Wendy's Co 10-Q

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 3, 2021 (the “Form 10-K”). There have been no material changes as of October 3, 2021 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”). The principal 100% owned subsidiary of Wendy’s Restaurants is Wendy’s International, LLC and its subsidiaries (“Wendy’s”). 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 United States (the “U.S.”) based on traffic share, and the third largest globally with 6,891 restaurants in the U.S. and 31 foreign countries and U.S. territories as of October 3, 2021. 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 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. In March 2020, Wendy’s entered the breakfast daypart across the U.S. system. Wendy’s breakfast menu features a variety of breakfast sandwiches, biscuits and croissants, sides such as seasoned potatoes, oatmeal bars and seasonal fruit, and a beverage platform that includes hot coffee, cold brew iced coffee and our vanilla and chocolate Frosty-ccino iced coffee. 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 based on 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 17 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 periods presented herein contain 13 weeks and 39 weeks, respectively. All references to years, quarters and months relate to fiscal periods rather than calendar periods. 32 Executive Overview Our Business As of October 3, 2021, the Wendy’s restaurant system was comprised of 6,891 restaurants, with 5,901 Wendy’s restaurants in operation in the U.S. Of the U.S. restaurants, 311 were operated by the Company and 5,590 were operated by a total of 225 franchisees. In addition, at October 3, 2021, there were 990 Wendy’s restaurants in operation in 31 foreign countries and U.S. territories. Of the international restaurants, 988 were operated by franchisees and two 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 3, 2021. 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 accelerated global growth through (1) building our breakfast daypart, (2) continued implementation of consumer-facing digital platforms and technologies and (3) expanding the Company’s footprint through targeted U.S. expansion and accelerated international expansion through same-restaurant sales growth and net new restaurant development. 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 fiscal week are excluded from same-restaurant sales. For fiscal 2020, same-restaurant sales excluded the impact of a 53rd operating week. In fiscal 2020, same-restaurant sales compared the 52 weeks from December 30, 2019 through December 27, 2020 to the 52 weeks from December 31, 2018 through December 29, 2019. For fiscal 2021, same-restaurant sales will compare the 52 weeks from January 4, 2021 through January 2, 2022 to the 52 weeks from January 6, 2020 through January 3, 2021. This methodology is consistent with the metric used by our management for internal reporting and analysis. 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. 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. 33 Same-restaurant sales and systemwide sales exclude sales from Argentina and Venezuela due to the highly inflationary economies of those countries. 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 Quarter Financial Highlights • Revenue increased 4.0% to $470.3 million in the third quarter of 2021 compared to $452.2 million in the third quarter of 2020; • Global same-restaurant sales increased 3.3%, U.S. same-restaurant sales increased 2.1% and international same-restaurant sales increased 14.7% compared to the third quarter of 2020; • Company-operated restaurant margin was 14.4% in the third quarter of 2021, a decrease of 250 basis points from the third quarter of 2020; and • Net income increased 3.6% to $41.2 million in the third quarter of 2021 compared to $39.8 million in the third quarter of 2020. Year-to-Date Financial Highlights • Revenue increased 13.0% to $1.4 billion in the first nine months of 2021 compared to $1.3 billion in the first nine months of 2020; • Global same-restaurant sales increased 10.9%, U.S. same-restaurant sales increased 10.2% and international same-restaurant sales increased 17.4% compared to the first nine months of 2020; • Company-operated restaurant margin was 17.4% in the first nine months of 2021, an increase of 350 basis points from the first nine months of 2020; and • Net income increased 87.4% to $148.3 million in the first nine months of 2021 compared to $79.1 million in the first nine months of 2020. COVID-19 Update On March 11, 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. In response to the pandemic, in March 2020, Wendy’s updated its brand standard to include the closure of all dining rooms except where there were specific needs, or a drive-thru or pick-up window option was not available, subject to applicable federal, state and local requirements. Substantially all Wendy’s restaurants continued to offer drive-thru and delivery service to our customers. During the second quarter of 2020, the Company began to implement its restaurant and dining room reopening 34 process through a phased approach in accordance with federal, state and local requirements, with customer and team member safety as its top priority. Dining rooms have been re-opening at each restaurant owner’s discretion, subject to applicable regulatory restrictions. During the third quarter and the first nine months of 2021, restaurant operations have been impacted by increased pressure on labor availability brought about by both the COVID-19 pandemic and other macroeconomic