plan, of ~~2025.~~

~~Debt Financing~~

Onwhich approximately $9 million to $11 million will be cash expenditures. The cash expenditures are expected to continue into 2025, with approximately two-thirds of the total cash expenditures occurring in 2023. Costs related to the Organizational Redesign Plan are recorded to “Reorganization and realignment costs.” During the three months ended April ~~1, 2022,~~2, 2023, the Company ~~completed a debt financing transaction under~~recognized costs totaling $6.7 million, which primarily included severance and related employee costs and share-based compensation. The Company expects to incur additional costs aggregating approximately $4 million to $6 million, comprised of (1) severance and related employee costs of approximately $2.5 million, (2) recruitment and relocation costs of approximately $0.9 million, (3) third-party and other costs of approximately $0.7 million and (4) share-based compensation of approximately $1.2 million. The Company expects costs related to the ~~Company issued fixed rate senior secured notes in the following 2022-1 series: Class A-2-I~~Organizational Redesign Plan to continue into 2026, with an interest rate of 4.236% and initial principal amount of $100.0 million (the “Class A-2-I Notes”) and Class A-2-II with an interest rate of 4.535% and initial principal amount of $400.0 million (the “Class A-2-II Notes” and, collectively, the “Series 2022-1 Class A-2 Notes”). The anticipated repayment datesapproximately three-fourths of the ~~Class A-2-I Notes and the Class A-2-II Notes will~~total costs to be March 2029 and March 2032, respectively. See “Liquidity and Capital Resources” below and Note 7 to the Condensed Consolidated Financial Statements contained in Item 1 herein for further information on the Company’s debt financing transaction.recognized during 2023.

3027

Results of Operations

The tables included throughout this Results of Operations set forth in millions the Company’s condensed consolidated results of operations for the ~~third~~first quarter of 2023 and ~~the first nine months of 2022 and 2021.~~2022.


		Third Quarter						Nine Months							First Quarter
		2022		2021		Change		2022		2021		Change			2023		2022		Change
Revenues:	Revenues:													Revenues:
Sales	Sales	$	228.8	$	171.1	$	57.7	$	668.9	$	553.7	$	115.2	Sales	$	227.9	$	209.3	$	18.6
Franchise royalty revenue and fees	Franchise royalty revenue and fees	141.7		138.8		2.9		414.2		398.2		16.0		Franchise royalty revenue and fees	141.7		128.9		12.8
Franchise rental income	Franchise rental income	58.5		62.4		(3.9)		174.9		182.2		(7.3)		Franchise rental income	57.8		57.9		(0.1)
Advertising funds revenue	Advertising funds revenue	103.6		98.0		5.6		301.0		289.7		11.3		Advertising funds revenue	101.4		92.5		8.9
		532.6		470.3		62.3		1,559.0		1,423.8		135.2			528.8		488.6		40.2
Costs and expenses:	Costs and expenses:													Costs and expenses:
Cost of sales	Cost of sales	196.2		146.4		49.8		578.5		457.4		121.1		Cost of sales	196.5		185.1		11.4
Franchise support and other costs	Franchise support and other costs	12.7		10.5		2.2		34.5		27.1		7.4		Franchise support and other costs	13.3		11.8		1.5
Franchise rental expense	Franchise rental expense	31.7		34.4		(2.7)		92.7		101.1		(8.4)		Franchise rental expense	30.6		28.9		1.7
Advertising funds expense	Advertising funds expense	108.3		108.5		(0.2)		317.0		310.6		6.4		Advertising funds expense	101.7		97.8		3.9
General and administrative	General and administrative	62.5		62.8		(0.3)		186.5		178.6		7.9		General and administrative	62.3		62.3		—
Depreciation and amortization (exclusive of amortization of cloud computing arrangements shown separately below)	Depreciation and amortization (exclusive of amortization of cloud computing arrangements shown separately below)	34.3		30.9		3.4		100.9		93.2		7.7		Depreciation and amortization (exclusive of amortization of cloud computing arrangements shown separately below)	33.5		33.2		0.3
Amortization of cloud computing arrangements	Amortization of cloud computing arrangements	0.9		—		0.9		0.9		—		0.9		Amortization of cloud computing arrangements	1.6		—		1.6
System optimization gains, net	System optimization gains, net	(0.5)		(1.4)		0.9		(4.1)		(32.7)		28.6		System optimization gains, net	—		(3.5)		3.5
Reorganization and realignment costs	Reorganization and realignment costs	—		0.4		(0.4)		0.6		7.4		(6.8)		Reorganization and realignment costs	6.8		0.5		6.3
Impairment of long-lived assets	Impairment of long-lived assets	0.2		0.6		(0.4)		2.7		1.8		0.9		Impairment of long-lived assets	0.4		0.6		(0.2)
Other operating income, net	Other operating income, net	(11.8)		(3.0)		(8.8)		(20.5)		(10.8)		(9.7)		Other operating income, net	(2.4)		(3.0)		0.6
		434.5		390.1		44.4		1,289.7		1,133.7		156.0			444.3		413.7		30.6
Operating profit	Operating profit	98.1		80.2		17.9		269.3		290.1		(20.8)		Operating profit	84.5		74.9		9.6
Interest expense, net	Interest expense, net	(31.9)		(26.0)		(5.9)		(90.4)		(83.0)		(7.4)		Interest expense, net	(31.7)		(26.4)		(5.3)
Loss on early extinguishment of debt	Loss on early extinguishment of debt	—		—		—		—		(17.9)		17.9		Loss on early extinguishment of debt	(1.3)		—		(1.3)
Investment income, net		—		—		—		2.1		—		2.1
Investment (loss) income, net														Investment (loss) income, net	(3.6)		2.1		(5.7)
Other income, net	Other income, net	2.9		0.2		2.7		4.4		0.4		4.0		Other income, net	7.4		0.2		7.2
Income before income taxes	Income before income taxes	69.1		54.4		14.7		185.4		189.6		(4.2)		Income before income taxes	55.3		50.8		4.5
Provision for income taxes	Provision for income taxes	(18.6)		(13.2)		(5.4)		(49.3)		(41.3)		(8.0)		Provision for income taxes	(15.5)		(13.4)		(2.1)
Net income	Net income	$	50.5	$	41.2	$	9.3	$	136.1	$	148.3	$	(12.2)	Net income	$	39.8	$	37.4	$	2.4

3128


		Third Quarter								Nine Months									First Quarter
		2022		% of Total Revenues		2021		% of Total Revenues		2022		% of Total Revenues		2021		% of Total Revenues			2023		% of Total Revenues		2022		% of Total Revenues
Revenues:	Revenues:																	Revenues:
Sales	Sales	$	228.8	43.0	%	$	171.1	36.4	%	$	668.9	42.9	%	$	553.7	38.9	%	Sales	$	227.9	43.1	%	$	209.3	42.8	%
Franchise royalty revenue and fees:	Franchise royalty revenue and fees:																	Franchise royalty revenue and fees:
Franchise royalty revenue	Franchise royalty revenue	124.5		23.4	%	116.6		24.8	%	361.4		23.2	%	344.4		24.2	%	Franchise royalty revenue	122.2		23.1	%	111.7		22.9	%
Franchise fees	Franchise fees	17.2		3.2	%	22.2		4.7	%	52.8		3.4	%	53.8		3.8	%	Franchise fees	19.5		3.7	%	17.2		3.5	%
Total franchise royalty revenue and fees	Total franchise royalty revenue and fees	141.7		26.6	%	138.8		29.5	%	414.2		26.6	%	398.2		28.0	%	Total franchise royalty revenue and fees	141.7		26.8	%	128.9		26.4	%
Franchise rental income	Franchise rental income	58.5		11.0	%	62.4		13.3	%	174.9		11.2	%	182.2		12.8	%	Franchise rental income	57.8		10.9	%	57.9		11.9	%
Advertising funds revenue	Advertising funds revenue	103.6		19.4	%	98.0		20.8	%	301.0		19.3	%	289.7		20.3	%	Advertising funds revenue	101.4		19.2	%	92.5		18.9	%
Total revenues	Total revenues	$	532.6	100.0	%	$	470.3	100.0	%	$	1,559.0	100.0	%	$	1,423.8	100.0	%	Total revenues	$	528.8	100.0	%	$	488.6	100.0	%

		Third Quarter								Nine Months									First Quarter
		2022		% of Sales		2021		% of Sales		2022		% of Sales		2021		% of Sales			2023		% of Sales		2022		% of Sales
Cost of sales:	Cost of sales:																	Cost of sales:
Food and paper	Food and paper	$	75.0	32.8	%	$	54.8	32.0	%	$	219.6	32.8	%	$	165.5	29.9	%	Food and paper	$	73.8	32.4	%	$	68.3	32.6	%
Restaurant labor	Restaurant labor	72.8		31.8	%	54.8		32.0	%	216.3		32.3	%	173.5		31.3	%	Restaurant labor	73.6		32.3	%	70.5		33.7	%
Occupancy, advertising and other operating costs	Occupancy, advertising and other operating costs	48.4		21.1	%	36.8		21.6	%	142.6		21.4	%	118.4		21.4	%	Occupancy, advertising and other operating costs	49.1		21.5	%	46.3		22.1	%
Total cost of sales	Total cost of sales	$	196.2	85.7	%	$	146.4	85.6	%	$	578.5	86.5	%	$	457.4	82.6	%	Total cost of sales	$	196.5	86.2	%	$	185.1	88.4	%

Third Quarter Nine Months
2022 % of
Sales 2021 % of
Sales 2022 % of
Sales 2021 % of
Sales
Restaurant margin $ 32.6 14.3 % $ 24.7 14.4 % $ 90.4 13.5 % $ 96.3 17.4 %


	First Quarter
	2023		% of Sales		2022		% of Sales
Company-operated restaurant margin:
U.S.	$	32.7	14.7	%	$	24.7	12.0	%
Global	31.4		13.8	%	24.2		11.6	%

3229

The table below presents certain of the Company’s key business measures, which are defined and further discussed in the “Executive Overview” section included herein.


