What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-02-21 compared with 2024-02-26 · 122 added, 156 removed, 404 unchanged (41% of the section changed)

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See “Special Note Regarding Forward-Looking Statements and Projections” in “Part I” preceding “Item 1 - Business.” You should consider our forward-looking statements in light of the risks discussed under the heading “Risk Factors” in Item 1A above, as well as our consolidated financial statements, related notes and other financial information appearing elsewhere in this report 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.

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See “Results of Operations” below and Note 25 to the Consolidated Financial Statements contained in Item 8 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 and are referred to herein as (1) “the year ended December 31, 2023” or “2023,” (2) “the year ended January 1, 2023” or “2022,” and (3) “the year ended January 2, 2022” or “2021,” all of which consisted of 52 weeks.

The Company’s fiscal reporting periods consist of 52 or 53 weeks ending on the Sunday closest to December 31 and are referred to herein as (1) “the year ended December 29, 2024” or “2024,” (2) “the year ended December 31, 2023” or “2023,” and (3) “the year ended January 1, 2023” or “2022,” all of which consisted of 52 weeks.

All references to years, quarters and months relate to fiscal periods rather than calendar periods.

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In addition, at December 29, 2024, there were 1,307 Wendy’s restaurants in operation in 31 foreign countries and U.S.

Of the international restaurants, 1,198 were operated by 106 franchisees and 12 were operated by the Company in the United Kingdom (the “U.K.”).

Of the international restaurants, 1,294 were operated by 107 franchisees and 13 were operated by the Company in the U.K.

The revenues from our restaurant business are derived from two principal sources:

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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.

Wendy’s long-term growth opportunities include delivering accelerated global growth through (1) driving same-restaurant sales momentum across all dayparts, (2) accelerating our consumer-facing digital platforms and technologies and (3) expanding the Company’s footprint across the globe.

Wendy’s strategic framework includes providing fresh, famous food to consumers, delivering an exceptional customer experience through operational excellence and expanding the Company’s footprint across the globe.

Our opportunities to execute on this framework for long-term profitable growth include (1) driving same-restaurant sales and share growth, (2) accelerating digital growth, (3) improving restaurant profitability and (4) driving global unit growth.

Key Business Measures

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• Average Unit Volumes - We calculate Company-operated restaurant average unit volumes by summing the average weekly sales of all Company-operated restaurants which reported sales during the week.

Franchised restaurant average unit volumes is a non-GAAP financial measure, which includes sales by franchised restaurants, which 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.

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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 highly inflationary economies of those countries.

Same-restaurant sales and systemwide sales exclude sales from Argentina due to that country’s highly inflationary 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, Company-operated restaurant margin, systemwide sales and average unit volumes, including franchised restaurant average unit volumes, 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’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.

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• Global Company-operated restaurant margin was 15.4% in 2024, an increase of 80 basis points compared to 2023;

• Net income increased 15.3% to $204.4 million in 2023 compared to $177.4 million in 2022.

Global Same-Restaurant Sales

Wendy’s long-term growth opportunities include driving same-restaurant sales across all dayparts through quality differentiation, exciting menu innovation and compelling value offerings.

Global same-restaurant sales increased 4.3% during 2023 and increased 9.2% on a two-year basis.

• Net income decreased 4.9% to $194.4 million in 2024 compared to $204.4 million in 2023.

Wendy’s long-term growth opportunities include accelerating consumer-facing digital platforms and technologies.

Over the past several years, 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.

Over the past several years, the Company has invested significant resources to focus on consumer-facing technology, including enhancements to Wendy’s mobile apps and loyalty programs and establishing delivery arrangements with third-party vendors for Wendy’s U.S.

and Canadian restaurants.

The Company is also continuing to make digital investments and is partnering with key technology providers to help execute our digital, restaurant technology and enterprise technology initiatives and support our technology innovation and growth.

During the second quarter of 2023, the Company revised its

definition of digital sales to reflect our full digital portfolio by including in-restaurant mobile scans, in addition to our previously included delivery, mobile order and kiosk digital channels.

The Company’s digital business has continued to grow and, under the revised definition, digital sales increased from approximately 11.0% of global systemwide sales during 2022 to approximately 13.2% during 2023.

The Company’s digital business has continued to grow and digital sales increased from approximately 13.2% of global systemwide sales during 2023 to approximately 17.6% during 2024.

New Restaurant Development

Wendy’s long-term growth opportunities include expanding the Company’s footprint across the globe.

To promote new restaurant development, the Company has provided franchisees with certain incentive programs for qualifying new restaurants, in addition to our build to suit development fund (see Note 20 to the Consolidated Financial Statements contained in Item 8 herein for further discussion).

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 fees for up to the first three years of operation for qualifying new restaurants.

To promote new restaurant development, the Company has provided franchisees with certain incentive programs for qualifying new and existing restaurants (see Note 20 to the Consolidated Financial Statements contained in Item 8 herein for further discussion), in addition to our build to suit development fund (see Note 19 to the Consolidated Financial Statements contained in Item 8 herein for further discussion).