factors; however, as of October 3, 2021, substantially all restaurants were open across the Wendy’s system, and the majority of restaurants had dining rooms open. Global systemwide same-restaurant sales during the first nine months of 2021 increased 10.9%, in part due to a significant increase in customer count compared with the adversely impacted fiscal months of March through June 2020. Breakfast Wendy’s long-term growth opportunities include investing in accelerated global growth, which includes building upon our breakfast daypart. Since the launch of breakfast across the U.S. system on March 2, 2020, systemwide sales have benefited from this new daypart, with breakfast representing approximately 7.2% of U.S. systemwide sales during the nine months ended October 3, 2021. As previously disclosed, the Company expects to fund a total of $25.0 million of incremental advertising to support the breakfast daypart during 2021, which the Company expects will continue to drive trial and acceleration of the Company’s breakfast offering. Digital Wendy’s long-term growth opportunities include accelerating same-restaurant sales through continued 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 and establishing delivery agreements with third-party vendors. The Company’s digital business continues to grow and represented approximately 8.0% of global systemwide sales during the nine months ended October 3, 2021. Debt Refinancing In June 2021, the Company completed a refinancing transaction under which the Company issued fixed rate senior secured notes in the following 2021-1 series: Class A-2-I with an interest rate of 2.370% and initial principal amount of $450.0 million and Class A-2-II with an interest rate of 2.775% and initial principal amount of $650.0 million (collectively, the “Series 2021-1 Class A-2 Notes”). A portion of the net proceeds from the sale of the Series 2021-1 Class A-2 Notes were used to repay in full the Company’s outstanding Series 2015-1 Class A-2-III Notes and Series 2018-1 Class A-2-I Notes, including the payment of prepayment and transaction costs. The Company also entered into a revolving financing facility of Series 2021-1 Variable Funding Senior Secured Notes, Class A-1 (the “Series 2021-1 Class A-1 Notes”), which allows for the drawing of up to $300.0 million on a revolving basis using various credit instruments, including a letter of credit facility. No amounts were borrowed under the Series 2021-1 Class A-1 Notes during the nine months ended October 3, 2021. The Series 2021-1 Class A-1 Notes replaced the Company’s $150.0 million Series 2019-1 Class A-1 Notes and $100.0 million Series 2020-1 Class A-1 Notes, which were cancelled on the closing date. As a result of the refinancing transaction, the Company incurred a loss on the early extinguishment of debt of $17.9 million, which was comprised of a specified make-whole payment of $9.6 million and the write-off of certain unamortized deferred financing costs of $8.3 million. 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 refinancing transaction. New Restaurant Development REEF Kitchens Development Commitment On August 11, 2021, the Company announced a development commitment by REEF Kitchens (“REEF”) to open and operate 700 delivery kitchens over the next five years across the U.S., Canada and the U.K. Strategic Build to Suit Development Fund On August 11, 2021, the Company announced the creation o f a $100.0 million strategic build to suit development fund to drive additional new restaurant growth that is being funded by the additional cash that was obtained as part of the Company’s debt refinancing transaction completed in June 2021. The Company expects the development fund to drive approximately 80 to 90 new franchise restaur ants from 2022 to 2025. 35 System Optimization Initiative The Company’s system optimization initiative includes a shift from Company-operated restaurants to franchised restaurants over time, through acquisitions and dispositions, as well as facilitating Franchise Flips. As of January 1, 2017, the Company completed its plan to reduce its ongoing Company-operated restaurant ownership to approximately 5% of the total system. While the Company has no plans to reduce its ownership below the approximately 5% level, 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, drive new restaurant development and accelerate reimages. 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, resulting in net gains totaling $30.8 million. Gains and losses recognized on dispositions are recorded to “System optimization gains, net” in our condensed consolidated statements of operations. NPC Quality Burgers, Inc. (“NPC”) As previously announced, NPC, formerly the Company’s largest franchisee, filed for chapter 11 bankruptcy in July 2020 and commenced a process to sell all or substantially all of its assets, including its interest in approximately 393 Wendy’s restaurants across eight different markets, pursuant to a court-approved auction process. On November 18, 2020, the Company submitted a consortium bid together with a group of pre-qualified franchisees to acquire NPC’s Wendy’s restaurants. Under the terms of the consortium bid, several existing and new franchisees would have been the ultimate purchasers of seven of the NPC markets, while the Company would have acquired one market. During the three months ended April 4, 2021, following a court-approved mediation process, NPC and certain affiliates of Flynn Restaurant Group (“FRG”) and the Company entered into separate asset purchase agreements under which all of NPC’s Wendy’s restaurants were sold to Wendy’s