		Third Quarter						Nine Months							First Quarter
		2022			2021			2022			2021				2023			2022
Key business measures:	Key business measures:													Key business measures:
U.S. same-restaurant sales:	U.S. same-restaurant sales:													U.S. same-restaurant sales:
Company-operated	Company-operated	6.8		%	3.4		%	4.2		%	13.2		%	Company-operated	7.4		%	2.9		%
Franchised	Franchised	6.3		%	2.0		%	3.2		%	10.0		%	Franchised	7.2		%	1.0		%
Systemwide	Systemwide	6.4		%	2.1		%	3.3		%	10.2		%	Systemwide	7.2		%	1.1		%

International same-restaurant sales (a)	International same-restaurant sales (a)	10.8		%	14.7		%	13.3		%	17.4		%	International same-restaurant sales (a)	13.9		%	14.1		%

Global same-restaurant sales:	Global same-restaurant sales:													Global same-restaurant sales:
Company-operated	Company-operated	6.8		%	3.4		%	4.2		%	13.2		%	Company-operated	7.4		%	2.9		%
Franchised (a)	Franchised (a)	6.9		%	3.3		%	4.4		%	10.8		%	Franchised (a)	8.0		%	2.4		%
Systemwide (a)	Systemwide (a)	6.9		%	3.3		%	4.4		%	10.9		%	Systemwide (a)	8.0		%	2.4		%

Systemwide sales (b):	Systemwide sales (b):													Systemwide sales (b):
U.S. Company-operated	U.S. Company-operated	$	225.2		$	170.0		$	659.6		$	552.3		U.S. Company-operated	$	222.6		$	206.5
U.S. franchised	U.S. franchised	2,780.6			2,621.2			8,058.9			7,783.6			U.S. franchised	2,722.2			2,505.8
U.S. systemwide	U.S. systemwide	3,005.8			2,791.2			8,718.5			8,335.9			U.S. systemwide	2,944.8			2,712.3
International Company-operated	International Company-operated	3.6			1.1			9.3			1.4			International Company-operated	5.3			2.8
International franchised (a)	International franchised (a)	409.7			361.3			1,182.7			1,018.3			International franchised (a)	413.2			356.7
International systemwide (a)	International systemwide (a)	413.3			362.4			1,192.0			1,019.7			International systemwide (a)	418.5			359.5
Global systemwide (a)	Global systemwide (a)	$	3,419.1		$	3,153.6		$	9,910.5		$	9,355.6		Global systemwide (a)	$	3,363.3		$	3,071.8

_______________

(a)Excludes Argentina ~~and Venezuela~~ due to the impact of ~~the~~that country’s highly inflationary ~~economies of those countries.~~economy.

(b)During the ~~third~~first quarter of ~~2022~~2023 and ~~2021,~~2022, global systemwide sales increased ~~8.9%~~10.0% and ~~5.3%~~4.2%, respectively, U.S. systemwide sales increased ~~7.7%~~8.6% and ~~3.7%~~2.4%, respectively, and international systemwide sales increased ~~18.3%~~21.0% and 20.2%, respectively, on a constant currency basis. During the first nine months of 2022 and 2021, global systemwide sales increased 6.3% and 13.2%, respectively, U.S. systemwide sales increased 4.6% and 12.1%, respectively, and international systemwide sales increased 20.1% and 23.6%19.2%, respectively, on a constant currency basis.

Third Quarter
U.S. Company-operated U.S. Franchised International Company-operated International Franchised Systemwide
Restaurant count:
Restaurant count at July 3, 2022 403 5,580 8 1,049 7,040
Opened 2 25 1 30 58
Closed (a) (1) (12) — (5) (18)
Net purchased from (sold by) franchisees (1) 1 — — —
Restaurant count at October 2, 2022 403 5,594 9 1,074 7,080
Nine Months
U.S. Company-operated U.S. Franchised International Company-operated International Franchised Systemwide
Restaurant count at January 2, 2022 403 5,535 5 1,006 6,949
Opened 5 96 4 93 198
Closed (a) (5) (37) — (25) (67)
Net purchased from (sold by) franchisees — — — — —
Restaurant count at October 2, 2022 403 5,594 9 1,074 7,080

~~_______________~~


	First Quarter
	U.S. Company-operated	U.S. Franchised	International Company-operated	International Franchised	Systemwide
Restaurant count:
Restaurant count at January 1, 2023	403	5,591	12	1,089	7,095
Opened	1	19	—	19	39
Closed	(1)	(24)	(1)	(13)	(39)

Restaurant count at April 2, 2023	403	5,586	11	1,095	7,095

~~(a)Excludes restaurants temporarily closed.~~


Sales	Sales	Third Quarter						Nine Months						Sales	First Quarter
		2022		2021		Change		2022		2021		Change			2023		2022		Change
Sales	Sales	$	228.8	$	171.1	$	57.7	$	668.9	$	553.7	$	115.2	Sales	$	227.9	$	209.3	$	18.6

The increase in sales ~~for the third quarter and~~during the first ~~nine months~~quarter of ~~2022~~2023 was primarily due to (1) ~~the Company’s acquisition of 93 franchise-operated restaurants in Florida during the fourth quarter of 2021 of $43.0 million and $128.2 million, respectively, (2)~~ a ~~6.8% and 4.2%~~7.4% increase in Company-operated same-restaurant sales of ~~$11.2~~$14.9 million and ~~$22.6 million, respectively, and (3)~~(2) net new restaurant development ~~of $2.9 million and $4.8 million, respectively. The increase in sales during~~compared with the first ~~nine months~~quarter of 2022 ~~was partially offset by the sale~~ of ~~47 Company-operated restaurants in New York during the second quarter of 2021 of $42.9~~$4.2 million. Company-operated same-restaurant sales increased due to higher average check, partially offset by a decrease in customer count. Company-operated same-restaurant sales during the first nine months of 2021 benefited from government stimulus payments to consumers during the first quarter of 2021, which did not recur in the first nine months of 2022.


Franchise Royalty Revenue and Fees	Franchise Royalty Revenue and Fees	Third Quarter						Nine Months						Franchise Royalty Revenue and Fees	First Quarter
		2022		2021		Change		2022		2021		Change			2023		2022		Change
Franchise royalty revenue	Franchise royalty revenue	$	124.5	$	116.6	$	7.9	$	361.4	$	344.4	$	17.0	Franchise royalty revenue	$	122.2	$	111.7	$	10.5
Franchise fees	Franchise fees	17.2		22.2		(5.0)		52.8		53.8		(1.0)		Franchise fees	19.5		17.2		2.3
		$	141.7	$	138.8	$	2.9	$	414.2	$	398.2	$	16.0		$	141.7	$	128.9	$	12.8

Franchise royalty revenue during the ~~third~~first quarter of ~~2022~~2023 increased ~~$7.9~~$10.5 million, of which (1) ~~$7.7~~$8.8 million was due to ~~a 6.9%~~an 8.0% increase in global franchise same-restaurant sales and (2) ~~$0.4~~$2.0 million was due to a net ~~increase in the number of franchise restaurants in operation during 2022~~new restaurant development compared ~~to 2021. Franchise royalty revenue during~~with the first ~~nine months~~quarter of 2022 increased $17.0 million, of which (1) $14.6 million was due to a 4.4% increase in global franchise same-restaurant sales and (2) $2.8 million was due to a net increase in the number of franchise restaurants in operation during 2022 compared to 2021. Franchise same-restaurant sales during the third quarter and the first nine months of 2022 increased due to higher average check, partially offset by a decrease in customer count.2022. Franchise same-restaurant sales during the first ~~nine months~~quarter of ~~2021~~2023 increased due to (1) higher average check and (2) an increase in customer count.