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 2023, the Company and its franchisees added 145 net new restaurants across the Wendy’s system.

Global restaurant counts as of December 29, 2024 were flat compared to December 31, 2023 as a result of our actions to strengthen the system by closing certain underperforming restaurants during 2024.

Organizational Redesign

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Penegor, the Company’s previous President and Chief Executive Officer, who departed from the Company in February 2024.

As a result of the succession of the President and Chief Executive Officer, the Company now expects to incur total costs of approximately $17 million to $19 million related to the Organizational Redesign Plan, of which approximately $15 million to $17 million will be cash expenditures expected through 2026.

Costs related to the plan are recorded to “Reorganization and realignment costs.” During 2023, the Company recognized costs totaling $9.1 million, which primarily included severance and related employee costs and share-based compensation.

The Company expects to incur additional costs aggregating approximately $8 million to $10 million, comprised of (1) severance and related employee costs of approximately $7.0 million, (2) share-based compensation of approximately $2.0 million and (3) recruitment and relocation costs of approximately $0.5 million.

The Company expects to incur total costs of approximately $18 million related to the Organizational Redesign Plan, including costs related to the succession of the President and Chief Executive Officer role.

Of the total costs, approximately $15 million will be cash expenditures through 2026.

Costs related to the Organizational Redesign Plan are recorded to “Reorganization and realignment costs.” During 2024, the Company recognized costs totaling $8.4 million, which primarily included severance and related employee costs.

The Company expects to incur additional costs aggregating approximately $0.6 million, comprised primarily of share-based compensation.

The Company expects costs related to the Organizational Redesign Plan to continue into 2026.

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For discussion related to 2022 items and year-to-year comparisons between 2023 and 2022 that are not included in this Form 10-K, please refer to Part II, Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2022 Form 10-K, filed with the United States Securities and Exchange Commission on March 1, 2023.

Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2023 Form 10-K, filed with the United States Securities and Exchange Commission on February 26, 2024.

Results of Operations

The tables included throughout this Results of Operations section set forth in millions (except as otherwise indicated) the Company’s consolidated results of operations for the years ended December 31, 2023, January 1, 2023 and January 2, 2022.

2024 2023 2022

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Interest expense, net (123.9) 0.2 (124.1) (1.8) (122.3)

Gain (loss) on early extinguishment of debt, net 2.3 2.3 — 17.9 (17.9)

Investment (loss) income, net (10.4) (12.5) 2.1 2.1 —

Gain on early extinguishment of debt, net — (2.3) 2.3 2.3 —

Investment income (loss), net — 10.4 (10.4) (12.5) 2.1

Other income, net 24.8 (4.8) 29.6 19.2 10.4

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(a) Excludes Argentina and Venezuela due to the impact of the highly inflationary economies of those countries.

(a) Excludes Argentina due to the impact of that country’s highly inflationary economy.

(b) During 2024 and 2023, global systemwide sales increased 3.1% and 6.1%, respectively, U.S.

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Closed (3) (58) (1) (41) (103)

Restaurant count at January 1, 2023

Restaurant count at December 31, 2023

403 5,627 12 1,198 7,240

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Closed (21) (177) — (78) (276)

Net (sold to) purchased by franchisees (3) 3 — — —

Restaurant count at December 29, 2024

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Sales $ 925.9 $ (4.2) $ 930.1 $ 33.5 $ 896.6

The increase in sales during 2023 was primarily due to (1) a 2.7% increase in Company-operated same-restaurant sales of $23.9 million and (2) net new restaurant development of $10.7 million.

Company-operated same-restaurant sales increased due to higher average check, partially offset by a decrease in customer count.

The decrease in sales during 2024 was primarily due to (1) net closures of Company-operated restaurants of $3.1 million and (2) a 0.1% decrease in Company-operated same-restaurant sales of $2.4 million.

Company-operated same-restaurant sales decreased due to a decrease in customer count, partially offset by higher average check.

Franchise Royalty Revenue and Fees 2024 2023 2022

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$ 626.0 $ 33.7 $ 592.3 $ 34.1 $ 558.2

Franchise royalty revenue during 2023 increased $26.6 million, of which (1) $22.0 million was due to a 4.4% increase in franchise same-restaurant sales and (2) $6.3 million was due to net new restaurant development.

Franchise royalty revenue during 2024 increased $16.3 million, of which (1) $9.3 million was due to a 1.7% increase in global franchise same-restaurant sales and (2) $8.3 million was due to net new restaurant development.

Franchise same-restaurant sales during 2024 increased due to higher average check, partially offset by a decrease in customer count.

The increase in franchise fees during 2023 was primarily due to (1) higher fees for providing information technology services to franchisees of $3.5 million and (2) an increase in fees from facilitating Franchise Flips and other miscellaneous fees of $4.0 million.

The increase in franchise fees during 2024 was primarily due to (1) early termination fees for franchised restaurant closures of $8.2 million, (2) higher fees for providing information technology services to franchisees of $4.7 million and (3) an increase in other miscellaneous fees of $4.5 million.