approved franchisees. Under the transaction, FRG acquired approximately half of NPC’s Wendy’s restaurants in four markets, while several existing Wendy’s franchisees that were part of the Company’s consortium bid acquired the other half of NPC’s Wendy’s restaurants in the other four markets. The Company did not acquire any restaurants as part of this transaction. Operations and Field Realignment In September 2020, the Company initiated a plan to reallocate resources to better support the long-term growth strategies for Company and franchise operations (the “Operations and Field Realignment Plan”). The Operations and Field Realignment Plan realigned the Company’s restaurant operations team, including transitioning from separate leaders of Company and franchise operations to a single leader of all U.S. restaurant operations. The Operations and Field Realignment Plan also includes contract terminations, including the closure of certain field offices. The Company expects to incur total costs aggregating approximately $5.5 million to $6.0 million, of which approximately $5.0 million to $5.5 million will be cash expenditures, related to the Operations and Field Realignment Plan. Costs related to the Operations and Field Realignment Plan are recorded to “Reorganization and realignment costs.” During the nine months ended October 3, 2021, the Company recognized costs totaling $1.6 million, which primarily included third-party and other costs. The Company expects to incur additional costs aggregating up to approximately $0.5 million, comprised primarily of third-party and other costs. The Company expects to recognize the majority of the remaining costs and make the majority of the remaining cash expenditures associated with the Operations and Field Realignment Plan during the remainder of 2021. 36 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 quarter and the first nine months of 2021 and 2020. Third Quarter Nine Months 2021 2020 Change 2021 2020 Change Revenues: Sales $ 171.1 $ 191.9 $ (20.8) $ 553.7 $ 523.0 $ 30.7 Franchise royalty revenue and fees 138.8 116.8 22.0 398.2 321.6 76.6 Franchise rental income 62.4 58.7 3.7 182.2 173.4 8.8 Advertising funds revenue 98.0 84.8 13.2 289.7 241.5 48.2 470.3 452.2 18.1 1,423.8 1,259.5 164.3 Costs and expenses: Cost of sales 146.4 159.5 (13.1) 457.4 450.2 7.2 Franchise support and other costs 10.5 6.0 4.5 27.1 19.4 7.7 Franchise rental expense 34.4 32.4 2.0 101.1 93.0 8.1 Advertising funds expense 108.5 92.0 16.5 310.6 253.4 57.2 General and administrative 62.8 47.3 15.5 178.6 147.6 31.0 Depreciation and amortization 30.9 33.0 (2.1) 93.2 98.7 (5.5) System optimization gains, net (1.4) — (1.4) (32.7) (2.3) (30.4) Reorganization and realignment costs 0.4 3.4 (3.0) 7.4 10.2 (2.8) Impairment of long-lived assets 0.6 — 0.6 1.8 4.7 (2.9) Other operating income, net (3.0) (2.7) (0.3) (10.8) (6.1) (4.7) 390.1 370.9 19.2 1,133.7 1,068.8 64.9 Operating profit 80.2 81.3 (1.1) 290.1 190.7 99.4 Interest expense, net (26.0) (29.1) 3.1 (83.0) (86.7) 3.7 Loss on early extinguishment of debt — — — (17.9) — (17.9) Other income, net 0.2 0.2 — 0.4 1.2 (0.8) Income before income taxes 54.4 52.4 2.0 189.6 105.2 84.4 Provision for income taxes (13.2) (12.6) (0.6) (41.3) (26.1) (15.2) Net income $ 41.2 $ 39.8 $ 1.4 $ 148.3 $ 79.1 $ 69.2 37 Third Quarter Nine Months 2021 % of Total Revenues 2020 % of Total Revenues 2021 % of Total Revenues 2020 % of Total Revenues Revenues: Sales $ 171.1 36.4 % $ 191.9 42.4 % $ 553.7 38.9 % $ 523.0 41.5 % Franchise royalty revenue and fees: Franchise royalty revenue 116.6 24.8 % 109.3 24.2 % 344.4 24.2 % 301.9 24.0 % Franchise fees 22.2 4.7 % 7.5 1.6 % 53.8 3.8 % 19.7 1.5 % Total franchise royalty revenue and fees 138.8 29.5 % 116.8 25.8 % 398.2 28.0 % 321.6 25.5 % Franchise rental income 62.4 13.3 % 58.7 13.0 % 182.2 12.8 % 173.4 13.8 % Advertising funds revenue 98.0 20.8 % 84.8 18.8 % 289.7 20.3 % 241.5 19.2 % Total revenues $ 470.3 100.0 % $ 452.2 100.0 % $ 1,423.8 100.0 % $ 1,259.5 100.0 % Third Quarter Nine Months 2021 % of Sales 2020 % of Sales 2021 % of Sales 2020 % of Sales Cost of sales: Food and paper $ 54.8 32.0 % $ 59.6 31.1 % $ 165.5 29.9 % $ 161.4 30.9 % Restaurant labor 54.8 32.0 % 59.4 30.9 % 173.5 31.3 % 170.3 32.6 % Occupancy, advertising and other operating costs 36.8 21.6 % 40.5 21.1 % 118.4 21.4 % 118.5 22.6 % Total cost of sales $ 146.4 85.6 % $ 159.5 83.1 % $ 457.4 82.6 % $ 450.2 86.1 % Third Quarter Nine Months 2021 % of Sales 2020 % of Sales 2021 % of Sales 2020 % of Sales Restaurant margin $ 24.7 14.4 % $ 32.4 16.9 % $ 96.3 17.4 % $ 72.8 13.9 % 38 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 2021 2020 2021 2020 Key business measures: U.S. same-restaurant sales: Company-operated 3.4 % 4.2 % 13.2 % (2.2) % Franchised 2.0 % 7.2 % 10.0 % 1.1 % Systemwide 2.1 % 7.0 % 10.2 % 0.9 % International same-restaurant sales (a) 14.7 % (2.1) % 17.4 % (7.3) % Global same-restaurant sales: Company-operated 3.4 % 4.2 % 13.2 % (2.2) % Franchised (a) 3.3 % 6.2 % 10.8 % 0.2 % Systemwide (a) 3.3 % 6.1 % 10.9 % — % Systemwide sales: (b) U.S. Company-operated $ 170.0 $ 191.9 $ 552.3 $ 523.0 U.S. franchised 2,621.2 2,499.7 7,783.6 6,913.1 U.S. systemwide 2,791.2 2,691.6 8,335.9 7,436.1 International Company-operated 1.1 — 1.4 — International franchised (a) 361.3 291.3 1,018.3 784.1 International systemwide (a) 362.4 291.3 1,019.7 784.1 Global systemwide (a) $ 3,153.6 $ 2,982.9 $ 9,355.6 $ 8,220.2 ________________ (a) Excludes Argentina and Venezuela due to the impact of the highly inflationary economies of those countries. (b) During the third quarter of 2021 and 2020, global systemwide sales increased 5.3% and 6.7%, respectively, U.S. systemwide sales increased 3.7% and 7.9%, respectively, and international systemwide sales increased 20.2% and decreased 3.5%, respectively, on a constant currency basis. During the first nine months of 2021 and 2020, global systemwide sales increased 13.2% and 0.5%, respectively, U.S. systemwide sales increased 12.1% and 1.6%, respectively, and international systemwide sales increased 23.6% and decreased 9.3%, respectively, on a constant currency basis. 