~~benefited from government stimulus payments to consumers~~The increase in franchise fees during the first quarter of ~~2021, which did not recur in the first nine months of 2022.~~

~~The decrease in franchise fees during the third quarter and the first nine months of 2022~~2023 was primarily due to the accelerated recognition of franchise agreement revenue in the prior year as a result of franchisee-to-franchisee restaurant transfers of $4.8 million. During the first nine months of 2022, franchise fees also decreased due to the accelerated recognition of franchise fees of $1.7 million associated with canceled development agreements during the first nine months of 2021, partially offset by(1) higher fees for providing information technology services to franchisees of ~~$5.5~~$0.9 million and (2) higher other miscellaneous franchise fees of $0.9 million. ~~This increase in fees for providing information technology services during the first nine months of 2022 reflects the one-month waiver of technology fees during the first quarter of 2021.~~


Franchise Rental Income	Franchise Rental Income	Third Quarter						Nine Months						Franchise Rental Income	First Quarter
		2022		2021		Change		2022		2021		Change			2023		2022		Change
Franchise rental income	Franchise rental income	$	58.5	$	62.4	$	(3.9)	$	174.9	$	182.2	$	(7.3)	Franchise rental income	$	57.8	$	57.9	$	(0.1)

The decrease in franchise rental income during the ~~third~~first quarter ~~and the first nine months~~ of ~~2022~~2023 was primarily due to the impact of ~~terminating existing~~assigning fewer leases ~~where the Company was lessor of $3.2 million and $8.0 million, respectively, primarily in connection~~to franchisees during 2023 compared with the Company’s acquisition of franchise-operated restaurants in Florida during the fourth quarter of 2021. The decrease in franchise rental income for the first nine months of 2022 was partially offset by the impact of the sale of Company-operated restaurants in New York during the second quarter of 2021.2022.


Advertising Funds Revenue	Advertising Funds Revenue	Third Quarter						Nine Months						Advertising Funds Revenue	First Quarter
		2022		2021		Change		2022		2021		Change			2023		2022		Change
Advertising funds revenue	Advertising funds revenue	$	103.6	$	98.0	$	5.6	$	301.0	$	289.7	$	11.3	Advertising funds revenue	$	101.4	$	92.5	$	8.9

The increase in advertising funds revenue during the ~~third~~first quarter ~~and the first nine months~~ of ~~2022~~2023 was primarily due to an increase in franchise same-restaurant sales in the U.S. and Canada.


Cost of Sales, as a Percent of Sales	Cost of Sales, as a Percent of Sales	Third Quarter						Nine Months						Cost of Sales, as a Percent of Sales	First Quarter
		2022		2021		Change		2022		2021		Change			2023		2022		Change
Food and paper	Food and paper	32.8	%	32.0	%	0.8	%	32.8	%	29.9	%	2.9	%	Food and paper	32.4	%	32.6	%	(0.2)	%
Restaurant labor	Restaurant labor	31.8	%	32.0	%	(0.2)	%	32.3	%	31.3	%	1.0	%	Restaurant labor	32.3	%	33.7	%	(1.4)	%
Occupancy, advertising and other operating costs	Occupancy, advertising and other operating costs	21.1	%	21.6	%	(0.5)	%	21.4	%	21.4	%	—	%	Occupancy, advertising and other operating costs	21.5	%	22.1	%	(0.6)	%
		85.7	%	85.6	%	0.1	%	86.5	%	82.6	%	3.9	%		86.2	%	88.4	%	(2.2)	%

The ~~increase~~decrease in cost of sales, as a percent of sales, during the ~~third~~first quarter ~~and the first nine months~~ of ~~2022~~2023 was primarily due to higher average check. This impact was partially offset by (1) higher commodity costs, (2) an increase in restaurant labor rates, (3) a decrease in customer count and (4) the impact of the Company’s investments to support the entry into the U.K. ~~market. These impacts were partially offset by higher average check.~~market and additional inflationary pressures in the U.K.


Franchise Support and Other Costs	Franchise Support and Other Costs	Third Quarter						Nine Months						Franchise Support and Other Costs	First Quarter
		2022		2021		Change		2022		2021		Change			2023		2022		Change
Franchise support and other costs	Franchise support and other costs	$	12.7	$	10.5	$	2.2	$	34.5	$	27.1	$	7.4	Franchise support and other costs	$	13.3	$	11.8	$	1.5

The increase in franchise support and other costs during the ~~third~~first quarter ~~and the first nine months~~ of ~~2022~~2023 was primarily due to an increase in costs incurred to provide information technology and other services to franchisees.

3531


Franchise Rental Expense	Franchise Rental Expense	Third Quarter						Nine Months						Franchise Rental Expense	First Quarter
		2022		2021		Change		2022		2021		Change			2023		2022		Change
Franchise rental expense	Franchise rental expense	$	31.7	$	34.4	$	(2.7)	$	92.7	$	101.1	$	(8.4)	Franchise rental expense	$	30.6	$	28.9	$	1.7

The ~~decrease~~increase in franchise rental expense during the ~~third~~first quarter ~~and the first nine months~~ of ~~2022~~2023 was primarily due to ~~(1)~~ the impact of assigning ~~certain~~fewer leases to franchisees ~~and (2) the impact of the Company’s acquisition of franchise-operated restaurants in Florida~~ during ~~the fourth quarter of 2021.~~2023 compared with 2022.


Advertising Funds Expense	Advertising Funds Expense	Third Quarter						Nine Months						Advertising Funds Expense	First Quarter
		2022		2021		Change		2022		2021		Change			2023		2022		Change
Advertising funds expense	Advertising funds expense	$	108.3	$	108.5	$	(0.2)	$	317.0	$	310.6	$	6.4	Advertising funds expense	$	101.7	$	97.8	$	3.9

On an interim basis, advertising funds expense is recognized in proportion to advertising funds revenue. The Company expects advertising funds expense to ~~exceed~~be lower than advertising funds revenue by approximately ~~$21.0~~$3.0 million for ~~2022,~~2023, which includes ~~(1) the Company’s previously announced decision to fund up to $16.0 million of incremental advertising and (2)~~ the amount by which advertising funds ~~revenue~~expense exceeded advertising funds ~~expense~~revenue in prior years (excluding the Company’s funding of incremental advertising) of approximately $5.0 million, partially offset by the Company’s planned incremental funding of advertising in Canada of approximately $2.0 million.

During the ~~third~~first quarter of 2022, advertising funds expense decreased due to a decrease in the recognition of the Company’s funding of incremental advertising, partially offset by an increase in franchise same-restaurant sales in the U.S. and Canada. During the first nine months of 2022,2023, advertising funds expense increased due to an increase in franchise same-restaurant sales in the U.S. and Canada, partially offset by a decrease in the ~~recognition of the~~ Company’s funding of incremental advertising.


General and Administrative	General and Administrative	Third Quarter						Nine Months						General and Administrative	First Quarter
		2022		2021 (a)		Change		2022		2021 (a)		Change			2023		2022 (a)		Change

Share-based compensation														Share-based compensation	$	3.8	$	6.3	$	(2.5)
Professional fees														Professional fees	15.0		13.5		1.5
Incentive compensation	Incentive compensation	$	6.4	$	11.0	$	(4.6)	$	19.2	$	33.5	$	(14.3)	Incentive compensation	7.5		6.2		1.3
Employee compensation and benefits		32.0		29.5		2.5		96.1		86.8		9.3
Professional fees		15.7		15.0		0.7		43.7		38.4		5.3
Travel-related expenses		3.0		1.7		1.3		7.8		3.4		4.4
Other, net	Other, net	5.4		5.6		(0.2)		19.7		16.5		3.2		Other, net	36.0		36.3		(0.3)
		$	62.5	$	62.8	$	(0.3)	$	186.5	$	178.6	$	7.9		$	62.3	$	62.3	$	—

_______________

(a)Certain reclassifications have been made to the prior year presentation to conform to the current year presentation.

~~The decrease in general~~General and administrative expenses during the ~~third~~first quarter of 2023 were flat compared with the first quarter of 2022, ~~was~~ primarily due to a decrease in ~~incentive~~share-based compensation, ~~accruals, reflecting higher operating performance as compared to plan in the first nine months of 2021 compared to the first nine months of 2022. This decrease was partially~~ offset by (1) ~~an increase in employee compensation~~higher professional fees, reflecting higher information technology-related costs, and ~~related benefits, reflecting investments in resources to support the Company’s development and digital organizations,~~ (2) an increase in ~~travel-related expenses and (3) higher professional fees, primarily as a result of costs associated with the Company’s enterprise resource planning (“ERP”) implementation.~~incentive compensation accruals.

The increase in general and administrative expenses during the first nine months of 2022 was primarily due to (1) an increase in employee compensation and related benefits, reflecting investments in resources to support the Company’s development and digital organizations, (2) higher professional fees, primarily as a result of costs associated with the Company’s ERP implementation and (3) an increase in travel-related expenses. These increases were partially offset by a decrease in incentive compensation accruals, reflecting higher operating performance as compared to plan in the first nine months of 2021 compared to the first nine months of 2022.


Depreciation and Amortization (exclusive of amortization of cloud computing arrangements shown separately below)	Depreciation and Amortization (exclusive of amortization of cloud computing arrangements shown separately below)	Third Quarter						Nine Months						Depreciation and Amortization (exclusive of amortization of cloud computing arrangements shown separately below)	First Quarter
		2022		2021		Change		2022		2021		Change			2023		2022		Change
Restaurants	Restaurants	$	21.2	$	18.4	$	2.8	$	64.3	$	56.5	$	7.8	Restaurants	$	20.9	$	21.8	$	(0.9)
Technology support, corporate and other	Technology support, corporate and other	13.1		12.5		0.6		36.6		36.7		(0.1)		Technology support, corporate and other	12.6		11.4		1.2
		$	34.3	$	30.9	$	3.4	$	100.9	$	93.2	$	7.7		$	33.5	$	33.2	$	0.3

The increase in depreciation and amortization during the ~~third~~first quarter ~~and the first nine months~~ of ~~2022~~2023 was primarily due to depreciation and amortization onfor technology investments and new restaurant assets, ~~acquired from a franchisee in Florida during the fourth quarter of 2021.~~partially offset by assets becoming fully depreciated.