Franchise Rental Income 2024 2023 2022

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Franchise rental income $ 236.5 $ 6.3 $ 230.2 $ (4.3) $ 234.5

The decrease in franchise rental income during 2023 was primarily due to the impact of assigning certain leases to franchisees, partially offset by an increase in executory costs.

See Note 19 to the Consolidated Financial Statements contained in Item 8 herein for further discussion.

The increase in franchise rental income during 2024 was primarily due to the impact of (1) amending certain existing leases of $4.0 million and (2) entering into new leases of $2.2 million.

Advertising Funds Revenue 2024 2023 2022

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Advertising funds revenue $ 458.1 $ 29.1 $ 429.0 $ 22.8 $ 406.2

The increase in advertising funds revenue during 2023 was primarily due to an increase in franchise same-restaurant sales in the U.S.

The increase in advertising funds revenue during 2024 was primarily due to (1) promotional activity of $12.0 million, (2) an increase in franchise same-restaurant sales in the U.S.

and Canada of $6.9 million and (3) net new restaurant development of $5.6 million.

Cost of Sales, as a Percent of Sales 2024 2023 2022

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84.6 % (0.8) % 85.4 % (0.8) % 86.2 %

The decrease in cost of sales, as a percent of sales, during 2023 was primarily due to higher average check.

This impact was partially offset by (1) an increase in restaurant labor rates, (2) higher commodity costs, (3) a decrease in customer count and (4) the impact of the Company’s investments to support the entry into the U.K.

market and additional inflationary pressures in the U.K.

The decrease in cost of sales, as a percent of sales, during 2024 was primarily due to (1) higher average check and (2) labor efficiencies.

These impacts were partially offset by (1) an increase in restaurant labor rates and (2) a decrease in customer count.

Franchise Support and Other Costs 2024 2023 2022

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Franchise support and other costs $ 67.7 $ 10.5 $ 57.2 $ 10.5 $ 46.7

The increase in franchise support and other costs during 2023 was primarily due to an increase in costs incurred to provide information technology and other services to franchisees.

The increase in franchise support and other costs during 2024 was primarily due to (1) an increase in costs incurred to provide information technology and other services to franchisees and (2) an increase in the provision for doubtful accounts.

Franchise Rental Expense 2024 2023 2022

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Franchise rental expense $ 127.4 $ 2.0 $ 125.4 $ 1.3 $ 124.1

The increase in franchise rental expense during 2023 was primarily due to an increase in executory costs.

See Note 19 to the Consolidated Financial Statements contained in Item 8 herein for further discussion.

The increase in franchise rental expense during 2024 was primarily due to the impact of assigning certain leases to franchisees.

Advertising Funds Expense 2024 2023 2022

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Advertising funds expense $ 478.1 $ 50.1 $ 428.0 $ (2.8) $ 430.8

The decrease in advertising funds expense during 2023 was primarily due to a decrease in the Company’s funding of incremental advertising, partially offset by an increase in franchise same-restaurant sales in the U.S.

The increase in advertising funds expense during 2024 was primarily due to (1) the same factors as described above for “Advertising Funds Revenue” and (2) the recognition of the expected Company breakfast advertising spend in excess of advertising funds revenue of $21.9 million.

General and Administrative 2024 2023 2022

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Employee compensation and benefits $ 135.1 $ 8.7 $ 126.4 $ (2.1) $ 128.5

Share-based compensation 22.5 (2.0) 24.5 2.5 22.0

Professional fees 58.0 (2.3) 60.3 (1.5) 61.8

Incentive compensation 25.6 (1.2) 26.8 1.8 25.0

Share-based compensation 22.2 (0.3) 22.5 (2.0) 24.5

Other, net 14.3 0.3 14.0 (1.2) 15.2

$ 255.2 $ 5.2 $ 250.0 $ (5.0) $ 255.0

The decrease in general and administrative expenses during 2023 was primarily due to (1) a decrease in employee compensation and benefits, (2) a decrease in share-based compensation and (3) lower professional fees, primarily as a result of costs associated with the Company’s enterprise resource planning (“ERP”) system implementation during 2022.

These decreases were partially offset by an increase in incentive compensation accruals, reflecting higher operating performance as compared to plan in 2023 versus 2022.

The increase in general and administrative expenses during 2024 was primarily due to higher employee compensation and benefits.

This increase was partially offset by (1) lower professional fees, primarily as a result of costs associated with the Company’s human capital management (“HCM”) system implementation during 2023, and (2) a decrease in incentive compensation accruals, reflecting lower operating performance as compared to plan in 2024 versus 2023.

Depreciation and Amortization (exclusive of amortization of cloud computing arrangements shown separately below) 2024 2023 2022

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$ 143.2 $ 7.4 $ 135.8 $ 2.4 $ 133.4

The increase in depreciation and amortization during 2023 was primarily due to (1) asset additions for new and remodeled restaurants and (2) asset disposals associated with closed restaurants.

These increases were partially offset by assets becoming fully depreciated.