39 Third Quarter U.S. Company-operated U.S. Franchised International Company-operated International Franchised Systemwide Restaurant count: Restaurant count at July 4, 2021 314 5,581 1 970 6,866 Opened 1 26 1 20 48 Closed (a) (4) (17) — (2) (23) Restaurant count at October 3, 2021 311 5,590 2 988 6,891 Nine Months U.S. Company-operated U.S. Franchised International Company-operated International Franchised Systemwide Restaurant count at January 3, 2021 361 5,520 — 947 6,828 Opened 4 65 2 58 129 Closed (a) (6) (43) — (17) (66) Net (sold to) purchased by franchisees (48) 48 — — — Restaurant count at October 3, 2021 311 5,590 2 988 6,891 ________________ (a) Excludes restaurants temporarily closed due to the impact of the COVID-19 pandemic. Sales Third Quarter Nine Months 2021 2020 Change 2021 2020 Change Sales $ 171.1 $ 191.9 $ (20.8) $ 553.7 $ 523.0 $ 30.7 The decrease in sales for the third quarter of 2021 was primarily due to the impact of the sale of 47 Company-operated restaurants in New York during the second quarter of 2021, partially offset by a 3.4% increase in Company-operated same-restaurant sales. Company-operated same-restaurant sales increased due to higher average check, partially offset by a decrease in customer count. The increase in sales for the first nine months of 2021 was primarily due to a 13.2% increase in Company-operated same-restaurant sales, partially offset by the impact of the sale of 47 Company-operated restaurants in New York during the second quarter of 2021. Company-operated same-restaurant sales increased due to (1) higher average check and (2) an increase in customer count, reflecting the prior year impact of the COVID-19 pandemic. Company-operated same-restaurant sales during the first nine months of 2021 benefited from (1) government stimulus payments to consumers during the first quarter of 2021 and (2) the positive impact from the breakfast daypart. Franchise Royalty Revenue and Fees Third Quarter Nine Months 2021 2020 Change 2021 2020 Change Franchise royalty revenue $ 116.6 $ 109.3 $ 7.3 $ 344.4 $ 301.9 $ 42.5 Franchise fees 22.2 7.5 14.7 53.8 19.7 34.1 $ 138.8 $ 116.8 $ 22.0 $ 398.2 $ 321.6 $ 76.6 The increase in franchise royalty revenue during the third quarter and the first nine months of 2021 was primarily due to (1) a 3.3% and 10.8% increase in global franchise same-restaurant sales, respectively, and (2) a net increase in the number of franchise restaurants in operation during 2021 compared to 2020. Franchise same-restaurant sales during the third quarter of 2021 increased due to higher average check, partially offset by a decrease in customer count. Franchise same-restaurant sales during the first nine months of 2021 increased due to (1) higher average check and (2) an increase in customer count, reflecting the prior year impact of the COVID-19 pandemic. Franchise same-restaurant sales during the first nine months of 2021 40 benefited from (1) government stimulus payments to consumers during the first quarter of 2021 and (2) the positive impact from the breakfast daypart. The increase in franchise fees during the third quarter and the first nine months of 2021 was primarily due to (1) an increase in fees for providing information technology services to franchisees and (2) the accelerated recognition of franchise agreement revenue as a result of franchisee-to-franchisee restaurant transfers. Franchise Rental Income Third Quarter Nine Months 2021 2020 Change 2021 2020 Change Franchise rental income $ 62.4 $ 58.7 $ 3.7 $ 182.2 $ 173.4 $ 8.8 The increase in franchise rental income during the third quarter and the first nine months of 2021 was primarily due to (1) an increase in percent rent, reflecting higher systemwide sales compared with 2020, and (2) the impact of the sale of 47 Company-operated restaurants in New York during the second quarter of 2021. Advertising Funds Revenue Third Quarter Nine Months 2021 2020 Change 2021 2020 Change Advertising funds revenue $ 98.0 $ 84.8 $ 13.2 $ 289.7 $ 241.5 $ 48.2 The Company maintains two national advertising funds established to collect and administer funds contributed for use in advertising and promotional programs for Company-operated and franchised restaurants in the U.S. and Canada. Franchisees make contributions to the national advertising funds based on a percentage of sales of the franchised restaurants. The increase in advertising funds revenue during the third quarter and the first nine months of 2021 was primarily due to (1) an increase in franchise same-restaurant sales in the U.S. and Canada and (2) the prior year abatement of national advertising fund contributions on breakfast sales. Cost of Sales, as a Percent of Sales Third Quarter Nine Months 2021 2020 Change 2021 2020 Change Food and paper 32.0 % 31.1 % 0.9 % 29.9 % 30.9 % (1.0) % Restaurant labor 32.0 % 30.9 % 1.1 % 31.3 % 32.6 % (1.3) % Occupancy, advertising and other operating costs 21.6 % 21.1 % 0.5 % 21.4 % 22.6 % (1.2) % 85.6 % 83.1 % 2.5 % 82.6 % 86.1 % (3.5) % The increase in cost of sales, as a percent of sales, during the third quarter of 2021 was primarily due to (1) an