Amortization of Cloud Computing Arrangements	Amortization of Cloud Computing Arrangements	Third Quarter						Nine Months						Amortization of Cloud Computing Arrangements	First Quarter
		2022		2021		Change		2022		2021		Change			2023		2022		Change
Amortization of cloud computing arrangements	Amortization of cloud computing arrangements	$	0.9	$	—	$	0.9	$	0.9	$	—	$	0.9	Amortization of cloud computing arrangements	$	1.6	$	—	$	1.6

Amortization of cloud computing arrangements primarily represents amortization of assets associated with the ~~Company's ERP implementation.~~Company’s enterprise resource planning (“ERP”) system implementation completed in the third quarter of 2022.

System Optimization Gains, Net Third Quarter Nine Months
2022 2021 Change 2022 2021 Change
System optimization gains, net $ (0.5) $ (1.4) $ 0.9 $ (4.1) $ (32.7) $ 28.6


System Optimization Gains, Net	First Quarter
	2023		2022		Change
System optimization gains, net	$	—	$	(3.5)	$	3.5

System optimization gains, net for the first ~~nine months~~quarter of 2022 were primarily comprised of post-closing adjustments on previous sales of restaurants. ~~System optimization gains, net~~See Note 3 to the Condensed Consolidated Financial Statements contained in Item 1 herein for further information.


Reorganization and Realignment Costs	First Quarter
	2023		2022		Change
Organizational redesign	$	6.7	$	—	$	6.7

Other reorganization and realignment plans	0.1		0.5		(0.4)
	$	6.8	$	0.5	$	6.3

During the ~~first nine~~three months ended April 2, 2023, the Company recognized costs totaling $6.7 million under the Organizational Redesign Plan, which primarily included severance and related employee costs of ~~2021 were primarily comprised~~$5.5 million and share-based compensation of ~~a gain on the sale of 47 Company-operated restaurants in New York.~~$0.8 million. See Note 4 to the Condensed Consolidated Financial Statements contained in Item 1 herein for further information.

Reorganization and Realignment Costs Third Quarter Nine Months
2022 2021 Change 2022 2021 Change
System optimization initiative $ — $ 0.3 $ (0.3) $ 0.5 $ 5.8 $ (5.3)
Other reorganization and realignment plans — 0.1 (0.1) 0.1 1.6 (1.5)
$ — $ 0.4 $ (0.4) $ 0.6 $ 7.4 $ (6.8)

As part of the Company’s system optimization initiative, the Company expects to continue to optimize the Wendy’s system through strategic restaurant acquisitions and dispositions, as well as by facilitating Franchise Flips. During the first nine months of 2022, the Company recognized costs associated with its system optimization initiative totaling $0.5 million, 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 first nine months of 2021, the Company recognized costs totaling $5.8 million, 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”). The Company expects to recognize a gain of approximately $0.7 million, primarily related to the write-off of certain NPC-related lease liabilities upon final termination of the leases. See Note 5 to the Condensed Consolidated Financial Statements contained in Item 1 herein for further information regarding the NPC bankruptcy sale process.

Costs incurred under the Company’s other reorganization and realignment plans were not material during the ~~third~~first quarter of 2023 and ~~first nine months of 2022 and 2021.~~2022. The Company does not expect to incur any material additional costs under these plans.


Impairment of Long-Lived Assets	Impairment of Long-Lived Assets	Third Quarter						Nine Months						Impairment of Long-Lived Assets	First Quarter
		2022		2021		Change		2022		2021		Change			2023		2022		Change
Impairment of long-lived assets	Impairment of long-lived assets	$	0.2	$	0.6	$	(0.4)	$	2.7	$	1.8	$	0.9	Impairment of long-lived assets	$	0.4	$	0.6	$	(0.2)

The ~~change~~decrease in impairment charges during the first ~~nine months~~quarter of ~~2022~~2023 was primarily driven by ~~impairment charges as a result of~~lease modifications associated with restaurants leased or subleased to franchisees in the ~~deterioration in operating performance of certain Company-operated restaurants.~~prior year.


Other Operating Income, Net	Other Operating Income, Net	Third Quarter						Nine Months						Other Operating Income, Net	First Quarter
		2022		2021		Change		2022		2021		Change			2023		2022		Change
Gain from insurance recoveries		$	(8.6)	$	—	$	(8.6)	$	(8.6)	$	—	$	(8.6)
Equity in earnings in joint ventures, net		(2.6)		(2.3)		(0.3)		(6.9)		(5.6)		(1.3)
Lease buyout	Lease buyout	—		—		—		(2.1)		(0.9)		(1.2)		Lease buyout	$	(0.2)	$	(0.8)	$	0.6
Gains on sales-type leases	Gains on sales-type leases	(0.7)		(0.7)		—		(2.9)		(4.2)		1.3		Gains on sales-type leases	(0.1)		(0.5)		0.4
Other, net		0.1		—		0.1		—		(0.1)		0.1
Equity in earnings in joint ventures, net														Equity in earnings in joint ventures, net	(2.1)		(1.7)		(0.4)
		$	(11.8)	$	(3.0)	$	(8.8)	$	(20.5)	$	(10.8)	$	(9.7)		$	(2.4)	$	(3.0)	$	0.6

The ~~increase in other operating income, net during the third quarter of 2022 was primarily due to a gain from insurance recoveries. The increase~~decrease in other operating income, net during the first ~~nine months~~quarter of ~~2022~~2023 was primarily due to (1) ~~a gain from insurance recoveries,~~lower lease buyout activity and (2) lower gains on sales-type leases. These decreases were partially offset by an increase in the equity in earnings from our TimWen joint ~~venture and (3) lease buyout activity. During the first nine months of 2022, these increases were partially offset by lower gains on new and modified sales-type leases.~~venture.


Interest Expense, Net	Interest Expense, Net	Third Quarter						Nine Months						Interest Expense, Net	First Quarter
		2022		2021		Change		2022		2021		Change			2023		2022		Change
Interest expense, net	Interest expense, net	$	31.9	$	26.0	$	5.9	$	90.4	$	83.0	$	7.4	Interest expense, net	$	31.7	$	26.4	$	5.3

The increase in interest expense, net during the ~~third~~first quarter ~~and the first nine months~~ of ~~2022~~2023 was primarily due to the impact of completing a debt financing transaction under the Company’s securitized financing facility in the first quarter of 2022. During the first nine months of 2022, this increase was partially offset by the impact of completing the refinancing of a portion of the Company’s securitized financing facility in the second quarter of 2021.

Loss on Early Extinguishment of Debt Third Quarter Nine Months
2022 2021 Change 2022 2021 Change
Loss on early extinguishment of debt $ — $ — $ — $ — $ 17.9 $ (17.9)


Loss on Early Extinguishment of Debt	First Quarter
	2023		2022		Change
Loss on early extinguishment of debt	$	1.3	$	—	$	1.3

During the ~~second~~first quarter of ~~2021, in connection with the refinancing of a portion of the Company’s securitized financing facility,~~2023, the Company incurred a loss on the early extinguishment of debt as a result of repaying the outstanding Series 2015-1 Class A-2-III Notes and Series 2018-1 Class A-2-I Notes with the proceeds from the issuance of its Series 2021-1 Class A-2 Notes. The loss on the early extinguishment of debt of ~~$17.9~~$1.3 million ~~was comprised~~due to the repurchase of ~~a specified make-whole payment~~$31.6 million in principal of ~~$9.6 million and~~ the ~~write-off of certain unamortized deferred financing costs of $8.3 million.~~Company’s 7% debentures.

Investment Income, Net Third Quarter Nine Months
2022 2021 Change 2022 2021 Change
Investment income, net $ — $ — $ — $ 2.1 $ — $ 2.1


Investment (Loss) Income, Net	First Quarter
	2023		2022		Change
Investment (loss) income, net	$	(3.6)	$	2.1	$	(5.7)

During the first ~~nine months~~quarter of 2023, the Company recorded a loss of $3.6 million due to an impairment charge for the difference between the estimated fair value and the carrying value of an investment in equity securities. During the first quarter of 2022, the Company recognized a gain of $2.1 million on an investment in equity securities as a result of an observable price change.


Other Income, Net	Other Income, Net	Third Quarter						Nine Months						Other Income, Net	First Quarter
		2022		2021		Change		2022		2021		Change			2023		2022		Change
Other income, net	Other income, net	$	2.9	$	0.2	$	2.7	$	4.4	$	0.4	$	4.0	Other income, net	$	7.4	$	0.2	$	7.2

The increase in other income, net during the ~~third~~first quarter ~~and the first nine months~~ of ~~2022~~2023 was primarily due to interest income earned on our cash equivalents, which increased as a result of cash received from our debt financing transaction under the Company’s securitized financing facility in the first quarter of 2022.