The increase in depreciation and amortization during 2024 was primarily due to (1) depreciation and amortization for technology investments and (2) asset additions for new and remodeled restaurants.

Amortization of Cloud Computing Arrangements 2024 2023 2022

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Amortization of cloud computing arrangements $ 14.7 $ 1.9 $ 12.8 $ 10.4 $ 2.4

Amortization of cloud computing arrangements primarily represents amortization of assets associated with the Company’s ERP system implementation completed in 2022.

The increase in amortization of cloud computing arrangements was primarily due to amortization of assets associated with the Company’s HCM system implementation completed in 2023.

System Optimization Gains, Net 2024 2023 2022

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System optimization gains, net $ 1.2 $ 0.3 $ 0.9 $ (5.9) $ 6.8

System optimization gains, net during 2022 were primarily comprised of gains on the sale of surplus and other properties.

System optimization gains, net during 2024 were primarily comprised of gains on the sale of Company-operated restaurants.

See Note 15 to the Consolidated Financial Statements contained in Item 8 herein for further discussion.

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Organizational Redesign Plan $ 8.4 $ (0.7) $ 9.1 $ 9.1 $ —

System optimization initiative 0.1 (0.5) 0.6 (6.3) 6.9

Other reorganization and realignment plans 0.1 — 0.1 (0.6) 0.7

$ 8.5 $ (0.7) $ 9.2 $ 8.5 $ 0.7

During 2023, the Company recognized costs totaling $9.1 million under the Organizational Redesign Plan, which primarily included severance and related employee costs of $6.2 million and share-based compensation of $1.3 million.

See Note 5 to the Consolidated Financial Statements contained in Item 8 herein for further information regarding the Organizational Redesign Plan.

Costs incurred under the Company’s system optimization initiative and other reorganization and realignment plans were not material during 2023 and 2022.

The Company does not expect to incur any material additional costs under these plans.

See Note 5 to the Consolidated Financial Statements contained in Item 8 herein for further information regarding the Company’s reorganization and realignment plans.

During 2024 and 2023, the Company recognized costs under the Organizational Redesign Plan of $8.4 million and $9.1 million, respectively, which primarily included severance and related employee costs.

See Note 16 to the Consolidated Financial Statements contained in Item 8 herein for further information on the Organizational Redesign Plan.

Impairment of Long-Lived Assets 2024 2023 2022

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Impairment of long-lived assets $ 9.7 $ 8.3 $ 1.4 $ (5.0) $ 6.4

The decrease in impairment of long-lived assets during 2023 was primarily driven by higher impairment charges in the prior year as a result of the deterioration in operating performance of certain Company-operated restaurants.

The increase in impairment of long-lived assets during 2024 was primarily due to (1) the decision to close certain Company-operated restaurants and (2) the deterioration in operating performance of certain other Company-operated restaurants.

Other Operating Income, Net 2024 2023 2022

Amount Change Amount Change Amount

Gain from insurance recoveries $ — $ 8.6 $ (8.6) $ (8.6) $ —

Lease buyout 0.1 2.9 (2.8) (3.8) 1.0

Gains on sales-type leases $ 0.5 $ (2.0) $ 2.5 $ (0.5) $ 3.0

Lease buyout (1.0) (0.9) (0.1) (2.9) 2.8

Equity in earnings in joint ventures, net 11.6 0.8 10.8 1.4 9.4

Gain from insurance recoveries — — — (8.6) 8.6

Other, net 0.3 (0.3) 0.6 0.7 (0.1)

$ 11.4 $ (2.4) $ 13.8 $ 9.9 $ 23.7

The decrease in other operating income, net during 2023 was primarily due to (1) a gain from insurance recoveries during 2022 and (2) lease buyout activity in 2022.

These impacts were partially offset by an increase in the equity in earnings from our TimWen joint venture.

The decrease in other operating income, net during 2024 was primarily due to prior year gains on new and modified sales-type leases.

Interest Expense, Net 2024 2023 2022

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Interest expense, net $ 123.9 $ (0.2) $ 124.1 $ 1.8 $ 122.3

Interest expense, net increased during 2023 primarily due to the impact of completing a debt financing transaction under the Company’s securitized financing facility in the first quarter of 2022, partially offset by the impact of repurchasing $40.4 million in principal of the Company’s 7% debentures and $29.2 million in principal of the Company’s Class A-2 senior secured notes during 2023.

See Note 12 to the Consolidated Financial Statements contained in Item 8 herein for further discussion.

Gain (Loss) on Early Extinguishment of Debt, Net 2023 2022 2021

Interest expense, net decreased during 2024 primarily due to lower outstanding long-term debt.

See Note 9 to the Consolidated Financial Statements contained in Item 8 herein for further information.

Gain on Early Extinguishment of Debt, Net 2024 2023 2022

Amount Change Amount Change Amount

Gain (loss) on early extinguishment of debt, net $ 2.3 $ 2.3 $ — $ 17.9 $ (17.9)

Gain on early extinguishment of debt, net $ — $ (2.3) $ 2.3 $ 2.3 $ —

During 2023, the Company incurred a net gain on early extinguishment of debt of $2.3 million, primarily due to a gain related to the repurchase of $29.2 million in principal of its Class A-2 senior secured notes, partially offset by a loss related to the repurchase of $40.4 million in principal of its 7% debentures.