increase in restaurant labor rates, (2) higher commodity costs, (3) lower local advertising spend during 2020 and (4) a decrease in customer count. These impacts were partially offset by higher average check. The decrease in cost of sales, as a percent of sales, during the first nine months of 2021 was primarily due to (1) higher average check, (2) an increase in customer count, reflecting the prior year impact of the COVID-19 pandemic, and (3) incremental recognition pay during April and May of 2020. These impacts were partially offset by (1) an increase in restaurant labor rates and (2) higher commodity costs. Franchise Support and Other Costs Third Quarter Nine Months 2021 2020 Change 2021 2020 Change Franchise support and other costs $ 10.5 $ 6.0 $ 4.5 $ 27.1 $ 19.4 $ 7.7 The increase in franchise support and other costs during the third quarter and the first nine months of 2021 was primarily due to an increase in costs incurred to provide information technology and other services to our franchisees. The increases in the first nine months were partially offset by investments made in 2020 to support U.S. franchisees in preparation of the national launch of breakfast on March 2, 2020. 41 Franchise Rental Expense Third Quarter Nine Months 2021 2020 Change 2021 2020 Change Franchise rental expense $ 34.4 $ 32.4 $ 2.0 $ 101.1 $ 93.0 $ 8.1 The increase in franchise rental expense during the third quarter and the first nine months of 2021 was primarily due to (1) an increase in percent rent, reflecting higher systemwide sales compared with 2020 and (2) the impact of the sale of 47 Company-operated restaurants in New York to franchisees during the second quarter of 2021. Franchise rental expense for the first nine months of 2021 also increased due to the impact of assigning certain leases to a franchisee in 2020. Advertising Funds Expense Third Quarter Nine Months 2021 2020 Change 2021 2020 Change Advertising funds expense $ 108.5 $ 92.0 $ 16.5 $ 310.6 $ 253.4 $ 57.2 On an interim basis, advertising funds expense is recognized in proportion to advertising funds revenue. The Company expects advertising funds expense to exceed advertising funds revenue by approximately $31.0 million for 2021, which includes (1) the Company’s previously announced decision to fund up to $25.0 million of incremental advertising and (2) the amount by which advertising funds revenue exceeded advertising funds expense in 2020 (excluding the Company’s funding of $14.6 million of incremental advertising) and 2019 of approximately $6.0 million. During the third quarter and the first nine months of 2021, advertising funds expense increased due to (1) an increase in franchise same-restaurant sales in the U.S. and Canada and (2) an increase of $3.3 million and $9.0 million, respectively, in the recognition of the expected advertising spend in excess of advertising funds revenue compared with the prior year. General and Administrative Third Quarter Nine Months 2021 2020 Change 2021 2020 Change Incentive compensation $ 11.0 $ 4.2 $ 6.8 33.5 13.2 20.3 Professional fees 11.7 8.0 3.7 29.4 20.8 8.6 Share-based compensation 5.7 5.2 0.5 16.7 14.4 2.3 Travel-related expenses 1.9 0.8 1.1 3.9 4.7 (0.8) Other, net 32.5 29.1 3.4 95.1 94.5 0.6 $ 62.8 $ 47.3 $ 15.5 $ 178.6 $ 147.6 $ 31.0 The increase in general and administrative expenses during the third quarter and the first nine months of 2021 was primarily due to (1) an increase in incentive compensation accruals and higher share-based compensation, reflecting higher operating performance as compared to plan in the first nine months of 2021 versus the first nine months of 2020, and (2) higher professional fees, primarily as a result of costs associated with the Company’s enterprise resource planning implementation. General and administrative expenses also increased during the third quarter of 2021 due to higher travel-related expenses. Depreciation and Amortization Third Quarter Nine Months 2021 2020 Change 2021 2020 Change Restaurants $ 18.4 $ 21.2 $ (2.8) $ 56.5 $ 63.7 $ (7.2) Technology support, corporate and other 12.5 11.8 0.7 36.7 35.0 1.7 $ 30.9 $ 33.0 $ (2.1) $ 93.2 $ 98.7 $ (5.5) The decrease in depreciation and amortization during the third quarter and the first nine months of 2021 was primarily due to assets becoming fully depreciated, partially offset by an increase in depreciation and amortization for technology investments. Depreciation and amortization during the first nine months of 2021 also decreased due to the impact of a prior year change in useful lives for certain asset categories. 42 System Optimization Gains, Net Third Quarter Nine Months 2021 2020 Change 2021 2020 Change System optimization gains, net $ (1.4) $ — $ (1.4) $ (32.7) $ (2.3) $ (30.4) System optimization gains, net for the third quarter of 2021 were primarily comprised of gains on the sale of surplus and other properties. System optimization gains, net for the first nine months of 2021 were primarily comprised of a gain on the sale of 47 Company-operated restaurants in New York. See Note 4 to the Condensed Consolidated Financial Statements contained in Item 1 herein for further information on the sale of the Company-operated restaurants in New York. Reorganization and Realignment Costs Third Quarter Nine Months 2021 2020 Change 2021 2020 Change Operations and field realignment $ 0.1 $ 3.0 $ (2.9) $ 1.6 $ 3.0 $ (1.4) IT realignment — 0.4 (0.4) — 6.8 (6.8) G&A realignment — — — — 0.3 (0.3) System optimization initiative 0.3 — 0.3 5.8 0.1 5.7 $ 0.4 $ 3.4 $ (3.0) $ 7.4 $ 10.2 $ (2.8) In September 2020, the Company initiated the Operations and Field Realignment Plan. The Operations and Field Realignment Plan realigned the Company’s restaurant operations team, including transitioning from separate leaders of Company and franchise operations to a single leader of all U.S. restaurant operations. The Operations and Field Realignment Plan also includes contract terminations, including the closure of certain field offices. During the first nine months of 2021, the Company recognized costs totaling $1.6 million, which primarily included third-party and other costs. The Company expects to incur additional costs aggregating up to approximately $0.5 million, comprised primarily of third-party and other costs. The Company expects to recognize the majority of the remaining costs associated with the Operations and Field Realignment Plan during the remainder of 2021. 