Provision for Income Taxes	Provision for Income Taxes	Third Quarter									Nine Months									Provision for Income Taxes	First Quarter
		2022			2021			Change			2022			2021			Change				2023			2022			Change
Income before income taxes	Income before income taxes	$	69.1		$	54.4		$	14.7		$	185.4		$	189.6		$	(4.2)		Income before income taxes	$	55.3		$	50.8		$	4.5
Provision for income taxes	Provision for income taxes	(18.6)			(13.2)			(5.4)			(49.3)			(41.3)			(8.0)			Provision for income taxes	(15.5)			(13.4)			(2.1)
Effective tax rate on income	Effective tax rate on income	26.9		%	24.3		%	2.6		%	26.6		%	21.8		%	4.8		%	Effective tax rate on income	28.0		%	26.4		%	1.6		%

Our effective tax rates for the ~~third~~first quarter of 2023 and ~~the first nine months of~~ 2022 ~~and 2021~~ were impacted by variations in income before income taxes, adjusted for recurring items such as non-deductible expenses and state income taxes, as well as non-recurring discrete items. The increase in the effective tax rate for the ~~third~~first quarter of ~~2022 compared with the third quarter of 2021 was primarily due to an increase in the tax effects of our foreign operations. The increase in the effective tax rate for the first nine months of 2022~~2023 compared with the first ~~nine months~~quarter of ~~2021~~2022 was primarily due to a ~~decrease in the benefit from share-based compensation and an increase in the tax effects of~~one-time adjustment to our foreign ~~operations.~~deferred income taxes related to prior periods. This unfavorable adjustment was partially offset by state income taxes, including discrete changes to state deferred income taxes.

Segment Information

See Note 1817 to the Condensed Consolidated Financial Statements contained in Item 1 herein for further information regarding the Company’s segments.

Wendy’s U.S.


		Third Quarter						Nine Months							First Quarter
		2022		2021		Change		2022		2021		Change			2023		2022		Change
Sales	Sales	$	225.2	$	170.0	$	55.2	$	659.6	$	552.3	$	107.3	Sales	$	222.6	$	206.5	$	16.1
Franchise royalty revenue	Franchise royalty revenue	108.8		102.6		6.2		315.6		305.4		10.2		Franchise royalty revenue	106.4		97.9		8.5
Franchise fees	Franchise fees	15.3		19.7		(4.4)		46.7		46.0		0.7		Franchise fees	17.3		15.4		1.9
Advertising fund revenue	Advertising fund revenue	96.6		91.5		5.1		281.8		271.9		9.9		Advertising fund revenue	94.7		87.5		7.2
Total revenues	Total revenues	$	445.9	$	383.8	$	62.1	$	1,303.7	$	1,175.6	$	128.1	Total revenues	$	441.0	$	407.3	$	33.7
Segment profit	Segment profit	$	123.7	$	108.9	$	14.8	$	355.5	$	347.6	$	7.9	Segment profit	$	125.2	$	104.8	$	20.4

The increase in Wendy’s U.S. revenues during the ~~third~~first quarter ~~and the first nine months~~ of ~~2022~~2023 was primarily due to ~~(1) the Company’s acquisition of 93 franchise-operated restaurants in Florida during the fourth quarter of 2021 and (2)~~ an increase in same-restaurant sales. The increase in Wendy’s U.S. revenues during the first nine months of 2022 was also driven by higher fees for providing information technology services to franchisees, reflecting the one-month waiver of technology feesSame-restaurant sales increased during the first quarter of 2021, partially offset by the sale of 47 Company-operated restaurants in New York during the second quarter of 2021. Same-restaurant sales increased during the third quarter and the first nine months of 20222023 primarily due to (1) higher average check ~~partially offset by a decrease~~and (2) an increase in customer count.

The increase in Wendy’s U.S. segment profit during the ~~third~~first quarter ~~and the first nine months~~ of ~~2022~~2023 was primarily due to (1) higher revenues, ~~and~~ (2) ~~a decrease in the recognition of the Company’s funding of incremental advertising. During the first nine months of 2022, these increases were partially offset by higher~~lower cost of sales, as a percent of sales for Company-operated restaurants driven by the same factors as described above for “Cost of Sales, as a Percent of Sales” (excluding the impact of the U.K. market). and (3) a decrease in the recognition of the Company’s funding of incremental advertising.

Wendy’s International


		Third Quarter						Nine Months							First Quarter
		2022		2021		Change		2022		2021		Change			2023		2022		Change
Sales	Sales	$	3.5	$	1.1	$	2.4	$	9.3	$	1.4	$	7.9	Sales	$	5.3	$	2.8	$	2.5
Franchise royalty revenue	Franchise royalty revenue	15.8		13.9		1.9		45.7		39.0		6.7		Franchise royalty revenue	15.8		13.8		2.0
Franchise fees	Franchise fees	1.3		1.2		0.1		3.7		4.0		(0.3)		Franchise fees	1.5		1.3		0.2
Advertising fund revenue	Advertising fund revenue	6.9		6.5		0.4		19.2		17.8		1.4		Advertising fund revenue	6.7		5.0		1.7
Total revenues	Total revenues	$	27.5	$	22.7	$	4.8	$	77.9	$	62.2	$	15.7	Total revenues	$	29.3	$	22.9	$	6.4
Segment profit	Segment profit	$	8.6	$	6.9	$	1.7	$	23.4	$	21.2	$	2.2	Segment profit	$	7.4	$	5.5	$	1.9

The increase in Wendy’s International revenues during the ~~third~~first quarter ~~and the first nine months~~ of ~~2022~~2023 was primarily due to (1) ~~the opening of Company-operated restaurants~~net new restaurant development in the U.K. ~~beginning in the second quarter of 2021~~ and (2) an increase in same-restaurant sales. Same-restaurant sales increased during the ~~third~~first quarter ~~and first nine months~~ of ~~2022~~2023 due to (1) an increase in customer count and (2) higher average check.

The increase in Wendy’s International segment profit during the ~~third~~first quarter ~~and the first nine months~~ of ~~2022~~2023 was primarily due to higher ~~revenues. This increase was~~revenues, partially offset by ~~(1) higher advertising fund expense, reflecting the Company’s funding of incremental advertising to support the launch of breakfast in Canada in May 2022, and (2)~~ the Company’s investments to support the entry into the U.K. ~~market.~~market and inflationary pressures in the U.K.

Global Real Estate & Development


		Third Quarter						Nine Months							First Quarter
		2022		2021		Change		2022		2021		Change			2023		2022		Change
Franchise fees	Franchise fees	$	0.6	$	1.4	$	(0.8)	$	2.5	$	3.8	$	(1.3)	Franchise fees	$	0.7	$	0.5	$	0.2
Franchise rental income	Franchise rental income	58.5		62.4		(3.9)		174.9		182.2		(7.3)		Franchise rental income	57.8		57.9		(0.1)
Total revenues	Total revenues	$	59.1	$	63.8	$	(4.7)	$	177.4	$	186.0	$	(8.6)	Total revenues	$	58.5	$	58.4	$	0.1
Segment profit	Segment profit	$	25.9	$	27.0	$	(1.1)	$	80.8	$	79.8	$	1.0	Segment profit	$	25.1	$	27.6	$	(2.5)

The ~~decrease~~increase in Global Real Estate & Development revenues during the ~~third~~first quarter ~~and the first nine months~~ of ~~2022~~2023 was primarily due to ~~lower~~higher franchise ~~rental income. See “Franchise Rental Income” above for further information.~~development-related fees.

The decrease in Global Real Estate & Development segment profit during the ~~third~~first quarter of ~~2022~~2023 was primarily due to ~~lower revenues, partially offset by a decrease~~an increase in franchise rental expense. ~~The increase in Global Real Estate & Development segment profit during the first nine months of 2022 was primarily due to a decrease in franchise rental expense, partially offset by lower revenues.~~ See “Franchise Rental Expense” above for further information.

Liquidity and Capital Resources

Cash Flows

Our primary sources of liquidity and capital resources are cash flows from operations and borrowings under our securitized financing facility. Our principal uses of cash are operating expenses, capital expenditures, repurchases of common stock, ~~and~~ dividends to ~~stockholders.~~stockholders and repurchases of debt.

Our anticipated cash requirements for the remainder of ~~2022,~~2023, exclusive of operating cash flow requirements, consist principally of:

•capital expenditures of approximately ~~$40.0~~$63.0 million to ~~$45.0~~$73.0 million, resulting in total anticipated cash capital expenditures for the year of approximately ~~$90.0~~$75.0 million to ~~$95.0~~$85.0 million;

•cash dividends aggregating approximately ~~$26.6~~$158.1 million as discussed below in “Dividends;”

•stock repurchases under the Company’s January 2023 Authorization as discussed below in “Stock Repurchases;” and

•~~potential stock~~debt repurchases of up to ~~$198.1~~$43.4 million as discussed below in ~~“Stock Repurchases.~~“Long-Term Debt, Including Current Portion.”

Based on current levels of operations, the Company expects that available cash and cash flows from operations will provide sufficient liquidity to meet operating cash requirements for the next 12 months.

We currently believe we have the ability to pursue additional sources of liquidity if needed or desired to fund operating cash requirements or for other purposes. However, there can be no assurance that additional liquidity will be readily available or available on terms acceptable to us.