See Note 9 to the Consolidated Financial Statements contained in Item 8 herein for further information.

Investment (Loss) Income, Net 2023 2022 2021

Investment Income (Loss), Net 2024 2023 2022

Amount Change Amount Change Amount

Investment (loss) income, net $ (10.4) $ (12.5) $ 2.1 $ 2.1 $ —

Investment income (loss), net $ — $ 10.4 $ (10.4) $ (12.5) $ 2.1

During 2023, the Company recorded a loss of $10.4 million due to impairment charges for the difference between estimated fair value and the carrying value of an investment in equity securities.

During 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 2024 2023 2022

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Other income, net $ 24.8 $ (4.8) $ 29.6 $ 19.2 $ 10.4

The increase in other income, net during 2023 was primarily due to interest income earned on our cash equivalents, which increased due to higher interest rates.

The decrease in other income, net during 2024 was primarily due to a decrease in interest income, reflecting lower balances of cash equivalents.

Provision for Income Taxes 2024 2023 2022

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Effective tax rate on income 28.7 % 1.9 % 26.8 % (0.4) % 27.2 %

The increase in the provision for income taxes was primarily due to (1) higher income before income taxes in 2023 and (2) an increase in the tax effects of our foreign operations.

These changes were partially offset by additional net income from our advertising funds, which are not subject to tax.

The decrease in the effective tax rate during 2023 was primarily due to (1) additional net income from our advertising funds, which are not subject to tax and (2) the tax benefit for changes in state deferred income taxes.

These changes were partially offset by an increase in the tax effects of our foreign operations.

The increase in the provision for income taxes and the effective tax rate during 2024 was primarily due to a discrete state tax item.

Numerous countries have enacted the Organization of Economic Corporation and Development’s framework on a global minimum tax (referred to as “Pillar 2”), with the earliest effective date for taxable years beginning after December 31, 2023.

While the Company does not expect this enactment will have a material impact on the Consolidated Financial Statements contained in Item 8 herein, we will continue to evaluate and monitor as additional guidance and clarification becomes available.

Segment Information

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The increase in Wendy’s U.S.

revenues during 2023 was primarily due to an increase in same-restaurant sales.

Same-restaurant sales increased during 2023 primarily due to higher average check, partially offset by a decrease in customer count.

The increase in Wendy’s U.S.

segment profit during 2023 was primarily due to (1) higher revenues, (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” (excluding the impact of the U.K.

market) and (3) a decrease in the Company’s funding of incremental advertising.

revenues during 2024 was primarily due to (1) higher advertising fund revenue, (2) an increase in franchisee fees, (3) an increase in franchise same-restaurant sales and (4) restaurant development activity.

Franchise same-restaurant sales increased during 2024 primarily due to higher average check, partially offset by a decrease in customer count.

These increases were partially offset by a decrease in Company-operated sales driven by the same factors as described above for “Sales.”

The decrease in Wendy’s U.S.

segment profit during 2024 was primarily due to (1) an increase in the Company’s funding of incremental advertising, (2) a decrease in Company-operated sales and (3) higher franchise support and other costs.

These changes were partially offset by an increase in franchise fees and royalty revenue.

Wendy’s International

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Segment profit $ 43.3 $ 7.6 $ 35.7 $ 5.3 $ 30.4

The increase in Wendy’s International revenues during 2023 was primarily due to (1) net new restaurant development in the U.K.

and (2) an increase in same-restaurant sales.

Same-restaurant sales increased during 2023 due to (1) higher average check and (2) an increase in customer count.

The increase in Wendy’s International segment profit during 2023 was primarily due to higher revenues.

This increase was partially offset by (1) higher other international advertising expenses, (2) higher franchise support and other costs and (3) the Company’s investments to support the entry into the U.K.

market and inflationary pressures in the U.K.

The increase in Wendy’s International revenues during 2024 was primarily due to (1) net new restaurant development and (2) an increase in franchise same-restaurant sales.

Franchise same-restaurant sales increased during 2024 due to higher average check, partially offset by a decrease in customer count.

The increase in Wendy’s International segment profit during 2024 was primarily due to higher revenues, partially offset by higher franchise support and other costs.

Global Real Estate & Development

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Segment profit $ 108.6 $ 5.1 $ 103.5 $ (5.2) $ 108.7

The decrease in Global Real Estate & Development revenues during 2023 was primarily due to the impact of assigning certain leases to franchisees, partially offset by an increase in executory costs.

The decrease in Global Real Estate & Development segment profit during 2023 was primarily due to a decrease in franchise rental income.

The increase in Global Real Estate & Development revenues during 2024 was primarily due to higher franchise rental income as a result of (1) amending certain existing leases and (2) entering into new leases.

The increase in Global Real Estate & Development segment profit during 2024 was primarily due to higher revenues, partially offset by higher franchise rental expense driven by the same factors above for “Franchise Rental Expense.”