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 nine months ended October 3, 2021, the Company recognized costs associated with its system optimization initiative totaling $5.8 million, which were primarily comprised of the write-off of certain lease assets, lease termination fees and transaction fees associated with the NPC bankruptcy sale process. The Company expects to recognize a gain of approximately $1.0 million related to the write-off of certain NPC-related lease liabilities upon final termination of the leases. Impairment of Long-Lived Assets Third Quarter Nine Months 2021 2020 Change 2021 2020 Change Impairment of long-lived assets $ 0.6 $ — $ 0.6 $ 1.8 $ 4.7 $ (2.9) The change in impairment charges during the third quarter of 2021 was primarily driven by impairment charges as a result of the deterioration in operating performance of certain Company-operated restaurants when compared to the third quarter of 2020. The change in impairment charges during the first nine months of 2021 was primarily driven by the expected deterioration in operating performance of certain Company-operated restaurants in the first nine months of 2020 as a result of the COVID-19 pandemic. Other Operating Income, Net Third Quarter Nine Months 2021 2020 Change 2021 2020 Change Gains on sales-type leases $ (0.7) $ (0.2) $ (0.5) $ (4.2) $ (1.4) $ (2.8) Equity in earnings in joint ventures, net (2.3) (2.1) (0.2) (5.6) (4.4) (1.2) Other, net — (0.4) 0.4 (1.0) (0.3) (0.7) $ (3.0) $ (2.7) $ (0.3) $ (10.8) $ (6.1) $ (4.7) The change in other operating income, net during the third quarter and the first nine months of 2021 was primarily due to (1) gains on new and modified sales-type leases and (2) an increase in the equity in earnings from our TimWen joint venture. 43 Interest Expense, Net Third Quarter Nine Months 2021 2020 Change 2021 2020 Change Interest expense, net $ 26.0 $ 29.1 $ (3.1) $ 83.0 $ 86.7 $ (3.7) Interest expense, net decreased during the third quarter and the first nine months of 2021 primarily due to 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 2021 2020 Change 2021 2020 Change Loss on early extinguishment of debt $ — $ — $ — $ 17.9 $ — $ 17.9 During the second quarter of 2021, in connection with the refinancing of a portion of the Company’s securitized financing facility, 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 million was comprised of a specified make-whole payment of $9.6 million and the write-off of certain unamortized deferred financing costs of $8.3 million. Other Income, Net Third Quarter Nine Months 2021 2020 Change 2021 2020 Change Other income, net $ 0.2 $ 0.2 $ — $ 0.4 $ 1.2 $ (0.8) The change in other income, net during the first nine months of 2021 was primarily due to fluctuations in interest income earned on our cash equivalents. Provision for Income Taxes Third Quarter Nine Months 2021 2020 Change 2021 2020 Change Income before income taxes $ 54.4 $ 52.4 $ 2.0 $ 189.6 $ 105.2 $ 84.4 Provision for income taxes (13.2) (12.6) (0.6) (41.3) (26.1) (15.2) Effective tax rate on income 24.3 % 24.2 % 0.1 % 21.8 % 24.8 % (3.0) % Our effective tax rates for the third quarter and the first nine months of 2021 and 2020 were impacted by variations in income before income taxes, including uncertainty in 2020 income before income taxes arising from the COVID-19 pandemic, 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 quarter of 2021 compared with the third quarter of 2020 was primarily due to a decrease in the tax benefit from share-based compensation. The decrease in the effective tax rate for the first nine months of 2021 compared with the first nine months of 2020 was primarily due to a decrease in the tax effects of our foreign operations and an increase in the tax benefit from share-based compensation. 44 Segment Information See Note 17 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 2021 2020 Change 2021 2020 Change Sales $ 170.0 $ 191.9 $ (21.9) $ 552.3 $ 523.0 $ 29.3 Franchise royalty revenue 102.6 98.1 4.5 305.4 271.1 34.3 Franchise fees 19.7 5.7 14.0 46.0 16.2 29.8 Advertising fund revenue 91.5 79.2 12.3 271.9 226.9 45.0 Total revenues $ 383.8 $ 374.9 $ 8.9 $ 1,175.6 $ 1,037.2 $ 138.4 Segment profit $ 108.9 $ 108.3 $ 0.6 $ 347.6 $ 283.3 $ 64.3 The increase in Wendy’s U.S. revenues during the third quarter and the first nine months of 2021 was primarily due to (1) an increase in systemwide same-restaurant sales and (2) higher franchise fees, reflecting an increase in fees for providing information technology services to franchisees. Same-restaurant sales increased during the third quarter and the first nine months of 2021 primarily due to higher average check. Same-restaurant sales during the first nine months of 2021 also benefited from (1) an increase in customer count, reflecting the prior