The table below summarizes our cash flows from operating, investing and financing activities for the first ~~nine~~three months of ~~2022~~2023 and ~~2021:~~2022:


		Nine Months							First Quarter
		2022		2021		Change			2023		2022		Change
Net cash provided by (used in):	Net cash provided by (used in):							Net cash provided by (used in):
Operating activities	Operating activities	$	182.6	$	276.7	$	(94.1)	Operating activities	$	53.0	$	21.0	$	32.0
Investing activities	Investing activities	(46.1)		15.0		(61.1)		Investing activities	(12.1)		(13.0)		0.9
Financing activities	Financing activities	324.5		(57.5)		382.0		Financing activities	(132.3)		452.8		(585.1)
Effect of exchange rate changes on cash	Effect of exchange rate changes on cash	(7.1)		0.2		(7.3)		Effect of exchange rate changes on cash	0.2		0.2		—
Net increase in cash, cash equivalents and restricted cash		$	453.9	$	234.4	$	219.5
Net (decrease) increase in cash, cash equivalents and restricted cash								Net (decrease) increase in cash, cash equivalents and restricted cash	$	(91.2)	$	461.0	$	(552.2)

Operating Activities

Cash provided by operating activities consists primarily of net income, adjusted for non-cash expenses such as depreciation and amortization, deferred income tax and share-based compensation, and the net change in operating assets and liabilities. Cash provided by operating activities was ~~$182.6~~$53.0 million and ~~$276.7~~$21.0 million in the first ~~nine months~~quarter of ~~2022~~2023 and ~~2021,~~2022, respectively. The change was primarily due to (1) ~~an increase~~a decrease in payments for incentive compensation, (2) higher net income, adjusted for ~~the 2021 fiscal year paid in 2022, (2) the timing of receipt of franchisee rental payments,~~non-cash expenses, and (3) ~~cash paid for cloud computing arrangements, primarily related to the Company’s ERP implementation, and (4)~~ the timing of payments for marketing expenses of the national advertising funds. These changes were partially offset by the timing of receipt of franchisee rental payments in the first quarter of 2022.

Investing Activities

Cash ~~(used in) provided by~~used in investing activities was ~~$(46.1)~~$12.1 million and ~~$15.0~~$13.0 million in the first ~~nine months~~quarter of ~~2022~~2023 and ~~2021,~~2022, respectively. The change was primarily due to ~~(1)~~ a decrease in ~~proceeds from dispositions of $48.9 million, reflecting the sale of 47 Company-operated restaurants in New York during the second quarter of 2021, (2) an increase in capital~~ expenditures ~~of $6.6 million and (3) the net settlement of deposits~~ associated with the Company’s ~~consortium bid to acquire NPC’s Wendy’s restaurants~~franchise development fund of ~~$4.9 million in the first quarter of 2021.~~$0.7 million.

Financing Activities

Cash (used in) provided by ~~(used in)~~ financing activities was ~~$324.5~~$(132.3) million and ~~$(57.5)~~$452.8 million in the first ~~nine months~~quarter of ~~2022~~2023 and ~~2021,~~2022, respectively. The change was primarily due to (1) a net increase in cash ~~provided by~~used in long-term debt activities of ~~$347.0~~$522.9 million, reflecting the respective impacts of the completion of the Company’s debt financing transaction during the first quarter of 2022 and repurchases of the Company’s ~~debt refinancing transaction~~7% debentures during the ~~second~~first quarter of ~~2021, and~~2023, (2) ~~a decrease~~an increase in the repurchases of common stock of ~~$73.7 million. These changes were partially offset by (1) a decrease in proceeds from stock option exercises, net of payments related to tax withholding for share-based compensation, of $23.1~~$36.7 million and ~~(2)~~(3) an increase in dividends of ~~$11.2~~$26.2 million.

Long-Term Debt, Including Current Portion

During the three months ended April 2, 2023, Wendy’s ~~Funding, LLC, a limited-purpose, bankruptcy-remote, wholly-owned indirect subsidiary~~repurchased $31.6 million in principal of ~~The Wendy’s Company, is the master issuer (the “Master Issuer”)~~its 7% debentures at par value.

We may from time to time seek to repurchase additional portions of our outstanding long-term debt, including our 7% debentures and/or our senior secured notes, ~~under a securitized financing facility that was entered into~~through open market purchases, privately negotiated transactions or otherwise. In February 2023, our Board of Directors authorized additional debt repurchases through February 2024, resulting in June 2015. On April 1, 2022, the Master Issuer completed a financing transaction with respect to this facility under which the Master Issuer issued the Series 2022-1 Class A-2 Notes with initial principal amounts totaling $500.0 million.

~~using various credit instruments, including a letter~~in 2023. As of ~~credit facility. No amounts were borrowed~~April 2, 2023, the Company had $43.4 million of additional debt repurchases remaining under the ~~Class A-1 Notes during~~authorization. Such repurchases, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. Whether or not to repurchase any debt and the ~~nine months ended October 2, 2022.~~size and timing of any such repurchases will be determined at our discretion.

Except as described above, there were no material changes to the ~~terms of any~~Company’s debt obligations since January ~~2, 2022.~~1, 2023. The Company was in compliance with its debt covenants as of ~~October~~April 2, ~~2022.~~2023. See Note 76 to the Condensed Consolidated Financial Statements contained in Item 1 herein for further information related to our long-term debt obligations.

Dividends

On March 15, ~~2022, June 15, 2022 and September 15, 2022,~~2023, the Company paid quarterly cash dividends per share of ~~$.125,~~$.25, aggregating ~~$80.2~~$53.1 million. On ~~November 9, 2022,~~May 10, 2023, the Company announced a dividend of ~~$.125~~$.25 per share to be paid on ~~December~~June 15, ~~2022~~2023 to stockholders of record as of ~~December~~June 1, ~~2022. As a result,~~2023. If the Company ~~expects that its~~pays regular quarterly cash dividends for the remainder of 2023 at the same rate as declared in the second quarter of 2023, the Company’s total cash requirement for dividends for the ~~fourth quarter~~remainder of ~~2022~~2023 will be approximately ~~$26.6~~$158.1 million based on the number of shares of its common stock outstanding at ~~November 2, 2022.~~May 3, 2023. The Company currently intends to continue to declare and pay quarterly cash dividends; however, there can be no assurance that any additional quarterly dividends will be declared or paid or of the amount or timing of such dividends, if any.

Stock Repurchases

In ~~February 2022,~~January 2023, our Board of Directors authorized a repurchase program for up to ~~$100.0~~$500.0 million of our common stock through February 28, ~~2023,~~2027, when and if market conditions warrant and to the extent legally permissible (the ~~“February 2022~~“January 2023 Authorization”). ~~On April 1, 2022,~~In connection with the ~~Company’s Board~~January 2023 Authorization, the remaining portion of ~~Directors approved an increase of $150.0 million to~~ the previous February 2022 ~~Authorization, resulting in an aggregate~~ authorization offor $250.0 million ~~that continues to expire on February 28, 2023.~~was canceled. During the ~~nine~~three months ended ~~October~~April 2, ~~2022,~~2023, the Company repurchased ~~2.8~~1.8 million shares under the ~~February 2022~~January 2023 Authorization with an aggregate purchase price of ~~$51.9~~$38.8 million, of which $2.1 million was accrued as of April 2, 2023, and excluding commissions. As of ~~October~~April 2, ~~2022,~~2023, the Company had ~~$198.1~~$461.2 million of availability remaining under the ~~February 2022 authorization.~~January 2023 Authorization. Subsequent to ~~October~~April 2, ~~2022~~2023 through ~~November 2, 2022, no~~May 3, 2023, the Company repurchased 1.1 million shares ~~were repurchased~~ under the ~~February 2022 Authorization.~~

In February 2020, our Board of Directors authorized a repurchase program for up to $100.0 million of our common stock through February 28, 2021, when and if market conditions warranted and to the extent legally permissible (the “February 2020 Authorization”). In July 2020, the Company’s Board of Directors approvedJanuary 2023 Authorization with an extension of the February 2020 Authorization by one year, through February 28, 2022. In addition, in May 2021, August 2021 and November 2021, the Board of Directors approved increases of $50.0 million, $70.0 million and $80.0 million, respectively, to the February 2020 Authorization, resulting in an aggregate authorization of $300.0 million that continued to expire on February 28, 2022. In November 2021, the Company entered into an accelerated share repurchase agreement (the “2021 ASR Agreement”) with a third-party financial institution to repurchase common stock as part of the February 2020 Authorization. Under the 2021 ASR Agreement, the Company paid the financial institution an initial purchase price of ~~$125.0~~$23.6 million, in cash and received an initial delivery of 4.9 million shares of common stock, representing an estimated 85% of the total shares expected to be delivered under the 2021 ASR Agreement. In February 2022, the Company completed the 2021 ASR Agreement and received an additional 0.7 million shares of common stock. The total number of shares of common stock ultimately purchased by the Company under the 2021 ASR Agreement was based on the average of the daily volume-weighted average prices of the common stock during the term of the 2021 ASR Agreement, less an agreed upon discount. In total, 5.6 million shares were delivered under the 2021 ASR Agreement at an average purchase price of $22.22 per share. With the completion of the 2021 ASR Agreement in February 2022 as described above, the Company completed the February 2020 Authorization.excluding commissions.