Consolidated Outlook for 2025

We expect sales at our Company-operated restaurants to be favorably impacted primarily by (1) investments in accelerated growth, which include a focus on growth of our breakfast daypart and digital business, (2) strategic price increases on our menu items and (3) focused execution of operational excellence.

We expect sales at our Company-operated restaurants to be favorably impacted primarily by (1) innovation on our core menu items, (2) new offerings in fast growing categories, (3) expanding our digital sales and (4) focused execution of operational excellence anticipated to improve the customer experience.

Franchise Royalty Revenue and Fees

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We expect cost of sales, as a percent of sales to be negatively impacted by higher restaurant labor rates.

Advertising Funds Revenue and Expense

We expect advertising funds expense to exceed advertising funds revenue due to the Company’s plans to fund approximately $27.0 million of incremental advertising in 2024 to continue to drive growth in our breakfast daypart.

General and Administrative

We expect general and administrative expenses to be higher primarily due to increases in (1) employee compensation and benefits, (2) stock compensation and (3) incentive compensation.

These increases are expected to be partially offset by lower professional fees.

We expect general and administrative expenses to be higher primarily due to increases in (1) employee compensation and benefits, including investments in field resources to drive operational excellence, and (2) incentive compensation.

Liquidity and Capital Resources

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, dividends to stockholders, repurchases of common stock and capital expenditures.

Cash Flows from Operating, Investing and Financing Activities

The table below summarizes our cash flows from operating, investing and financing activities for each of the past three fiscal years:

2023 2022 2021

Amount Change Amount Change Amount

Net cash provided by (used in):

Operating activities $ 345.4 $ 85.5 $ 259.9 $ (85.9) $ 345.8

Investing activities (86.5) (8.7) (77.8) 76.9 (154.7)

Financing activities (504.3) (793.0) 288.7 531.4 (242.7)

Effect of exchange rate changes on cash 2.4 8.4 (6.0) (6.3) 0.3

Net (decrease) increase in cash, cash equivalents and restricted cash $ (243.0) $ (707.8) $ 464.8 $ 516.1 $ (51.3)

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 $345.4 million and $259.9 million in 2023 and 2022, respectively.

The change was primarily due to (1) higher net income, adjusted for non-cash expenses, (2) a decrease in payments for incentive compensation and (3) the timing of payments for marketing expenses of the national advertising funds.

Investing Activities

Cash used in investing activities was $86.5 million and $77.8 million in 2023 and 2022, respectively.

The change was primarily due to (1) a decrease in proceeds from dispositions of $6.1 million and (2) an increase in expenditures associated with the Company’s franchise development fund of $4.3 million.

Financing Activities

Cash (used in) provided by financing activities was $(504.3) million and $288.7 million in 2023 and 2022, respectively.

During 2023, cash used in financing activities was primarily comprised of (1) dividends of $209.3 million, (2) repurchases of common stock of $189.6 million and (3) long-term debt activities of $94.7 million, including the impact of repurchases of the Company’s 7% debentures and Class A-2 senior secured notes.

During 2022, cash provided by financing activities was primarily comprised of long-term debt activities of $463.0 million, reflecting the impact of the completion of the Company’s debt financing transaction during the first quarter of 2022, partially offset by (1) dividends of $106.8 million and (2) repurchases of common stock of $52.0 million.

Material Cash Requirements

Our anticipated cash requirements for 2024, exclusive of operating cash flow requirements, consist principally of:

• capital expenditures of approximately $90.0 million to $100.0 million as discussed below in “Capital Expenditures;”

• quarterly cash dividends aggregating approximately $205.0 million as discussed below in “Dividends;” and

• stock repurchases under the January 2023 Authorization as discussed below in “Stock Repurchases.”

Our principal uses of cash are operating expenses, repurchases of common stock, dividends to stockholders and capital expenditures.

As of December 29, 2024, cash, cash equivalents and restricted cash totaled $503.6 million.

In addition, the Company maintains a revolving financing facility, which allows for the drawing of up to $300.0 million.

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.

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However, there can be no assurance that additional liquidity will be readily available or available on terms acceptable to us.

Capital Expenditures

In 2023, cash capital expenditures amounted to $85.0 million.

In 2024, we expect that cash capital expenditures will amount to approximately $90.0 million to $100.0 million, principally relating to (1) technology investments, including consumer-facing digital technology, (2) the opening of new Company-operated restaurants and the reimaging of existing Company-operated restaurants, (3) land investments, (4) maintenance capital expenditures for Company-operated restaurants, (5) restaurant equipment investments and (6) various other capital projects.

In addition to the capital expenditures noted above, cash expenditures related to the Company’s build to suit development fund amounted to $8.0 million during 2023.

In 2024, we expect to spend approximately $35.0 million under the development fund to drive new restaurant growth.

Cloud Computing Arrangements

The Company’s cash expenditures related to cloud computing arrangements (“CCA”) amounted to $32.9 million during 2023, primarily related to the Company’s human capital management system implementation.