year impact of the COVID-19 pandemic, and (2) the positive impact from the breakfast daypart. These increases were partially offset by the impact of the sale of 47 Company-operated restaurants in New York during the second quarter of 2021. The increase in Wendy’s U.S. segment profit during the third quarter of 2021 was primarily due to higher revenues, partially offset by (1) higher 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,” (2) higher franchise support and other costs, (3) higher general and administrative expenses and (4) higher advertising fund expense, reflecting the Company’s decision to fund incremental advertising to support the breakfast daypart. The increase in Wendy’s U.S. segment profit during the first nine months of 2021 was primarily due to (1) higher revenues and (2) 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.” These changes were partially offset by (1) higher general and administrative expenses, (2) higher advertising fund expense, reflecting the Company’s decision to fund incremental advertising to support the breakfast daypart and (3) higher franchise support and other costs. Wendy’s International Third Quarter Nine Months 2021 2020 Change 2021 2020 Change Sales $ 1.1 $ — $ 1.1 $ 1.4 $ — $ 1.4 Franchise royalty revenue 13.9 11.2 2.7 39.0 30.8 8.2 Franchise fees 1.2 0.5 0.7 4.0 1.3 2.7 Advertising fund revenue 6.5 5.6 0.9 17.8 14.6 3.2 Total revenues $ 22.7 $ 17.3 $ 5.4 $ 62.2 $ 46.7 $ 15.5 Segment profit $ 6.9 $ 6.6 $ 0.3 $ 21.2 $ 15.3 $ 5.9 The increase in Wendy’s International revenues during the third quarter and the first nine months of 2021 was primarily due to an increase in same-restaurant sales. Same-restaurant sales increased during the third quarter and the first nine months of 2021 due to an increase in customer count, reflecting the prior year impact of the COVID-19 pandemic. The increase in Wendy’s International segment profit during the third quarter and the first nine months of 2021 was primarily due to higher revenues, partially offset by higher general and administrative expenses. 45 Global Real Estate & Development Third Quarter Nine Months 2021 2020 Change 2021 2020 Change Franchise fees $ 1.4 $ 1.4 $ — $ 3.8 $ 2.2 $ 1.6 Franchise rental income 62.4 58.7 3.7 182.2 173.4 8.8 Total revenues $ 63.8 $ 60.1 $ 3.7 $ 186.0 $ 175.6 $ 10.4 Segment profit $ 27.0 $ 25.3 $ 1.7 $ 79.8 $ 75.5 $ 4.3 The increase in Global Real Estate & Development revenues during the third quarter and the first nine months of 2021 was primarily due to higher franchise rental income. See “Franchise Rental Income” above for further information. The increase in Global Real Estate & Development segment profit during the third quarter of 2021 was primarily due to an increase in net rental income, reflecting the impact of the sale of 47 Company-operated restaurants in New York to franchisees during the second quarter of 2021. The increase in Global Real Estate & Development segment profit during the first nine months of 2021 was primarily due to (1) gains on new and modified sales-type leases and (2) an increase in the equity in earnings from the TimWen joint venture. 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. Our anticipated cash requirements for the remainder of 2021, exclusive of operating cash flow requirements, consist principally of: • capital expenditures of approximately $30.0 million to $40.0 million, resulting in total anticipated cash capital expenditures for the year of approximately $75.0 million to $85.0 million; • cash dividends aggregating approximately $26.5 million as discussed below in “Dividends;” and • potential stock repurchases of up to $140.6 million, of which $15.5 million was repurchased subsequent to October 3, 2021 through November 3, 2021, as discussed below in “Stock Repurchases.” 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 months of 2021 and 2020: Nine Months 2021 2020 Change Net cash provided by (used in): Operating activities $ 276.7 $ 205.8 $ 70.9 Investing activities 15.0 (41.0) 56.0 Financing activities (57.5) (115.3) 57.8 Effect of exchange rate changes on cash 0.2 (1.8) 2.0 Net increase in cash, cash equivalents and restricted cash $ 234.4 $ 47.7 $ 186.7 46 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 $276.7 million and $205.8 million in the first nine months of 2021 and 2020, respectively. The increase was primarily due to (1) higher net income, adjusted for non-cash expenses, (2) a cash payment of $24.7 million related to the settlement of the financial institutions class action in January 2020, (3) the timing of receipt of franchisee rental payments and (4) a decrease in payments for incentive compensation for the 2020 fiscal year paid in 2021. These increases were partially offset by (1) the timing of payments for marketing expenses of the national advertising funds and (2) an increase in cash paid for income taxes. Investing Activities Cash provided by (used in) investing activities was $15.0 million and $(41.0) million in the first nine months of 2021 and 2020, respectively. The change was primarily due to (1) an increase in proceeds from dispositions of $49.1 million, reflecting the sale of 47 Company-operated restaurants in New York during the second quarter of 2021, (2) the net settlement of deposits associated with the Company’s consortium bid to acquire NPC’s Wendy’s restaurants of $4.9 million in the first quarter of 2021 and (3) a decrease in capital expenditures of $1.5 million. Financing Activities Cash used in financing activities was $57.5 million and $115.3 million in the first nine months of 2021 and 2020, respectively. The change