Cloud Computing Arrangements

In addition to the anticipated cash requirements for capital expenditures noted above in “Cash Flows,” the Company expects to spend approximately ~~$30.0~~$25.0 million during ~~2022~~2023 on cloud computing arrangements (“CCA”), primarily related to the Company’s ~~ERP~~human capital management system implementation. The Company’s cash expenditures related to CCA amounted to ~~$22.7~~$6.6 million during the ~~nine~~three months ended ~~October~~April 2, ~~2022.~~2023.

General Inflation, Commodities and Changing Prices

Inflationary pressures on labor and commodity price increases directly impacted our consolidated results of operations during the ~~nine~~three months ended ~~October~~April 2, ~~2022,~~2023, and we expect this to continue throughout the remainder of ~~2022.~~2023. We attempt to

manage any inflationary costs and commodity price increases through selective menu price increases and ~~changes in~~ product mix. Delays in implementing such menu price increases and competitive pressures ~~consumer spending levels and other factors~~

may limit our ability to recover such cost increases in the future. Inherent volatility experienced in certain commodity markets, such as those for beef, chicken, pork, cheese and grains, could have a significant effect on our results of operations and may have an adverse effect on us in the future. The extent of any impact will depend on our ability to manage such volatility through product mix and selective menu price increases.

Seasonality

Wendy’s restaurant operations are moderately seasonal. Wendy’s average restaurant sales are normally higher during the summer months than during the winter months. Because our business is moderately seasonal, results for a particular quarter are not necessarily indicative of the results that may be achieved for any other quarter or for the full fiscal year.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

This “Quantitative and Qualitative Disclosures about Market Risk” should be read in conjunction with “Item 7A. Quantitative and Qualitative Disclosures about Market Risk” in our annual report on Form 10-K for the fiscal year ended January 2, 2022 (the “Form 10-K”).

As of ~~October~~April 2, ~~2022,~~2023, there were no material changes from the information contained in the Company’s Form 10-K ~~except as described below.~~

~~Interest Rate Risk~~

~~Following~~for the ~~Company’s debt financing transaction that was completed on April~~fiscal year ended January 1, 2022, our long-term debt, including the current portion, aggregated $2,903.1 million as of October 2, 2022 (excluding unamortized debt issuance costs and the effect of purchase accounting adjustments). The Company’s predominantly fixed-rate debt structure reduces its exposure to interest rate increases that could adversely affect its earnings and cash flows. The Company is exposed to interest rate increases under its Series 2021-1 Class A-1 Notes and other lines of credit; however, the Company had no outstanding borrowings under the 2021-1 Class A-1 Notes and other lines of credit as of October 2, 2022. See “Liquidity and Capital Resources” in “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 7 to the Condensed Consolidated Financial Statements contained in Item 1 herein for further information regarding the Company’s debt financing transaction.2023.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

The management of the Company, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of ~~October~~April 2, ~~2022.~~2023. Based on such evaluations, the Chief Executive Officer and Chief Financial Officer concluded that as of ~~October~~April 2, ~~2022,~~2023, the disclosure controls and procedures of the Company were effective at a reasonable assurance level in (1) recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act and (2) ensuring that information required to be disclosed by the Company in such reports is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

During the third quarter of 2022, the Company completed the implementation of a new ERP system. Our new ERP system is intended to provide us with enhanced transactional processing, security and management tools, and is an important component of our system of disclosure controls and procedures. We modified and removed certain existing internal controls, as well as implemented new controls and procedures impacted by the implementation of the new ERP system. We will continue to monitor and evaluate the operating effectiveness of the related controls during subsequent periods. Except for the implementation of the new ERP system, thereThere were no ~~other~~ changes in the internal control over financial reporting of the Company during the ~~third~~first quarter of ~~2022~~2023 that materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

There are inherent limitations in the effectiveness of any control system, including the potential for human error and the possible circumvention or overriding of controls and procedures. Additionally, judgments in decision-making can be faulty and breakdowns can occur because of a simple error or mistake. An effective control system can provide only reasonable, not absolute, assurance that the control objectives of the system are adequately met. Accordingly, the management of the Company, including its Chief Executive Officer and Chief Financial Officer, does not expect that the control system can prevent or detect all error or fraud. Finally, projections of any evaluation or assessment of effectiveness of a control system to future periods are subject to the risks that, over time, controls may become inadequate because of changes in an entity’s operating environment or deterioration in the degree of compliance with policies or procedures.

4438

PART II. OTHER INFORMATION

Special Note Regarding Forward-Looking Statements and Projections

This Quarterly Report on Form 10-Q and oral statements made from time to time by representatives of the Company may contain or incorporate by reference certain statements that are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Reform Act”). Generally, forward-looking statements include the words “may,” “believes,” “plans,” “expects,” “anticipates,” “intends,” “estimate,” “goal,” “upcoming,” “outlook,” “guidance” or the negation thereof, or similar expressions. In addition, all statements that address future operating, financial or business performance, strategies or initiatives, future efficiencies or savings, anticipated costs or charges, future capitalization, anticipated impacts of recent or pending investments or transactions and statements expressing general views about future results or brand health are forward-looking statements within the meaning of the Reform Act. Forward-looking statements are based on our expectations at the time such statements are made, speak only as of the dates they are made and are susceptible to a number of risks, uncertainties and other factors. For all of our forward-looking statements, we claim the protection of the safe harbor for forward-looking statements contained in the Reform Act. Our actual results, performance and achievements may differ materially from any future results, performance or achievements expressed or implied by our forward-looking statements. Many important factors could affect our future results and cause those results to differ materially from those expressed in or implied by our forward-looking statements. Such factors include, but are not limited to, the following:

•the ~~disruption to our business from the novel coronavirus (COVID-19) pandemic and the impact of the pandemic on our results of operations, financial condition and prospects;~~

•~~the~~ impact of competition or poor customer experiences at Wendy’s restaurants;

•adverse economic conditions or disruptions, including in regions with a high concentration of Wendy’s restaurants;

•changes in discretionary consumer spending and consumer tastes and preferences;

•the disruption to our business from the COVID-19 pandemic and the impact of the pandemic on our results of operations, financial condition and prospects;

•impacts to our corporate reputation or the value and perception of our brand;

•the effectiveness of our marketing and advertising programs and new product development;

•our ability to manage the accelerated impact of social media;

•our ability to protect our intellectual property;

•food safety events or health concerns involving our products;

•our ability to deliver accelerated global sales growth and achieve or maintain market share across our dayparts;

•our ability to achieve our growth strategy through new restaurant development and our Image Activation program;

•our ability to effectively manage the acquisition and disposition of restaurants or successfully implement other

strategic initiatives;

•risks associated with leasing and owning significant amounts of real estate, including environmental matters;

•~~our ability to achieve and maintain market share in the breakfast daypart;~~

•risks associated with our international operations, including our ability to execute our international growth strategy;

•changes in commodity and other operating costs;

•shortages or interruptions in the supply or distribution of our products and other risks associated with our independent

supply chain purchasing co-op;

•the impact of increased labor costs or labor shortages;

•the continued succession and retention of key personnel and the effectiveness of our leadership and organizational structure;

4539

•risks associated with our digital commerce strategy, platforms and technologies, including our ability to adapt to changes in industry trends and consumer preferences;

•our dependence on computer systems and information technology, including risks associated with the failure ~~misuse,~~or interruption ~~or breach~~ of our systems or technology or ~~other~~the occurrence of cyber incidents or deficiencies;

•risks associated with our securitized financing facility and other debt agreements, including compliance with operational and financial covenants, restrictions on our ability to raise additional capital, the impact of our overall debt levels and our ability to generate sufficient cash flow to meet our debt service obligations and operate our business;

•risks associated with our capital allocation policy, including the amount and timing of equity and debt repurchases and

dividend payments;

•risks associated with complaints and litigation, compliance with legal and regulatory requirements and an increased focus on environmental, social and governance issues;

•risks associated with the availability and cost of insurance, changes in accounting standards, the recognition of impairment or other charges, ~~the impact of reorganization and realignment initiatives,~~ changes in tax rates or tax laws and fluctuations in foreign currency exchange rates;

•conditions beyond our control, such as adverse weather conditions, natural disasters, hostilities, social unrest, health epidemics or pandemics or other catastrophic events;

•~~Trian Fund Management, L.P. and certain of its affiliates filed a Schedule 13D/A~~risks associated with the Securities and Exchange Commission on May 24, 2022 indicating, among other things, that they intend to explore and evaluate the possibility of participating, alone or with third parties, in a potential transaction with respect to us to enhance stockholder value; there can be no assurance that (i) any such potential transaction will occur or result in additional value for our ~~stockholders or (ii) that the exploration of a potential transaction will not have an adverse impact on our business;~~organizational redesign; and

•other risks and uncertainties affecting us and our subsidiaries referred to in our Annual Report on Form 10-K filed with the SEC on March 1, ~~2022~~2023 (see especially “Item 1A. Risk Factors” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations”) and in our other current and periodic filings with the SEC.