In 2024, we expect to spend approximately $25.0 million on CCA, primarily related to data platforms, ERP projects and investments associated with the

Company’s growth initiatives.

See Note 1 to the Consolidated Financial Statements contained in Item 8 herein for further information related to our accounting policy for CCA.

Material Cash Requirements

Stock Repurchases

In January 2023, our Board of Directors authorized a repurchase program for up to $500.0 million of our common stock through February 28, 2027, when and if market conditions warrant and to the extent legally permissible (the “January 2023 Authorization”).

During 2024, the Company repurchased 4.3 million shares under the January 2023 Authorization with an aggregate purchase price of $75.0 million, excluding excise tax of $0.6 million and commissions of $0.1 million.

As of December 29, 2024, the Company had $235.0 million of availability remaining under the January 2023 Authorization.

The Company expects to repurchase shares with an aggregate purchase price of up to $200.0 million during 2025, subject to market conditions.

Subsequent to December 29, 2024 through February 19, 2025, the Company repurchased 3.4 million shares under the January 2023 Authorization with an aggregate purchase price of $50.4 million, excluding applicable excise tax and commissions.

On March 15, 2024, June 17, 2024, September 17, 2024 and December 16, 2024, the Company paid quarterly cash dividends per share of $.25, aggregating $204.4 million.

On February 13, 2025, the Company announced a dividend of $.25 per share to be paid on March 17, 2025 to stockholders of record as of March 3, 2025.

If the Company pays regular quarterly cash dividends for the remainder of 2024 at the same rate as declared in the first quarter of 2024, the Company’s total cash requirement for dividends for all of 2024 would be approximately $205.0 million based on the number of shares of its common stock outstanding at February 16, 2024.

Beginning in the second quarter of 2025, the Company expects to pay a quarterly dividend of $.14 per share.

As a result, the Company’s total cash requirement for dividends for all of 2025 is expected to be approximately $125.0 million.

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 connection with the January 2023 Authorization, the remaining portion of the Company’s previously authorized $250.0 million repurchase program was canceled.

During 2023, the Company repurchased 9.1 million shares under the January 2023 Authorization with an aggregate purchase price of $190.0 million, of which $0.6 million was accrued as of December 31, 2023, and excluding excise tax of $1.7 million and commissions of $0.1 million.

As of December 31, 2023, the Company had $310.0 million of availability remaining under the January 2023 Authorization.

Capital Expenditures

In 2024, cash capital expenditures amounted to $94.4 million, primarily related to digital and technology investments and various other development-related projects.

In 2025, we expect that cash capital expenditures will amount to approximately $100.0 million to $110.0 million, principally relating to (1) technology investments, including consumer-facing digital technology, (2) the opening of new Company-operated restaurants, (3) land investments and (4) various other capital projects.

In addition to the capital expenditures noted above, cash expenditures related to the Company’s build to suit development fund amounted to $41.2 million during 2024.

In 2025, we expect to invest approximately $70.0 million in the development fund to drive new restaurant growth.

Long-Term Debt, Including Current Portion

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No amounts were borrowed under the Class A-1 Notes during 2024.

During the year ended December 31, 2023, Wendy’s repurchased $40.4 million in principal of its 7% debentures for $40.5 million and repurchased $29.2 million in principal of its Class A-2 senior secured notes for $24.9 million.

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, through open market purchases, privately negotiated transactions or otherwise.

In December 2022, our Board of Directors authorized debt repurchases of up to $25.0 million (the “December 2022 Authorization”) and, in February 2023, our Board of Directors authorized additional debt repurchases of up to $50.0 million through February 29, 2024 (the “February 2023 Authorization”).

In addition, in October 2023, our Board of Directors approved an increase of $10.0 million to the February 2023 Authorization, which continues to expire in February 2024, resulting in total debt repurchases of up to $85.0 million.

As of December 31, 2023, the Company had completed the December 2022 Authorization and had $19.6 million remaining under the February 2023 Authorization.

Further repurchases, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors.

We may from time to time seek to repurchase portions of our outstanding long-term debt, including our 7% debentures and/or our senior secured notes, through open market purchases, privately negotiated transactions or otherwise.

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 size and timing of any such repurchases will be determined at our discretion.

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As of December 29, 2024, the Company’s purchase obligations were $214.2 million, including $77.9 million payable within 12 months.

Cash Flows from Operating, Investing and Financing Activities

The table below summarizes our cash flows from operating, investing and financing activities for each of the past three fiscal years:

2024 2023 2022

Amount Change Amount Change Amount

Net cash provided by (used in):

Operating activities $ 355.3 $ 9.9 $ 345.4 $ 85.5 $ 259.9

Investing activities (129.3) (42.8) (86.5) (8.7) (77.8)

Financing activities (303.1) 201.2 (504.3) (793.0) 288.7

Effect of exchange rate changes on cash (8.1) (10.5) 2.4 8.4 (6.0)

Net (decrease) increase in cash, cash equivalents and restricted cash $ (85.2) $ 157.8 $ (243.0) $ (707.8) $ 464.8

Operating Activities

Cash provided by operating activities was $355.3 million and $345.4 million in 2024 and 2023, respectively.