was primarily due to (1) a net increase in cash provided by long-term debt activities of $147.1 million, reflecting the impact of the completion of the Company’s debt refinancing transaction during the second quarter of 2021, and (2) an increase in proceeds from stock option exercises, net of payments related to tax withholding for share-based compensation, of $12.7 million. These changes were partially offset by (1) an increase in repurchases of common stock of $79.0 million and (2) an increase in dividends of $19.8 million. Long-Term Debt, Including Current Portion Wendy’s Funding, LLC, a limited-purpose, bankruptcy-remote, wholly-owned indirect subsidiary of The Wendy’s Company, is the master issuer (the “Master Issuer”) of outstanding senior secured notes under a securitized financing facility that was entered into in June 2015. In June 2021, the Master Issuer completed a refinancing transaction with respect to this facility under which the Master Issuer issued the Series 2021-1 Class A-2 Notes with initial principal amounts totaling $1.1 billion. The net proceeds from the sale of the Series 2021-1 Class A-2 Notes were used to repay in full the Master Issuer’s outstanding Series 2015-1 Class A-2-III Notes and Series 2018-1 Class A-2-I Notes, including the payment of prepayment and transaction costs. The remaining funds will be used for general corporate purposes, which may include funding for growth initiatives, return of capital to shareholders, or additional debt retirement. In connection with the issuance of the Series 2021-1 Class A-2 Notes, the Master Issuer also issued the Series 2021-1 Class A-1 Notes, which allow for the drawing of up to $300.0 million on a revolving basis using various credit instruments, including a letter of credit facility. No amounts were borrowed under the Series 2021-1 Class A-1 Notes during the nine months ended October 3, 2021. The Series 2021-1 Class A-1 Notes replaced the Company’s $150.0 million Series 2019-1 Class A-1 Notes and $100.0 million Series 2020-1 Class A-1 Notes, which were cancelled on the closing date, and the letters of credit outstanding against the Series 2019-1 Class A-1 Notes were transferred to the Series 2021-1 Class A-1 Notes. Except as described above, there were no material changes to the terms of any debt obligations since January 3, 2021. The Company was in compliance with its debt covenants as of October 3, 2021. See Note 7 to the Condensed Consolidated Financial Statements contained in Item 1 herein for further information related to our long-term debt obligations. 47 Dividends On March 15, 2021, June 15, 2021 and September 15, 2021, the Company paid quarterly cash dividends per share of $.09, $0.10 and $.12, respectively, aggregating $69.0 million. On November 10, 2021, the Company announced a dividend of $.12 per share to be paid on December 15, 2021 to stockholders of record as of December 1, 2021. As a result of the November 10 announcement, the Company expects that its total cash requirement for the fourth quarter of 2021 will be approximately $26.5 million based on the number of shares of its common stock outstanding at November 3, 2021. 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 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”). As previously announced, beginning in March 2020, the Company temporarily suspended all share repurchase activity under the February 2020 authorization in connection with the Company’s response to the COVID-19 pandemic. In July 2020, the Company’s Board of Directors approved an extension of the February 2020 authorization by one year, through February 28, 2022, when and if market and economic conditions warrant and to the extent legally permissible. The Company resumed share repurchases in August 2020. In addition, in May 2021 and August 2021, the Board of Directors approved increases of $50.0 million and $70.0 million, respectively, to the February 2020 authorization, resulting in an aggregate authorization of $220.0 million that continues to expire on February 28, 2022. During the nine months ended October 3, 2021, the Company repurchased 5.9 million shares under the February 2020 authorization with an aggregate purchase price of $127.2 million, of which $2.3 million was accrued at October 3, 2021, and excluding commissions of $0.1 million. As of October 3, 2021, the Company had $60.6 million of availability remaining under the February 2020 authorization. Subsequent to October 3, 2021 through November 3, 2021, the Company repurchased 0.7 million shares under the February 2020 authorization with an aggregate purchase price of $15.5 million, excluding commissions. In addition, in November 2021, the Board of Directors approved an increase of $80.0 million to the February 2020 authorization, resulting in an aggregate authorization of $300.0 million that continues to expire on February 28, 2022. The Company also announced in November 2021 its intention to launch a $125.0 million accelerated share repurchase transaction during the fourth quarter of 2021 as part of the February 2020 authorization. The Company has availability of $125.1 million remaining under the February 2020 authorization as of November 10, 2021. General Inflation, Commodities and Changing Prices We believe that general inflation did not have a significant effect on our consolidated results of operations. We attempt to manage any inflationary costs and commodity price increases through product mix and selective menu price increases. Delays in implementing such menu price increases and competitive pressures 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.