In addition to the factors described above, there are risks associated with our predominantly franchised business model that could impact our results, performance and achievements. Such risks include our ability to identify, attract and retain experienced and qualified franchisees, our ability to effectively manage the transfer of restaurants between and among franchisees, the business and financial health of franchisees, the ability of franchisees to meet their royalty, advertising, development, reimaging and other commitments, participation by franchisees in brand strategies and the fact that franchisees are independent third parties that own, operate and are responsible for overseeing the operations of their restaurants. Our predominantly franchised business model may also impact the ability of the Wendy’s system to effectively respond and adapt to market changes. ~~Many of these risks have been or in the future may be heightened due to the business disruption and impact from the COVID-19 pandemic.~~

All future written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to above. New risks and uncertainties arise from time to time, and factors that we currently deem immaterial may become material, and it is impossible for us to predict these events or how they may affect us. We assume no obligation to update any forward-looking statements after the date of this Quarterly Report on Form 10-Q as a result of new information, future events or developments, except as required by federal securities laws, although we may do so from time to time. We do not endorse any projections regarding future performance that may be made by third parties.

Item 1. Legal Proceedings.

The Company is involved in litigation and claims incidental to our business. We provide accruals for such litigation and claims when ~~payment~~we determine it is probable that a liability has been incurred and the loss is reasonably estimable. The Company believes it has adequate accruals for all of its legal and environmental matters. We cannot estimate the aggregate possible range of loss for our existing litigation and claims ~~for~~due to various reasons, including, but not limited to, many proceedings being in preliminary stages, with various motions either yet to be submitted or pending, discovery yet to occur, ~~and/or~~and significant factual matters unresolved. In addition, most cases seek an indeterminate amount of damages and many involve multiple parties. Predicting the outcomes of settlement discussions or judicial or arbitral decisions is thus inherently difficult and future developments could cause these actions or claims, individually or in aggregate, to have a material adverse effect on the Company’s financial condition, results of operations, or cash flows of a particular reporting period.

Item 1A. Risk Factors.

In addition to the information contained in this report, you should carefully consider the risk factors disclosed in our Form 10-K, which could materially affect our business, financial condition or future results. Except as ~~set forth below or as may be~~ described elsewhere in this report, there have been no material changes from the risk factors previously disclosed in our Form 10-K.

~~Food safety events or health concerns regarding our products could create negative publicity and adversely affect our brand, business and results of operations.~~

Food safety is a top priority for Wendy’s, and we dedicate substantial resources to food safety matters to ensure our customers enjoy safe, quality food products. However, food safety events, including instances of food-borne illness (such as salmonella or E. coli), have occurred in the food industry in the past, and could occur in the future. For example, in August 2022, the Centers for Disease Control and Prevention (the “CDC”) announced it was investigating a multistate outbreak of E. coli in which many of the impacted individuals reported having eaten at a Wendy’s restaurant and most reported consuming sandwich romaine lettuce. The Company cooperated with the CDC’s investigation and, as a precautionary measure, removed sandwich romaine lettuce from its restaurants in the relevant region. As of October 4, 2022, the CDC announced that the outbreak was over and that the specific source of the outbreak had not been confirmed. Since the outbreak was announced, the Company has been referenced in news stories, and the Company (and others) have been named in various claims and lawsuits related to the outbreak. Food safety events, whether or not involving Wendy’s restaurants or other restaurant companies, could adversely affect the price and availability of certain products and result in negative publicity for Wendy’s or the restaurant industry. This negative publicity may reduce demand for Wendy’s food and could result in a decrease in customer counts to Wendy’s restaurants as consumers shift their preferences to our competitors or to other products or food types. Any report linking our restaurants or suppliers to food-borne illnesses, food tampering, contamination or mislabeling or other food-safety issues could damage the value of our brand immediately and severely hurt sales of our products and possibly lead to product liability claims, litigation (including class actions) or other damages. The Wendy’s system may also be adversely impacted by consumer concerns regarding the nutritional aspects of the products we sell, the ingredients in our products or the cooking processes used in our restaurants. These or similar concerns could result in less demand for our products and a decline in sales at Company-operated restaurants and in royalties from sales at franchised restaurants.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

The following table provides information with respect to repurchases of shares of our common stock by us and our “affiliated purchasers” (as defined in Rule 10b-18(a)(3) under the Exchange Act) during the ~~third~~first quarter of ~~2022:~~2023:

Issuer Repurchases of Equity Securities

Period Total Number of Shares Purchased (1) Average
Price Paid
per Share Total Number of
Shares Purchased
as Part of
Publicly Announced
Plans Approximate Dollar
Value of Shares
that May Yet Be
Purchased Under
the Plans (2)
July 4, 2022
through
August 7, 2022 15,868 $20.11 — $198,088,626
August 8, 2022
through
September 4, 2022 56,525 $21.14 — $198,088,626
September 5, 2022
through
October 2, 2022 — — — $198,088,626
Total 72,393 $20.92 — $198,088,626


Period	Total Number of Shares Purchased (1)	Average Price Paid per Share	Total Number of Shares Purchased as Part of Publicly Announced Plans	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans (2)
January 2, 2023 through February 5, 2023	412,675	$22.38	318,041	$492,952,784
February 6, 2023 through March 5, 2023	499,065	$22.42	432,000	$483,244,922
March 6, 2023 through April 2, 2023	1,044,961	$21.12	1,043,972	$461,214,676
Total	1,956,701	$21.72	1,794,013	$461,214,676

(1)Represents shares of common stock reacquired by the Company from holders of share-based awards to satisfy certain requirements associated with the vesting or exercise of the respective award. The shares were valued at the fair market value of the Company’s common stock on the vesting or exercise date of such awards, as set forth in the applicable plan document.

(2)In ~~February 2022,~~January 2023, our Board of Directors authorized ~~the~~a repurchase ofprogram for up to ~~$100.0~~$500.0 million of our common stock through February 28, ~~2023,~~2027, when and if market conditions warrant and to the extent legally permissible (the “February 2022 Authorization”). On April 1, 2022, our Board of Directors approved an increase of $150.0 million to the February 2022 Authorization, resulting in an aggregate authorization of $250.0 million that continues to expire on February 28, 2023.permissible.

Subsequent to ~~October~~April 2, ~~2022~~2023 through ~~November 2, 2022, no~~May 3, 2023, the Company repurchased 1.1 million shares ~~were repurchased~~ under the ~~February 2022 Authorization.~~January 2023 Authorization with an aggregate purchase price of $23.6 million, excluding commissions.

4841

Item 6. Exhibits.


EXHIBIT NO.			DESCRIPTION


10.1			Form of Long-Term Performance Unit Award Agreement for 2023 under T he Wendy’s Company 2020 Omnibus Award Plan.* **
31.1			Certification of the Chief Executive Officer of The Wendy’s Company, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
31.2			Certification of the Chief Financial Officer of The Wendy’s Company, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
32.1			Certifications of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
101			The following financial information from The Wendy’s Company’s Quarterly Report on Form 10-Q for the quarter ended ~~October~~April 2, ~~2022~~2023 formatted in Inline eXtensible Business Reporting Language: (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statements of Comprehensive Income, (iv) the Condensed Consolidated Statements of Stockholders’ Equity, (v) the Condensed Consolidated Statements of Cash Flows, and (vi) Notes to Condensed Consolidated Financial Statements.
104			The cover page from The Wendy’s Company’s Quarterly Report on Form 10-Q for the quarter ended ~~October~~April 2, ~~2022,~~2023, formatted in Inline XBRL and contained in Exhibit 101.

_______________


*			Filed herewith.
**			Identifies a management contract or compensatory plan or arrangement.

4942

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


			THE WENDY’S COMPANY (Registrant)
Date: ~~November 9, 2022~~May 10, 2023			By: /s/ Gunther Plosch
			Gunther Plosch
			Chief Financial Officer
			(On behalf of the registrant)

Date: ~~November 9, 2022~~May 10, 2023			By: /s/ ~~Leigh A. Burnside~~Suzanne M. Thuerk
			~~Leigh A. Burnside~~Suzanne M. Thuerk
			~~Senior Vice President,~~ Chief Accounting Officer ~~and~~
			~~Chief Financial Officer U.S.~~
			(Principal Accounting Officer)

5043


	As Previously Reported		Reclassifications		As Currently Reported
Cloud computing arrangements expenditures	$	—	$	(5,619)	$	(5,619)
Changes in operating assets and liabilities and other, net	26,636		5,619		32,255


	Three Months Ended				Nine Months Ended				Total Incurred Since Inception
	October 2, 2022		October 3, 2021		October 2, 2022		October 3, 2021
Severance and related employee costs	$	—	$	—	$	—	$	661	$	18,898
Professional fees	(28)		277		346		1,016		24,023
Other (a)	18		—		151		1,354		7,769
	(10)		277		497		3,031		50,690
Accelerated depreciation and amortization (b)	—		—		—		—		25,398
NPC lease termination costs (c)	17		18		51		2,839		2,907
Share-based compensation (d)	—		—		—		—		5,013
Total system optimization initiative	$	7	$	295	$	548	$	5,870	$	84,008


	Balance January 2, 2022		Charges		Payments		Balance October 2, 2022
Professional fees	$	—	$	346	$	(346)	$	—
Other	—		151		(151)		—
	$	—	$	497	$	(497)	$	—


	Balance January 3, 2021		Charges		Payments		Balance October 3, 2021
Severance and related employee costs	$	—	$	661	$	(661)	$	—
Professional fees	1,230		1,016		(2,246)		—
Other	—		1,354		(1,354)		—
	$	1,230	$	3,031	$	(4,261)	$	—