The change was primarily due to a decrease in cash paid for cloud computing arrangements (“CCA”).

Investing Activities

Cash used in investing activities was $129.3 million and $86.5 million in 2024 and 2023, respectively.

The change was primarily due to (1) an increase in expenditures associated with the Company’s franchise development fund of $33.3 million and (2) an increase in capital expenditures of $9.4 million.

Financing Activities

Cash used in financing activities was $303.1 million and $504.3 million in 2024 and 2023, respectively.

The change was primarily due to (1) a decrease in repurchases of the Company’s common stock of $112.2 million, (2) a decrease in repayments of long-term debt of $65.5 million, reflecting the impact of repurchases of the Company’s 7% debentures and Class A-2 senior secured notes during 2023, and (3) an increase in proceeds from stock option exercises of $18.2 million.

Guarantees and Other Contingencies

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General Inflation, Commodities and Changing Prices

Inflationary pressures on labor and commodity price increases directly impacted our consolidated results of operations during 2023.

We expect inflationary pressures on labor to continue into 2024.

We attempt to manage any inflationary costs and commodity price increases through selective menu price increases and product mix.

Inflationary pressures on labor directly impacted our consolidated results of operations during 2024, and we anticipate continued labor inflation in 2025.

We attempt to manage any inflationary costs and commodity price increases through selective menu price increases, product mix and focused execution of operational excellence.

Delays in implementing such menu price increases and competitive pressures may limit our ability to recover such cost increases in the future.

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The guideline company method of the market approach provides an indication of value by relating the equity or invested capital (debt plus equity) of guideline companies to various measures of their earnings and cash flow, then applying such multiples to the business being valued.

The result of applying the guideline company approach is adjusted based on the incremental value associated with a controlling interest in the business.

The result of applying the guideline company approach is adjusted based on the incremental value

associated with a controlling interest in the business.

This “control premium” represents the amount a new controlling stockholder would pay for the benefits resulting from synergies and other potential benefits derived from controlling the enterprise.

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Company-operated and franchise restaurants reporting unit and our Canada franchise restaurants reporting unit was more likely than not greater than the carrying amount.

Our quantitative goodwill impairment test for our global real estate and development operations reporting unit indicated that there had been no impairment and the fair value of this

reporting unit of approximately $1,300.0 million was approximately 9% in excess of its carrying value.

A 70 basis point increase in the discount rate or a 140 basis point decrease in the terminal value growth rate would have resulted in the fair value of the reporting unit being less than its carrying value.

Our quantitative goodwill impairment test for our global real estate and development operations reporting unit indicated that there had been no impairment and the fair value of this reporting unit of approximately $1,500.0 million was approximately 29% in excess of its carrying value.

Our indefinite-lived intangible assets represent trademarks and totaled $903.0 million as of December 29, 2024.

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If the carrying amount of the long-lived asset group is not recoverable on an undiscounted cash flow basis, then impairment is recognized to the extent that the carrying amount exceeds its fair value and is included in “Impairment of long-lived assets.” Our critical estimates in this review process include the anticipated future cash flows from leases and/or subleases or individual Company-operated restaurants, which is used in assessing the recoverability of the respective long-lived assets.

Our impairment losses principally reflect impairment charges resulting from the deterioration in operating performance of certain Company-operated restaurants.

Our impairment losses principally reflect impairment charges resulting from the decision to close certain Company-operated restaurants and the deterioration in operating performance of certain other Company-operated restaurants.

Our fair value estimates are subject to change as a result of many factors including, among others, any changes in our business plans, changing economic conditions and the competitive environment.

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We have unrecognized tax benefits of $14.8 million, which if resolved favorably would reduce our tax expense by $11.7 million as of December 29, 2024.

We accrue interest related to uncertain tax positions in “Interest expense, net.” As of December 31, 2023, we had $1.0 million accrued for interest.

We accrue interest related to uncertain tax positions in “Provision for income taxes.” As of December 29, 2024, we had $1.4 million accrued for interest.

The Company participates in the Internal Revenue Service (the “IRS”) Compliance Assurance Process (“CAP”).

As part of CAP, tax years are examined on a contemporaneous basis so that all or most issues are resolved prior to the filing of the tax return.

As such, our U.S.

federal income tax returns for fiscal years through 2021 have been settled.

The statute of limitations for the Company’s state tax returns vary, but generally the Company’s state income tax returns from its 2018 fiscal year forward remain subject to examination.

As part of the CAP, tax years are examined on a contemporaneous basis so that all or most issues are resolved prior to the filing of the tax return.

As such, our tax returns for fiscal years through 2022 have been settled.

The Company or one of its subsidiaries also files tax returns in various state, local and foreign jurisdictions.

The statute of limitations in these jurisdictions vary but generally income tax returns from its 2019 fiscal year and forward remain subject to examination.

We believe that adequate provisions have been made for any liabilities, including interest and penalties that may result from the completion of these examinations.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis