What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2025-02-21 compared with 2024-02-26 · 506 added, 572 removed, 1223 unchanged (47% of the section changed)

4 unchanged sentences

Report of Independent Registered Public Accounting Firm (PCAOB ID No.

Consolidated Balance Sheets as of December 31, 2023 and January 1, 2023

Consolidated Statements of Operations for the years ended December 31, 2023, January 1, 2023 and

January 2, 2022

Consolidated Statements of Comprehensive Income for the years ended December 31, 2023, January 1, 2023 and

January 2, 2022

Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2023, January 1, 2023 and

January 2, 2022

Consolidated Statements of Cash Flows for the years ended December 31, 2023, January 1, 2023 and

January 2, 2022

Consolidated Balance Sheets as of December 29, 2024 and December 31, 2023

Consolidated Statements of Operations for the years ended December 29, 2024, December 31, 2023

and January 1, 2023

Consolidated Statements of Comprehensive Income for the years ended December 29, 2024, December 31, 2023 and January 1, 2023

Consolidated Statements of Stockholders’ Equity for the years ended December 29, 2024, December 31, 2023 and January 1, 2023

Consolidated Statements of Cash Flows for the years ended December 29, 2024, December 31, 2023

and January 1, 2023

Notes to Consolidated Financial Statements 63

(1) Summary of Significant Accounting Policies 63

(2) Revenue 73

(3) Acquisitions 76

(4) System Optimization Gains, Net 77

(5) Reorganization and Realignment Costs 78

(6) Net Income Per Share 80

(2) Cash and Receivables 72

(8) Investments 82

(3) Revenue 73

(4) Properties 75

(5) Leases 76

(6) Goodwill and Other Intangible Assets 80

(7) Investments 81

(8) Accrued Expenses and Other Current Liabilities 82

2 unchanged sentences

(11) Income Taxes 87

(12) Net Income Per Share 90

(13) Stockholders’ Equity 91

(14) Share-Based Compensation 92

(15) System Optimization Gains, Net 96

(16) Reorganization and Realignment Costs 97

(17) Impairment of Long-Lived Assets 98

(18) Retirement Benefit Plans 99

(19) Leases 99

(18) Retirement Benefit Plan 98

(19) Supplemental Cash Flow Information 99

7 unchanged sentences

2010 Plan (14) Share-Based Compensation

2019-1 Class A-1 Notes (12) Long-Term Debt

2020-1 Class A-1 Notes (12) Long-Term Debt

2020 Plan (14) Share-Based Compensation

2 unchanged sentences

2022-1 Class A-2 Notes (9) Long-Term Debt

401(k) Plan (18) Retirement Benefit Plans

401(k) Plan (18) Retirement Benefit Plan

Advertising Funds (1) Summary of Significant Accounting Policies

5 unchanged sentences

CCA (1) Summary of Significant Accounting Policies

CODM (25) Segment Information

Company (1) Summary of Significant Accounting Policies

5 unchanged sentences

February 2022 Authorization (13) Stockholders’ Equity

Fountain Beverages (21) Guarantees and Other Commitments and Contingencies

Franchise Flip (1) Summary of Significant Accounting Policies

FRG (3) Acquisitions

GAAP (1) Summary of Significant Accounting Policies

Groundbreaker (21) Guarantees and Other Commitments and Contingencies

Indenture (9) Long-Term Debt

IRS (11) Income Taxes

IT (21) Guarantees and Other Commitments and Contingencies

January 2023 Authorization (13) Stockholders’ Equity

LIBOR (1) Summary of Significant Accounting Policies

Master Issuer (9) Long-Term Debt

NPC (3) Acquisitions

Organizational Redesign Plan (16) Reorganization and Realignment Costs

Pacesetter (21) Guarantees and Other Commitments and Contingencies

QSCC (21) Transactions with Related Parties

6 unchanged sentences

Senior Notes (9) Long-Term Debt

SERP (18) Retirement Benefit Plans

SOFR (1) Summary of Significant Accounting Policies

SOFR (9) Long-Term Debt

Straight-Line Rent (1) Summary of Significant Accounting Policies

Target (14) Share-Based Compensation

Defined Term Footnote Where Defined

The Wendy’s Company (1) Summary of Significant Accounting Policies

3 unchanged sentences

Wendy’s (1) Summary of Significant Accounting Policies

Defined Term Footnote Where Defined

Wendy’s Co-op (21) Transactions with Related Parties

6 unchanged sentences

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of The Wendy’s Company and subsidiaries (the “Company”) as of December 31, 2023 and January 1, 2023, the related consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows, for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and January 1, 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

We have audited the accompanying consolidated balance sheets of The Wendy’s Company and subsidiaries (the “Company”) as of December 29, 2024 and December 31, 2023, the related consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows, for each of the three years in the period ended December 29, 2024, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 29, 2024 and December 31, 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 29, 2024, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 29, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 21, 2025, expressed an unqualified opinion on the Company’s internal control over financial reporting.

42 unchanged sentences

(In Thousands Except Par Value)

2023 January 1,

2024 December 31,

Current assets:

50 unchanged sentences

(In Thousands Except Per Share Amounts)

2023 January 1,

2024 December 31,

2023 January 1,

19 unchanged sentences

Interest expense, net ( 123,881 ) ( 124,061 ) ( 122,319 )

Gain (loss) on early extinguishment of debt, net 2,283 — ( 17,917 )

Investment (loss) income, net ( 10,358 ) 2,107 39

Gain on early extinguishment of debt, net — 2,283 —

Investment income (loss), net 11 ( 10,358 ) 2,107

Other income, net 24,924 29,570 10,403

10 unchanged sentences

(In Thousands)

2023 January 1,

2024 December 31,

2023 January 1, 2023

Net income $ 194,357 $ 204,440 $ 177,370

Other comprehensive income (loss):

Other comprehensive (loss) income:

Foreign currency translation adjustment ( 16,378 ) 5,801 ( 15,976 )

Other comprehensive income (loss) 5,801 ( 15,976 ) 1,441

Other comprehensive (loss) income ( 16,378 ) 5,801 ( 15,976 )

Comprehensive income $ 177,979 $ 210,241 $ 161,394

7 unchanged sentences

Net income — — 177,370 — — 177,370

Other comprehensive income, net — — — — 1,441 1,441

Other comprehensive loss, net — — — — ( 15,976 ) ( 15,976 )

Cash dividends — — ( 106,779 ) — — ( 106,779 )

10 unchanged sentences

Net income — — 204,440 — — 204,440

Other comprehensive loss, net — — — — ( 15,976 ) ( 15,976 )

Other comprehensive income, net — — — — 5,801 5,801

Cash dividends — — ( 209,253 ) — — ( 209,253 )

Repurchases of common stock — — — ( 191,871 ) — ( 191,871 )

including accelerated share

repurchase — 18,750 — ( 70,700 ) — ( 51,950 )

Share-based compensation — 23,747 — — — 23,747

4 unchanged sentences

Other — 230 ( 73 ) 244 — 401

Balance at January 1, 2023 47,042 2,937,885 414,749 ( 2,869,780 ) ( 64,176 ) 465,720

Balance at December 31, 2023 47,042 2,960,035 409,863 ( 3,048,786 ) ( 58,375 ) 309,779

Net income — — 194,357 — — 194,357

Other comprehensive income, net — — — — 5,801 5,801

Other comprehensive loss, net — — — — ( 16,378 ) ( 16,378 )

Cash dividends — — ( 204,443 ) — — ( 204,443 )

11 unchanged sentences

(In Thousands)

2023 January 1,

2024 December 31,

2023 January 1,

9 unchanged sentences

Change in operating lease liabilities ( 48,911 ) ( 47,212 ) ( 45,682 )

Net receipt (recognition) of deferred vendor incentives 1,034 ( 1,060 ) 715

Net (recognition) receipt of deferred vendor incentives ( 586 ) 1,034 ( 1,060 )

System optimization gains, net ( 1,219 ) ( 880 ) ( 6,779 )

7 unchanged sentences

Changes in operating assets and liabilities:

Accounts and notes receivable, net 430 ( 5,857 ) ( 5,613 )

Accounts and notes receivable ( 5,158 ) 430 ( 5,857 )

Inventories 138 439 ( 1,203 )

7 unchanged sentences

Franchise development fund ( 41,246 ) ( 7,951 ) ( 3,605 )

Acquisitions — — ( 123,069 )

Dispositions 4,946 2,115 8,237

1 unchanged sentence

Notes receivable, net 1,383 4,280 3,136

Payments for investments — — ( 10,000 )

Net cash used in investing activities ( 129,305 ) ( 86,546 ) ( 77,776 )

4 unchanged sentences

Deferred financing costs — — ( 10,232 )

Repurchases of common stock, including accelerated share repurchase ( 189,554 ) ( 51,950 ) ( 268,531 )

Repurchases of common stock ( 77,375 ) ( 189,554 ) ( 51,950 )

Dividends ( 204,443 ) ( 209,253 ) ( 106,779 )

15 unchanged sentences

Wendy’s Restaurants is the parent company of Wendy’s International, LLC and its subsidiaries (“Wendy’s”).

Wendy’s franchises and operates Wendy’s quick-service restaurants specializing in hamburger sandwiches throughout the United States of America (“U.S.”) and in 32 foreign countries and U.S.

Wendy’s franchises and operates Wendy’s quick-service restaurants throughout the United States of America (“U.S.”) and in 31 foreign countries and U.S.

At December 29, 2024, Wendy’s operated and franchised 394 and 6,846 restaurants, respectively.

12 unchanged sentences

Actual results could differ materially from those estimates.

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.

11 unchanged sentences

Accounts and Notes Receivable, Net

Accounts and notes receivable, net, consist primarily of royalties, rents, property taxes and franchise fees due principally from franchisees, delivery-related receivables, credit card receivables, insurance receivables and refundable income taxes.

Accounts and notes receivable, net, consist primarily of royalties, rents, property taxes and franchise fees due principally from franchisees, credit card receivables, insurance receivables and refundable income taxes.

Reserve estimates include consideration of the likelihood of default expected over the estimated life of the receivable.

9 unchanged sentences

Properties and Depreciation and Amortization

Properties are stated at cost, including capitalized internal costs of employees to the extent such employees are dedicated to specific restaurant construction projects, less accumulated depreciation and amortization.

Properties are stated at cost, including capitalized internal costs of employees to the extent such employees are dedicated to specific restaurant construction and information technology projects, less accumulated depreciation and amortization.

Depreciation and amortization of properties is computed principally on the straight-line basis using the following estimated useful lives of the related major classes of properties:

49 unchanged sentences

The Company has significant influence over these investees.

Such investments are accounted for using the equity method, under which our results of operations include our share of the income (loss) of the investees in “Other operating income, net.” Cash distributions and dividends received that are determined to be returns of capital are recorded as a reduction of the carrying value of our investments and returns on our investments are recorded to “Investment (loss) income, net.”

The difference between the carrying value of our TimWen equity investment and the underlying equity in the historical net assets of the investee is accounted for as if the investee were a consolidated subsidiary.

12 unchanged sentences

Foreign Currency Translation

The Company’s primary foreign operations are in Canada where the functional currency is the Canadian dollar.

Financial statements of foreign subsidiaries are prepared in their functional currency and then translated into U.S.

12 unchanged sentences

A tax position that meets the more-likely-than-not recognition threshold is then measured for purposes of financial statement recognition as the largest amount of benefit that is greater than 50% likely of being realized upon being effectively settled.

Interest accrued for uncertain tax positions is charged to “Interest expense, net.” Penalties accrued for uncertain tax positions are charged to “General and administrative.”

Interest and penalties accrued for uncertain tax positions are charged to “Provision for income taxes.”

Restaurant Acquisitions and Dispositions

16 unchanged sentences

Revenue Recognition

“Sales” includes revenues recognized upon delivery of food to the customer at Company-operated restaurants.

“Sales” includes revenue recognized upon delivery of food to the customer at Company-operated restaurants.

“Sales” excludes taxes collected from the Company’s customers.

2 unchanged sentences

Gift card payments are recorded as deferred income when received and are recognized as revenue upon redemption.

“Franchise royalty revenue and fees” includes royalties, new build technical assistance fees, renewal fees, franchisee-to- franchisee restaurant transfer (“Franchise Flip”) technical assistance fees, Franchise Flip advisory fees, development fees and

THE WENDY’S COMPANY AND SUBSIDIARIES

1 unchanged sentence

(In Thousands Except Per Share Amounts)

information technology and other fees.

Royalties from franchised restaurants are based on a percentage of sales of the franchised restaurant and are recognized as earned.

85 unchanged sentences

territories, with the largest number in Canada.

restaurants are located in 50 states and the District of Columbia, with the largest number in Florida, Texas, Ohio, Georgia, California, North Carolina, Pennsylvania and Michigan.

restaurants are located in 50 states and the District of Columbia, with the largest number in Florida, Texas, Ohio, California, Georgia, North Carolina, Pennsylvania and New York.

Because our restaurant operations are generally located throughout the U.S.

1 unchanged sentence

territories, we believe the risk of geographic concentration is not significant.

We could be adversely affected by changing consumer preferences resulting from concerns over nutritional or safety aspects of beef, chicken, eggs, pork, french fries or other products we sell or the effects of food safety events or disease outbreaks.

We could be adversely affected by changing consumer preferences, including as a result from concerns over nutritional or safety aspects of beef, chicken, eggs, pork, french fries or other products we sell or the effects of food safety events or disease outbreaks.

Our exposure to foreign exchange risk is primarily related to fluctuations in the Canadian dollar relative to the U.S.

3 unchanged sentences

(In Thousands Except Per Share Amounts)

exposure to Canadian dollar foreign currency risk is mitigated by the fact that there are no Company-operated restaurants in Canada and less than 10 % of Wendy’s franchised restaurants are in Canada.

However, our exposure to Canadian dollar foreign currency risk is mitigated by the fact that there are no Company-operated restaurants in Canada and less than 10 % of Wendy’s franchised restaurants are in Canada.

The Company is subject to credit risk through its accounts receivable consisting primarily of amounts due from franchisees for royalties, franchise fees and rent.

3 unchanged sentences

New Accounting Standards Adopted

Reference Rate Reform

In March 2020, the Financial Accounting Standards Board (“FASB”) issued guidance to provide temporary optional expedients and exceptions to current reference rate reform guidance to ease the financial reporting burdens related to the market transition from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates.

During 2023, certain of the Company’s subsidiaries executed amendments to the 2021-1 Variable Funding Senior Secured Notes, Class A-1 and the U.S.

advertising fund revolving line of credit to transition from LIBOR to the Secured Overnight Financing Rate (“SOFR”), plus any applicable margin.

In connection with these contract amendments, the Company adopted the reference rate reform guidance during the second quarter of 2023.

The adoption of this guidance did not have a material impact on our consolidated financial statements.

Business Combinations

In October 2021, the FASB issued an amendment to improve the accounting for revenue contracts with customers acquired in a business combination.

The amendment requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with current revenue recognition guidance as if the acquirer had originated the contracts.

Common-Control Lease Arrangements

In March 2023, the Financial Accounting Standards Board (“FASB”) issued an update to amend certain lease accounting guidance that applies to arrangements between related parties under common control.

The amendment requires a lessee in a common-control lease arrangement to amortize leasehold improvements that it owns over the useful life of the improvements to the common-control group, regardless of the lease term, if the lessee continues to control the use of the underlying asset through a lease.

The Company adopted this amendment during the first quarter of 2024.

The adoption of this guidance did not have a material impact on our consolidated financial statements.

The adoption of this amendment did not have a material impact on our consolidated financial statements.

Reportable Segment Disclosures

In November 2023, the FASB issued an amendment to expand reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses.

In addition, the amendment enhances interim disclosure requirements, clarifies circumstances in which an entity can disclose multiple segment measures of profit or loss and provides new segment disclosure requirements for entities with a single reportable segment.

The Company adopted this amendment during the fourth quarter of 2024.

The adoption of this amendment did not have a material impact on our consolidated financial statements.

Refer to Note 25 for the expanded reportable segment disclosures.

New Accounting Standards

5 unchanged sentences

We are currently evaluating the impact of the adoption of this guidance on our consolidated financial statements.

Reportable Segment Disclosures

In November 2023, the FASB issued an amendment to enhance reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses.

Disaggregation of Income Statement Expenses

In November 2024, the FASB issued an amendment to expand disclosure requirements related to certain income statement expenses.

The amendment requires disaggregation of certain expense captions into specified categories in disclosures within the footnotes to the consolidated financial statements.

The amendment is effective commencing with our 2027 fiscal year.

We are currently evaluating the impact of the adoption of this guidance on our consolidated financial statements.

Common-Control Lease Arrangements

In March 2023, the FASB issued an update to amend certain lease accounting guidance that applies to arrangements between related parties under common control.

The standard is effective

THE WENDY’S COMPANY AND SUBSIDIARIES

1 unchanged sentence

(In Thousands Except Per Share Amounts)

beginning with our 2024 fiscal year.

The Company does not expect the guidance to have a material impact on our consolidated financial statements.

(2) Cash and Receivables

December 29, 2024 December 31, 2023

Cash and cash equivalents

Cash $ 131,300 $ 150,136

Cash equivalents 319,212 365,901

450,512 516,037

Restricted cash

Accounts held by trustee for the securitized financing facility 34,089 35,483

Other 392 365

34,481 35,848

Advertising Funds (a) 18,615 36,931

53,096 72,779

Total cash, cash equivalents and restricted cash

$ 503,608 $ 588,816

_______________

(a) Included in “Advertising funds restricted assets.”

December 29, 2024 December 31, 2023

Gross Allowance for Doubtful Accounts Net Gross Allowance for Doubtful Accounts Net

Accounts and Notes Receivable, Net

Accounts receivable (a) $ 91,989 $ ( 5,153 ) $ 86,836 $ 106,335 $ ( 1,538 ) $ 104,797

Notes receivable from franchisees (b) (c) 15,239 ( 2,149 ) 13,090 18,035 ( 1,149 ) 16,886

$ 107,228 $ ( 7,302 ) $ 99,926 $ 124,370 $ ( 2,687 ) $ 121,683

______________

(a) Includes income tax refund receivables of $ 3,587 and $ 5,284 as of December 29, 2024 and December 31, 2023, respectively.

Additionally, as of December 31, 2023, included receivables of $ 17,460 related to expected contributions from applicable insurance for legal settlements.

See Note 8 for further information on our legal reserves.

(b) Includes the current portion of sales-type and direct financing lease receivables of $ 9,377 and $ 10,779 as of December 29, 2024 and December 31, 2023, respectively.

See Note 5 for further information.

(c) Includes notes receivable related to the Brazil JV of $ 5,837 and $ 6,837 as of December 29, 2024 and December 31, 2023, respectively.

As of December 29, 2024 and December 31, 2023, the Company had reserves of $ 2,149 and $ 1,149 , respectively, on the loans outstanding related to the Brazil JV.

See Note 7 for further information.

As of December 31, 2023, included a note receivable from a franchisee in Indonesia of $ 394 .

The note was repaid during 2024.

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

The following is a rollforward of the allowance for doubtful accounts:

Accounts Receivable Notes Receivable Total

Balance at December 31, 2023

$ 1,538 $ 1,149 $ 2,687

Provision for doubtful accounts 3,716 1,000 4,716

Uncollectible accounts written off, net of recoveries ( 101 ) — ( 101 )

Balance at December 29, 2024

$ 5,153 $ 2,149 $ 7,302

Balance at January 1, 2023

$ 1,707 $ 4,640 $ 6,347

Provision for doubtful accounts 534 ( 414 ) 120

Uncollectible accounts written off, net of recoveries ( 703 ) ( 3,077 ) ( 3,780 )

Balance at December 31, 2023

$ 1,538 $ 1,149 $ 2,687

Balance at January 2, 2022

$ 3,229 $ 5,290 $ 8,519

Provision for doubtful accounts ( 565 ) ( 350 ) ( 915 )

Uncollectible accounts written off, net of recoveries ( 957 ) ( 300 ) ( 1,257 )

Balance at January 1, 2023

$ 1,707 $ 4,640 $ 6,347

Nature of Goods and Services

3 unchanged sentences

The franchise agreement generally provides for a 20 -year term and a 10 -year renewal subject to certain conditions.

The initial term may be extended up to 25 years and the renewal extended up to 20 years for qualifying restaurants under certain new restaurant development and reimaging programs.

The initial term may be extended up to 25 years at the franchisee’s option.

The franchise agreement requires that the franchisee pay a royalty based on a percentage of sales at the franchised restaurant, as well as make contributions to the Advertising Funds based on a percentage of sales.

1 unchanged sentence

The agreement also typically requires that the franchisee pay Wendy’s a technical assistance fee.

The technical assistance fee is used to defray some of the costs to Wendy’s for start-up and transitional services related to new and existing franchisees acquiring restaurants and in the development and opening of new restaurants.

The technical assistance fee is used to defray some of the costs to Wendy’s for start-up and transitional services related to new and existing franchisees in the development and opening of new restaurants or acquiring Company-operated restaurants.

The franchise agreement also requires that the franchisee pay an annual fee for technology services.

1 unchanged sentence

Wendy’s also enters into development agreements with certain franchisees.

The development agreement generally provides the franchisee with the right to develop a specified number of new Wendy’s restaurants using the Image Activation design within a stated, non-exclusive territory for a specified period, subject to the franchisee meeting interim new restaurant development requirements.

The development agreement generally provides the franchisee with the right to develop a specified number of new Wendy’s restaurants using Wendy’s current design standards and specifications within a stated, non-exclusive territory for a specified period, subject to the franchisee meeting interim new restaurant development requirements.

Wendy’s owns and leases sites from third parties, which it leases and/or subleases to franchisees.

1 unchanged sentence

The initial lease term for properties leased or subleased to franchisees is generally set to be coterminous with the initial 20 -year term of the related franchise agreement and any renewal term is coterminous with the 10 -year renewal term of the related franchise agreement.

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

Royalties and contributions to the Advertising Funds are generally due within the month subsequent to which the revenue was generated through sales at the franchised restaurant.

2 unchanged sentences

Rental income is due in accordance with the terms of each lease, which is generally at the beginning of each month.

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

Disaggregation of Revenue

21 unchanged sentences

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

2023 (a) January 1,

2024 (a) December 31,

Receivables, which are included in “Accounts and notes receivable, net” (b)

4 unchanged sentences

_______________

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

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

THE WENDY’S COMPANY AND SUBSIDIARIES

1 unchanged sentence

(In Thousands Except Per Share Amounts)

(c) Deferred franchise fees are included in “Accrued expenses and other current liabilities” and “Deferred franchise fees” and totaled $ 10,673 and $ 90,132 , respectively, as of December 31, 2023, and $ 8,977 and $ 90,231 , respectively, as of January 1, 2023.

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

(c) Deferred franchise fees are included in “Accrued expenses and other current liabilities” and “Deferred franchise fees” and totaled $ 11,024 and $ 88,387 , respectively, as of December 29, 2024, and $ 10,673 and $ 90,132 , respectively, as of December 31, 2023.

Significant changes in deferred franchise fees are as follows:

12 unchanged sentences

(a) Includes development-related franchise fees expected to be recognized over a duration of one year or less.

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

(3) Acquisitions

During 2021, the Company acquired 93 restaurants from a franchisee.

The Company completed no significant acquisitions of restaurants from franchisees during 2023 or 2022.

The Company did not incur any material acquisition-related costs associated with the acquisition in 2021 and such transaction was not significant to our consolidated financial statements.

The table below presents the allocation of the total purchase price to the fair value of assets acquired and liabilities assumed for restaurants acquired from a franchisee:

Restaurants acquired from franchisee (b) 93

Total consideration paid, net of cash received $ 127,948

Identifiable assets acquired and liabilities assumed:

(4) Properties

Acquired franchise rights 81,239

Finance lease assets 25,547

Operating lease assets 44,282

Finance lease liabilities ( 25,059 )

Operating lease liabilities ( 43,478 )

Total identifiable net assets 104,506

Goodwill $ 23,442

December 29, 2024 December 31, 2023

Land $ 379,581 $ 373,634

Buildings and improvements 534,054 519,244

Leasehold improvements 453,381 432,051

Office, restaurant and transportation equipment 362,312 344,623

1,729,328 1,669,552

(a) The fair values of assets acquired and liabilities assumed related to restaurants acquired in 2021 were provisional amounts as of January 2, 2022, pending final purchase accounting adjustments.

The Company finalized the purchase price allocation during 2022, which resulted in an increase in cash received of $ 260 .

(b) Included two restaurants under construction and not operating as of January 2, 2022.

NPC Quality Burgers, Inc.

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.

As part of the consortium bid, the Company submitted a deposit of $ 43,240 .

The deposit included $ 38,361 received from the group of prequalified franchisees, which was payable to the franchisees pending resolution of the bankruptcy sale process.

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.

In addition, the deposits outstanding as of January 3, 2021 were settled during the three months ended April 4, 2021 upon resolution of the bankruptcy sale process.

The net settlement of deposits of $ 4,879 is included in “Acquisitions” in the consolidated statements of cash flows.

Accumulated depreciation and amortization ( 821,541 ) ( 778,472 )

$ 907,787 $ 891,080

Depreciation and amortization expense related to properties was $ 75,575 , $ 70,108 and $ 69,239 during 2024, 2023 and 2022, respectively.

THE WENDY’S COMPANY AND SUBSIDIARIES

1 unchanged sentence

(In Thousands Except Per Share Amounts)

(4) System Optimization Gains, Net

The Company’s system optimization initiative included a shift from Company-operated restaurants to franchised restaurants over time, through acquisitions and dispositions, as well as facilitating Franchise Flips.

As of December 31, 2023, Company-operated restaurant ownership was approximately 5 % of the total system.

While the Company has no plans to move its ownership away from approximately 5 % of the total system, the Company expects to continue to optimize the Wendy’s system through Franchise Flips, as well as evaluating strategic acquisitions of franchised restaurants and strategic dispositions of Company-operated restaurants to existing and new franchisees, to further strengthen the franchisee base, drive new restaurant development and accelerate reimages.

During 2023, 2022 and 2021, the Company facilitated 99 , 79 and 34 Franchise Flips, respectively.

Additionally, during 2021, the Company completed the sale of 47 Company-operated restaurants in New York (including Manhattan) to franchisees and, during 2022, the Company completed the sale of one Company-operated restaurant to a franchisee.

No Company-operated restaurants were sold to franchisees during 2023.

Gains and losses recognized on dispositions are recorded to “System optimization gains, net” in our consolidated statements of operations.

Costs related to acquisitions and dispositions under our system optimization initiative are recorded to “Reorganization and realignment costs,” which are further described in Note 5.

All other costs incurred related to facilitating Franchise Flips are recorded to “Franchise support and other costs.”

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

Nature of Leases

The Company operates restaurants that are located on sites owned by us and sites leased by us from third parties.

In addition, the Company owns sites and leases sites from third parties, which it leases and/or subleases to franchisees.

The Company also leases restaurant, office and transportation equipment.

As of December 29, 2024, the nature of restaurants operated by the Company and its franchisees was as follows:

December 29, 2024

Company-operated restaurants:

Owned land and building 151

Owned building and held long-term land leases 136

Leased land and building 107

Total Company-operated restaurants 394

Franchisee-operated restaurants:

Company-owned properties leased to franchisees 486

Company-leased properties subleased to franchisees 1,155

Other franchisee-operated restaurants 5,205

Total franchisee-operated restaurants 6,846

Total Company-operated and franchisee-operated restaurants 7,240

Company as Lessee

The components of lease cost for 2024, 2023 and 2022 are as follows:

2024 2023 2022

Number of restaurants sold to franchisees — 1 47

Proceeds from sales of restaurants (a) $ — $ 79 $ 50,518

Net assets sold (b) — ( 141 ) ( 16,939 )

Goodwill related to sales of restaurants — — ( 4,847 )

Net unfavorable leases (c) — ( 360 ) ( 2,939 )

Gain on sales-type leases — — 7,156

Other (d) — 6 ( 2,148 )

Finance lease cost:

Amortization of finance lease assets $ 13,877 $ 16,061 $ 15,440

Interest on finance lease liabilities 43,051 42,624 42,918

56,928 58,685 58,358

Post-closing adjustments on sales of restaurants (e) (f) 858 2,877 1,218

Gain on sales of restaurants, net 858 2,461 32,019

Gain on sales of other assets, net (g) 22 4,318 1,526

System optimization gains, net $ 880 $ 6,779 $ 33,545

Operating lease cost 84,382 85,138 86,050

Variable lease cost (a) 66,977 66,859 64,473

Short-term lease cost 5,420 5,864 5,439

Total operating lease cost (b) 156,779 157,861 155,962

Total lease cost $ 213,707 $ 216,546 $ 214,320

_______________

(a) In addition to the proceeds noted herein, the Company received cash proceeds of $ 378 and $ 39 during 2022 and 2021, respectively, related to a note receivable issued in connection with the sale of the Manhattan Company-operated restaurants.

(b) Net assets sold consisted primarily of equipment.

(c) During 2021, the Company recorded favorable lease assets of $ 3,799 and unfavorable lease liabilities of $ 6,738 as a result of leasing and/or subleasing land, buildings and/or leasehold improvements to franchisees, in connection with the sale of the New York Company-operated restaurants (including Manhattan).

(d) 2021 includes a deferred gain of $ 3,500 as a result of certain contingencies related to the extension of lease terms.

(e) 2021 includes a gain on sales-type leases of $ 1,625 and the write-off of certain lease assets of $ 927 as a result of an amendment to lease terms in connection with a Manhattan Company-operated restaurant previously sold to a franchisee.

(a) Includes expenses for executory costs of $ 39,754 , $ 39,456 , and $ 38,749 for 2024, 2023 and 2022, respectively, for which the Company is reimbursed by sublessees.

(b) Includes $ 127,228 , $ 125,180 and $ 123,924 for 2024, 2023 and 2022, respectively, recorded to “Franchise rental expense” for leased properties that are subsequently leased to franchisees.

Also includes $ 27,633 , $ 30,538 and $ 29,648 for 2024, 2023 and 2022, respectively, recorded to “Cost of sales” for leases for Company-operated restaurants.

THE WENDY’S COMPANY AND SUBSIDIARIES

1 unchanged sentence

(In Thousands Except Per Share Amounts)

(f) 2023, 2022 and 2021 include the recognition of deferred gains of $ 858 , $ 3,522 and $ 515 , respectively, as a result of the resolution of certain contingencies related to the extension of lease terms for restaurants previously sold to franchisees.

(g) During 2023, 2022 and 2021, the Company received cash proceeds of $ 2,115 , $ 7,780 and $ 4,561 , respectively, primarily from the sale of surplus and other properties.

Assets Held for Sale

As of December 31, 2023 and January 1, 2023, the Company had assets held for sale of $ 2,689 and $ 1,661 , respectively, primarily consisting of surplus properties.

Assets held for sale are included in “Prepaid expenses and other current assets.”

(5) Reorganization and Realignment Costs

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

2023 2022 2021

Organizational Redesign Plan $ 9,064 $ — $ —

System optimization initiative 136 611 6,852

Other reorganization and realignment plans — 87 1,696

Reorganization and realignment costs $ 9,200 $ 698 $ 8,548

Organizational Redesign

In February 2023, the Board of Directors approved a plan to redesign the Company’s organizational structure to better support the execution of the Company’s long-term growth strategy by maximizing organizational efficiency and streamlining decision making (the “Organizational Redesign Plan”).

As a result of the Organizational Redesign Plan, the Company held its general and administrative expense in 2023 relatively flat compared with 2022.

Additionally, in January 2024, the Board of Directors announced the appointment of Kirk Tanner as the Company’s new President and Chief Executive Officer, effective February 5, 2024.

Tanner succeeded Todd A.

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

As a result of the succession of the President and Chief Executive Officer, the Company now expects to incur total costs of approximately $ 17,000 to $ 19,000 related to the Organizational Redesign Plan.

During 2023, the Company recognized costs totaling $ 9,064 , which primarily included severance and related employee costs and share-based compensation.

The Company expects to incur additional costs aggregating approximately $ 8,000 to $ 10,000 , comprised of (1) severance and related employee costs of approximately $ 7,000 , (2) share-based compensation of approximately $ 2,000 and (3) recruitment and relocation costs of approximately $ 500 .

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

The following is a summary of the costs recorded as a result of the Organizational Redesign Plan:

Severance and related employee costs $ 6,243

Recruitment and relocation costs 554

Third-party and other costs 996

Share-based compensation (a) 1,271

Total organizational redesign $ 9,064

The following table includes supplemental cash flow and non-cash information related to leases:

2024 2023 2022

(a) Primarily represents the accelerated recognition of share-based compensation resulting from the termination of employees under the Organizational Redesign Plan.

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from finance leases $ 43,050 $ 42,624 $ 42,979

Operating cash flows from operating leases 86,664 86,972 88,372

Financing cash flows from finance leases 20,404 21,588 17,312

Right-of-use assets obtained in exchange for lease obligations:

Finance lease liabilities 47,014 20,243 34,478

Operating lease liabilities 41,423 12,659 24,742

The following table includes supplemental information related to leases:

December 29, 2024 December 31,

Weighted-average remaining lease term (years):

Finance leases 14.0 14.3

Operating leases 11.9 12.6

Weighted average discount rate:

Finance leases 8.09 % 8.52 %

Operating leases 4.98 % 4.93 %

Supplemental balance sheet information:

Finance lease assets, gross $ 349,212 $ 318,951

Accumulated amortization ( 104,258 ) ( 90,015 )

Finance lease assets 244,954 228,936

Operating lease assets 679,777 705,615

THE WENDY’S COMPANY AND SUBSIDIARIES

1 unchanged sentence

(In Thousands Except Per Share Amounts)

The table below presents a rollforward of our accruals for the Organizational Redesign Plan, which are included in “Accrued expenses and other current liabilities” as of December 31, 2023.

Balance January 1, 2023

Charges Payments Balance December 31, 2023

Severance and related employee costs $ — $ 6,243 $ ( 4,551 ) $ 1,692

Recruitment and relocation costs — 554 ( 554 ) —

Third-party and other costs — 996 ( 996 ) —

$ — $ 7,793 $ ( 6,101 ) $ 1,692

System Optimization Initiative

The Company recognizes costs related to acquisitions and dispositions under its system optimization initiative.

During 2023, the Company recognized costs totaling $ 136 .

During 2022, the Company recognized costs totaling $ 611 , which were primarily comprised of professional fees and other costs associated with the Company’s acquisition of 93 franchise-operated restaurants in Florida during the fourth quarter of 2021.

During 2021, the Company recognized costs totaling $ 6,852 , 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, as well as professional fees and transaction fees associated with the Company’s acquisition of 93 franchise-operated restaurants in Florida during the fourth quarter of 2021.

See Note 3 for further information on the NPC bankruptcy sale process.

The Company expects to recognize a gain of approximately $ 150 , primarily related to the write-off of certain NPC-related lease liabilities upon final termination of the leases.

As of December 31, 2023, January 1, 2023 and January 2, 2022 there were no accruals for our system optimization initiative.

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

Year Ended Total Incurred Since Inception

2023 2022 2021

Severance and related employee costs $ — $ 4 $ 661 $ 18,902

Professional fees 3 395 1,570 24,075

Other (a) 73 145 1,765 7,836

76 544 3,996 50,813

Accelerated depreciation and amortization (b) — — — 25,398

NPC lease termination costs (c) 60 67 2,856 2,983

Share-based compensation (d) — — — 5,013

Total system optimization initiative $ 136 $ 611 $ 6,852 $ 84,207

The following table illustrates the Company’s future minimum rental payments for non-cancelable leases as of December 29, 2024:

Leases Operating

Fiscal Year Company-Operated Franchise

and Other Company-Operated Franchise

2025 $ 7,717 $ 56,538 $ 19,800 $ 64,320

(a) 2021 includes transaction fees of $ 1,350 associated with the NPC bankruptcy sale process.

(b) Primarily includes accelerated amortization of previously acquired franchise rights related to the Company-operated restaurants in territories that have been sold to franchisees in connection with our system optimization initiative.

(d) Represents incremental share-based compensation resulting from the modification of stock options and performance-based awards in connection with the termination of employees under our system optimization initiative.

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

Other Reorganization and Realignment

For 2022 and 2021, costs incurred under the Company’s other reorganization and realignment plans were $ 87 and $ 1,696 , respectively.

No costs were incurred under the Company’s other reorganization and realignment plans in 2023.

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

(6) Net Income Per Share

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

2026 7,877 58,284 21,630 65,071

Net income $ 204,440 $ 177,370 $ 200,392

Common stock:

Weighted average basic shares outstanding 209,486 213,766 221,375

Dilutive effect of stock options and restricted shares 2,048 2,073 3,030

Weighted average diluted shares outstanding 211,534 215,839 224,405

Net income per share:

Basic $ .98 $ .83 $ .91

Diluted $ .97 $ .82 $ .89

Basic net income per share for 2023, 2022 and 2021 was computed by dividing net income amounts by the weighted average number of shares of common stock outstanding.

Diluted net income per share was computed by dividing net income by the weighted average number of basic shares outstanding plus the potential common share effect of dilutive stock options and restricted shares.

We excluded potential common shares of 5,377 , 4,443 and 2,404 for 2023, 2022 and 2021, respectively, from our diluted net income per share calculation as they would have had anti-dilutive effects.

(7) Cash and Receivables

December 31, 2023 January 1, 2023

Cash and cash equivalents

Cash $ 150,136 $ 185,207

Cash equivalents 365,901 560,682

2027 7,924 59,312 21,539 65,278

Restricted cash

Accounts held by trustee for the securitized financing facility 35,483 34,850

Other 365 353

2028 7,986 60,494 21,373 65,586

Advertising Funds (a) 36,931 50,709

2029 8,185 61,928 21,385 64,867

Total cash, cash equivalents and restricted cash

Thereafter 81,102 538,098 154,084 437,968

Total minimum payments $ 120,791 $ 834,654 $ 259,811 $ 763,090

Less interest

( 38,201 ) ( 319,372 ) ( 66,637 ) ( 201,863 )

Present value of minimum lease payments (a) (b) $ 82,590 $ 515,282 $ 193,174 $ 561,227

_______________

(a) Included in “Advertising funds restricted assets.”

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

December 31, 2023 January 1, 2023

Gross Allowance for Doubtful Accounts Net Gross Allowance for Doubtful Accounts Net

Accounts and Notes Receivable, Net

Accounts receivable (a) $ 106,335 $ ( 1,538 ) $ 104,797 $ 100,270 $ ( 1,707 ) $ 98,563

Notes receivable from franchisees (b) (c) 18,035 ( 1,149 ) 16,886 22,503 ( 4,640 ) 17,863

(a) The present value of minimum finance lease payments of $ 22,509 and $ 575,363 are included in “Current portion of finance lease liabilities” and “Long-term finance lease liabilities,” respectively.

(b) The present value of minimum operating lease payments of $ 50,068 and $ 704,333 are included in “Current portion of operating lease liabilities” and “Long-term operating lease liabilities,” respectively.

Company as Lessor

The components of lease income for 2024, 2023 and 2022 are as follows:

2024 2023 2022

Non-current (d)

Notes receivable from franchisees (c) $ — $ — $ — $ 3,888 $ — $ 3,888

Sales-type and direct-financing leases:

Selling profit $ 474 $ 2,466 $ 2,981

Interest income (a) 29,187 31,412 31,298

Operating lease income 168,497 163,927 170,633

Variable lease income 67,996 66,241 63,832

Franchise rental income (b) $ 236,493 $ 230,168 $ 234,465

_______________

(a) Includes income tax refund receivables of $ 5,284 and $ 3,236 as of December 31, 2023 and January 1, 2023, respectively.

Additionally, includes receivables of $ 17,460 as of December 31, 2023 related to expected contributions from applicable insurance for legal settlements.

See Note 11 for further information on our legal reserves.

(b) Includes the current portion of sales-type and direct financing lease receivables of $ 10,779 and $ 8,263 as of December 31, 2023 and January 1, 2023, respectively.

See Note 19 for further information.

Includes a note receivable from a franchisee in Indonesia of $ 394 and $ 1,153 as of December 31, 2023 and January 1, 2023, respectively.

(c) Includes notes receivable related to the Brazil JV, of which $ 6,837 and $ 13,087 are included in current notes receivable as of December 31, 2023 and January 1, 2023, respectively, and $ 3,888 is included in non-current notes receivable as of January 1, 2023.

As of December 31, 2023 and January 1, 2023, the Company had reserves of $ 1,149 and $ 4,640 , respectively, on the loans outstanding related to the Brazil JV.

See Note 8 for further information.

(d) Included in “Other assets.”

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

(b) Includes sublease income of $ 174,478 , $ 170,112 and $ 175,053 recognized during 2024, 2023 and 2022, respectively.

Sublease income includes lessees’ variable payments to the Company for executory costs of $ 39,793 , $ 39,350 and $ 38,733 for 2024, 2023 and 2022, respectively.

THE WENDY’S COMPANY AND SUBSIDIARIES

1 unchanged sentence

(In Thousands Except Per Share Amounts)

The following is a rollforward of the allowance for doubtful accounts:

Accounts Receivable Notes Receivable Total

Balance at January 1, 2023

$ 1,707 $ 4,640 $ 6,347

Provision for doubtful accounts 534 ( 414 ) 120

Uncollectible accounts written off, net of recoveries ( 703 ) ( 3,077 ) ( 3,780 )

Balance at December 31, 2023

$ 1,538 $ 1,149 $ 2,687

Balance at January 2, 2022

$ 3,229 $ 5,290 $ 8,519

Provision for doubtful accounts ( 565 ) ( 350 ) ( 915 )

Uncollectible accounts written off, net of recoveries ( 957 ) ( 300 ) ( 1,257 )

Balance at January 1, 2023

$ 1,707 $ 4,640 $ 6,347

Balance at January 3, 2021

$ 3,739 $ 5,625 $ 9,364

Provision for doubtful accounts ( 148 ) ( 335 ) ( 483 )

Uncollectible accounts written off, net of recoveries ( 362 ) — ( 362 )

Balance at January 2, 2022

The following table illustrates the Company’s future minimum rental receipts for non-cancelable leases and subleases as of December 29, 2024:

Sales-Type and

Direct Financing Leases Operating

Fiscal Year Subleases Owned Properties Subleases Owned Properties

2025 $ 35,495 $ 1,129 $ 108,540 $ 57,306

(8) Investments

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

2023 January 1,

Equity method investments $ 32,727 $ 33,921

Other investments in equity securities 1,718 12,107

2026 36,747 1,157 108,841 59,098

Equity Method Investments

Wendy’s has a 50 % share in the TimWen real estate joint venture and a 20 % share in the Brazil JV, both of which are accounted for using the equity method of accounting, under which our results of operations include our share of the income (loss) of the investees in “Other operating income, net.”

A wholly-owned subsidiary of Wendy’s entered into the Brazil JV during the second quarter of 2015 for the operation of Wendy’s restaurants in Brazil.

Wendy’s, Starboard International Holdings B.V.

and Infinity Holding E Participações Ltda.

contributed $ 1 , $ 2 and $ 2 , respectively, each receiving proportionate equity interests of 20 %, 40 % and 40 %, respectively.

The Brazil JV ceased operations in 2021 and no income or loss was recorded during 2023, 2022 and 2021.

A wholly-owned subsidiary of Wendy’s had receivables outstanding related to the Brazil JV totaling $ 6,837 and $ 16,975 as of December 31, 2023 and January 1, 2023, respectively.

The total receivables outstanding as of December 31, 2023 are due in 2024.

As of December 31, 2023 and January 1, 2023, the Company had reserves of $ 1,149 and $ 4,640 , respectively, on the receivables related to the Brazil JV.

See Note 7 for further information.

The carrying value of our investment in TimWen exceeded our interest in the underlying equity of the joint venture by $ 14,086 and $ 16,423 as of December 31, 2023 and January 1, 2023, respectively, primarily due to purchase price adjustments from the 2008 merger of Triarc Companies, Inc.

and Wendy’s International, Inc.

(the “Wendy’s Merger”).

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

Presented below is activity related to our investment in TimWen included in our consolidated balance sheets and consolidated statements of operations as of and for the years ended December 31, 2023, January 1, 2023 and January 2, 2022.

2027 37,304 1,292 109,624 58,835

Balance at beginning of period $ 33,921 $ 39,870 $ 44,574

Equity in earnings for the period 13,493 12,267 14,329

Amortization of purchase price adjustments (a) ( 2,674 ) ( 2,845 ) ( 3,126 )

2028 38,200 1,047 110,555 58,642

Distributions received ( 12,901 ) ( 12,612 ) ( 16,337 )

Foreign currency translation adjustment included in

“Other comprehensive income (loss)” and other

2029 38,471 1,052 110,177 59,382

Balance at end of period $ 32,727 $ 33,921 $ 39,870

Thereafter 349,099 9,366 729,374 500,209

Total future minimum receipts 535,316 15,043 $ 1,277,111 $ 793,472

Unearned interest income ( 247,224 ) ( 5,710 )

Net investment in sales-type and direct financing leases (a) $ 288,092 $ 9,333

_______________

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

Other Investments in Equity Securities

During 2021, the Company made an investment in equity securities of $ 10,000 .

During the year ended January 1, 2023, the Company recognized a gain of $ 2,107 as a result of an observable price change for a similar investment of the same issuer.

During the year ended December 31, 2023, the Company recorded impairment charges of $ 10,389 for the difference between the estimated fair value and the carrying value of the investment.

(9) Properties

December 31, 2023 January 1, 2023

(a) The present value of minimum sales-type and direct financing rental receipts of $ 9,377 and $ 288,048 are included in “Accounts and notes receivable, net” and “Net investment in sales-type and direct financing leases,” respectively.

The present value of minimum sales-type and direct financing rental receipts includes a net investment in unguaranteed residual assets of $ 125 .

Properties owned by the Company and leased to franchisees and other third parties under operating leases include:

December 29, 2024 December 31, 2023

Land $ 261,131 $ 260,125

Buildings and improvements 303,521 296,242

Leasehold improvements 432,051 422,330

Office, restaurant and transportation equipment 344,623 314,223

Restaurant equipment 1,943 1,701

566,595 558,068

1 unchanged sentence

$ 358,672 $ 359,639

Depreciation and amortization expense related to properties was $ 70,108 , $ 69,239 and $ 68,298 during 2023, 2022 and 2021, respectively.

THE WENDY’S COMPANY AND SUBSIDIARIES

9 unchanged sentences

Changes in goodwill:

Restaurant acquisitions (b) ( 260 ) — — ( 260 )

Restaurant dispositions — — — —

Currency translation adjustment and other — ( 1,930 ) — ( 1,930 )

Balance at January 1, 2023:

Currency translation adjustment — 639 — 639

Balance at December 31, 2023:

Goodwill, gross 620,603 39,973 122,548 783,124

2 unchanged sentences

Changes in goodwill:

Restaurant acquisitions — — — —

Restaurant dispositions — — — —

Currency translation adjustment and other — 639 — 639

Currency translation adjustment — ( 2,259 ) — ( 2,259 )

Balance at December 29, 2024:

4 unchanged sentences

(a) Accumulated impairment losses resulted from the full impairment of goodwill of the Wendy’s international franchise restaurants during the fourth quarter of 2013.

(b) Includes an adjustment to the fair value of net assets acquired in connection with the acquisition of franchised restaurants during 2021.

See Note 3 for further information.

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

The following is a summary of the components of other intangible assets and the related amortization expense:

December 31, 2023 January 1, 2023

December 29, 2024 December 31, 2023

Cost Accumulated Amortization Net Cost Accumulated Amortization Net

8 unchanged sentences

$ 1,807,538 $ ( 615,274 ) $ 1,192,264 $ 1,780,993 $ ( 561,864 ) $ 1,219,129

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

Aggregate amortization expense:

4 unchanged sentences

Thereafter 74,110

(7) Investments

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

2024 December 31,

Equity method investments $ 27,288 $ 32,727

Other investments in equity securities 1,718 1,718

$ 29,006 $ 34,445

Equity Method Investments

A wholly-owned subsidiary of Wendy’s entered into the Brazil JV during the second quarter of 2015 for the operation of Wendy’s restaurants in Brazil.

Wendy’s, Starboard International Holdings B.V.

and Infinity Holding E Participações Ltda.

contributed $ 1 , $ 2 and $ 2 , respectively, each receiving proportionate equity interests of 20 %, 40 % and 40 %, respectively.

The Brazil JV ceased operations in 2021 and no income or loss was recorded during 2024, 2023 and 2022.

A wholly-owned subsidiary of Wendy’s had receivables outstanding related to the Brazil JV totaling $ 5,837 and $ 6,837 as of December 29, 2024 and December 31, 2023, respectively.

The total receivables outstanding as of December 29, 2024 were due in 2024.

As of December 29, 2024 and December 31, 2023, the Company had reserves of $ 2,149 and $ 1,149 , respectively, on the receivables related to the Brazil JV.

The Company is currently pursuing collection of certain of the past due amounts.

See Note 2 for further information.

The carrying value of our investment in TimWen exceeded our interest in the underlying equity of the joint venture by $ 10,575 and $ 14,086 as of December 29, 2024 and December 31, 2023, respectively, primarily due to purchase price adjustments from the 2008 merger of Triarc Companies, Inc.

and Wendy’s International, Inc.

(the “Wendy’s Merger”).

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

2024 2023 2022

Balance at beginning of period $ 32,727 $ 33,921 $ 39,870

Equity in earnings for the period 14,084 13,493 12,267

Amortization of purchase price adjustments (a) ( 2,477 ) ( 2,674 ) ( 2,845 )

11,607 10,819 9,422

Distributions received ( 14,408 ) ( 12,901 ) ( 12,612 )

Foreign currency translation adjustment included in

“Other comprehensive (loss) income”

( 2,638 ) 888 ( 2,759 )

Balance at end of period $ 27,288 $ 32,727 $ 33,921

_______________

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

Other Investments in Equity Securities

During 2021, the Company made an investment in equity securities of $ 10,000 .

During the year ended January 1, 2023, the Company recognized a gain of $ 2,107 as a result of an observable price change for a similar investment of the same issuer.

During the year ended December 31, 2023, the Company recorded impairment charges of $ 10,389 for the difference between the estimated fair value and the carrying value of the investment.

(8) Accrued Expenses and Other Current Liabilities

December 31, 2023 January 1, 2023

December 29, 2024 December 31, 2023

Accrued compensation and related benefits $ 45,310 $ 44,625

11 unchanged sentences

Long-term debt consisted of the following:

2023 January 1,

2024 December 31,

Class A-2 Notes:

33 unchanged sentences

As a result, the Company recognized a gain on early extinguishment of debt of $ 3,914 for the year ended December 31, 2023.

In connection with the issuance of the 2021-1 Class A-2-I and 2021-1 Class A-2-II Notes, the Master Issuer also entered into a revolving financing facility of 2021-1 Variable Funding Senior Secured Notes, Class A-1 (the “2021-1 Class A-1 Notes”), which allows for the drawing of up to $ 300,000 on a revolving basis using various credit instruments, including a letter of credit facility.

As of December 31, 2023, the Company had no outstanding borrowings under the 2021-1 Class A-1 Notes.

THE WENDY’S COMPANY AND SUBSIDIARIES

1 unchanged sentence

(In Thousands Except Per Share Amounts)

The Master Issuer’s issuance of the 2021-1 Class A-1 Notes in June 2021 replaced the Company’s previous $ 150,000 Series 2019-1 Variable Funding Senior Secured Notes, Class A-1 (the “2019-1 Class A-1 Notes”) and $ 100,000 Series 2020-1 Variable Funding Senior Secured Notes, Class A-1 (the “2020-1 Class A-1 Notes”).

of credit facility.

As of December 29, 2024, the Company had no outstanding borrowings under the 2021-1 Class A-1 Notes.

The Class A-2 Notes and the 2021-1 Class A-1 Notes are collectively referred to as the “Senior Notes.”

5 unchanged sentences

If the Master Issuer has not repaid or refinanced the Class A-2 Notes prior to their respective anticipated repayment dates, which range from 2026 through 2032, additional interest will accrue pursuant to the Indenture.

The 2021-1 Class A-1 Notes accrue interest at a variable interest rate based on (i) the prime rate, (ii) overnight federal funds rates, (iii) SOFR for U.S.

The 2021-1 Class A-1 Notes accrue interest at a variable interest rate based on (i) the prime rate, (ii) overnight federal funds rates, (iii) Secured Overnight Financing Rate (“SOFR”) for U.S.

Dollars or (iv) with respect to advances made by conduit investors, the weighted average cost of, or related to, the issuance of commercial paper allocated to fund or maintain such advances, in each case plus any applicable margin and as specified in the purchase agreement for the 2021-1 Class A-1 Notes.

7 unchanged sentences

In accordance with the Indenture, certain cash accounts have been established with the Indenture trustee for the benefit of the trustee and the noteholders, and are restricted in their use.

As of December 31, 2023 and January 1, 2023, Wendy’s Funding had restricted cash of $ 35,483 and $ 34,850 , respectively, which primarily represents cash collections and cash reserves held by the trustee to be used for payments of principal, interest and commitment fees required for the Class A-2 Notes.

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

As of December 29, 2024 and December 31, 2023, Wendy’s Funding had restricted cash of $ 34,089 and $ 35,483 , respectively, which primarily represents cash collections and cash reserves held by the trustee to be used for payments of principal, interest and commitment fees required for the Class A-2 Notes.

Debt Financing

1 unchanged sentence

The legal final maturity date of the 2022-1 Class A-2 Notes is March 2052 and the anticipated repayment dates are in 2029 and 2032.

Refinancing Transactions

In June 2021, the Master Issuer completed a refinancing transaction under which the Master Issuer issued the Series 2021-1 Class A-2-I Notes and the Series 2021-1 Class A-2-II 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 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.

As a result of the refinancing, the Company recorded a loss on early extinguishment of debt of $ 17,917 during 2021, which was comprised of a specified make-whole payment of $ 9,632 and the write-off of certain unamortized deferred financing costs of $ 8,285 .

As part of the June 2021 refinancing transaction, the Master Issuer also issued the 2021-1 Class A-1 Notes.

The Series 2021-1 Class A-1 Notes replaced the 2019-1 Class A-1 Notes and 2020-1 Class A-1 Notes, which were canceled 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.

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

Debt Issuance Costs

During 2022 and 2021, the Company incurred debt issuance costs of $ 10,232 and $ 20,873 in connection with the issuance of the 2022-1 Class A-2 Notes and the June 2021 refinancing transaction.

During 2022, the Company incurred debt issuance costs of $ 10,232 in connection with the issuance of the 2022-1 Class A-2 Notes.

The debt issuance costs are being amortized to “Interest expense, net” through the anticipated repayment dates of the Class A-2 Notes utilizing the effective interest rate method.

9 unchanged sentences

Borrowings under the facility are guaranteed by Wendy’s.

In March 2020, the Company drew down C$ 5,500 under the revolving credit facility, which the Company fully repaid through repayments of C$ 3,000 in the fourth quarter of 2020 and C$ 2,500 in the first quarter of 2021.

As of December 29, 2024, the Company had no outstanding borrowings under the Canadian revolving credit facility.

4 unchanged sentences

Interest expense on the Company’s long-term debt was $ 110,038 , $ 112,659 and $ 110,751 during 2024, 2023 and 2022, respectively, which was recorded to “Interest expense, net.”

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

Pledged Assets

6 unchanged sentences

Other intangible assets 978,513

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

(10) Fair Value Measurements

9 unchanged sentences

The inputs into the determination of fair value require significant management judgment or estimation.

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

Financial Instruments

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

December 31, 2023 January 1, 2023

December 29, 2024 December 31, 2023

Value Carrying

24 unchanged sentences

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

Total impairment losses may reflect the impact of remeasuring long-lived assets held and used (including land, buildings, leasehold improvements, favorable lease assets and ROU assets) to fair value as a result of (1) the deterioration in operating performance of certain Company-operated restaurants and (2) the Company’s decision to lease and/or sublease the land and/or buildings to franchisees in connection with the sale or anticipated sale of restaurants, including any subsequent lease modifications.

Total impairment losses may reflect the impact of remeasuring long-lived assets held and used (including land, buildings, leasehold improvements, favorable lease assets and ROU assets) to fair value as a result of (1) the deterioration in operating performance or anticipated closures of certain Company-operated restaurants and (2) the Company’s decision to lease and/or sublease the land and/or buildings to franchisees in connection with the sale or anticipated sale of restaurants, including any subsequent lease modifications.

The fair values of long-lived assets held and used presented in the tables below represent the remaining carrying value and were estimated based on either discounted cash flows of future anticipated lease and sublease income or discounted cash flows of future anticipated Company-operated restaurant performance.

35 unchanged sentences

Deferred tax assets (liabilities) are set forth below:

December 31, 2023 January 1, 2023

December 29, 2024 December 31, 2023

Deferred tax assets:

2 unchanged sentences

Deferred revenue 23,085 23,848

Unfavorable leases 17,104 19,085

Accrued compensation and related benefits 15,786 14,577

Accrued expenses and reserves 6,802 7,012

Other 51,626 50,935

11 unchanged sentences

(In Thousands Except Per Share Amounts)

The amounts and expiration dates of net operating loss and tax credit carryforwards are as follows:

The amounts and expiration dates of tax credit and net operating loss carryforwards are as follows:

Amount Expiration

9 unchanged sentences

Total $ 946,356

The Company’s valuation allowances of $ 39,346 and $ 35,680 as of December 31, 2023 and January 1, 2023, respectively, relate primarily to foreign and state tax credit and net operating loss carryforwards.

Valuation allowances increased $ 3,666 during 2023 and decreased $ 2,597 and $ 11,691 during 2022 and 2021, respectively.

The Company’s valuation allowances of $ 38,536 and $ 39,346 as of December 29, 2024 and December 31, 2023, respectively, relate primarily to foreign tax credit and foreign and state net operating loss carryforwards.

The relative presence of Company-operated restaurants in various states impacts expected future state taxable income available to utilize state net operating loss carryforwards.

The current portion of refundable income taxes was $ 5,284 and $ 3,236 as of December 31, 2023 and January 1, 2023, respectively, and is included in “Accounts and notes receivable, net.” There were no long-term refundable income taxes as of December 31, 2023 and January 1, 2023.

The current portion of refundable income taxes was $ 3,587 and $ 5,284 as of December 29, 2024 and December 31, 2023, respectively, and is included in “Accounts and notes receivable, net.” There were no long-term refundable income taxes as of December 29, 2024 and December 31, 2023.

The reconciliation of income tax computed at the U.S.

4 unchanged sentences

State income tax provision, net of U.S.

federal income tax effect ( 11,400 ) ( 11,616 ) ( 6,256 )

federal income tax effect (a) ( 15,717 ) 5.8 % ( 11,400 ) 4.1 % ( 11,616 ) 4.8 %

Prior years’ tax matters 78 0.0 % ( 2,250 ) 0.8 % 2,290 ( 0.9 ) %

2 unchanged sentences

tax effects of foreign operations 457 ( 0.2 ) % 1,799 ( 0.6 ) % ( 3,744 ) 1.6 %

Valuation allowances (a) ( 3,533 ) 2,127 11,807

Non-deductible goodwill (b) — — ( 947 )

Valuation allowances ( 3,323 ) 1.2 % ( 3,533 ) 1.3 % 2,127 ( 0.9 ) %

Tax credits 899 ( 0.3 ) % 1,050 ( 0.4 ) % 1,385 ( 0.6 ) %

4 unchanged sentences

_______________

(a) 2021 primarily relates to a $ 12,606 benefit resulting from a change in state tax law.

(b) Related to the sale of the New York Company-operated restaurants (including Manhattan).

See Note 4 for further information.

(a) The change in state effective tax rate during 2024 was driven primarily by state rate law changes.

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

1 unchanged sentence

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

The statute of limitations for the Company’s

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

THE WENDY’S COMPANY AND SUBSIDIARIES

1 unchanged sentence

(In Thousands Except Per Share Amounts)

state tax returns vary, but generally the Company’s state income tax returns from its 2018 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.

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

Unrecognized Tax Benefits

4 unchanged sentences

Tax positions of current year 375 836 178

Tax positions of prior years ( 690 ) ( 662 ) ( 2,015 )

Tax positions of prior years (a) ( 2,069 ) ( 690 ) ( 662 )

Settlements — ( 249 ) ( 8 )

1 unchanged sentence

Ending balance $ 14,805 $ 16,719 $ 17,404

_______________

(a) Reduction in uncertain tax benefits related to tax positions of prior years during 2024 was primarily driven by a non-recurring state rate law change.

During 2025, we believe it is reasonably possible the Company will reduce unrecognized tax benefits by up to $ 1,024 due primarily to the lapse of statutes of limitations and expected settlements.

During 2023, 2022 and 2021, the Company recognized $ 134 , $( 30 ) and $ 138 of expense (income) for interest, respectively, and $ 37 of income in 2021 for penalties, related to uncertain tax positions.

The Company has $ 979 and $ 943 accrued for interest related to uncertain tax positions as of December 31, 2023 and January 1, 2023, respectively.

During 2024, 2023 and 2022, the Company recognized expense (income) for interest of $ 376 , $ 134 and $( 30 ), respectively.

The Company has $ 1,355 and $ 979 accrued for interest related to uncertain tax positions as of December 29, 2024 and December 31, 2023, respectively.

(12) Net Income Per Share

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

2024 2023 2022

Net income $ 194,357 $ 204,440 $ 177,370

Common stock:

Weighted average basic shares outstanding 204,351 209,486 213,766

Dilutive effect of stock options and restricted shares 1,263 2,048 2,073

Weighted average diluted shares outstanding 205,614 211,534 215,839

Net income per share:

Basic $ .95 $ .98 $ .83

Diluted $ .95 $ .97 $ .82

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

Basic net income per share for 2024, 2023 and 2022 was computed by dividing net income amounts by the weighted average number of shares of common stock outstanding.

We excluded potential common shares of 7,845 , 5,377 and 4,443 for 2024, 2023 and 2022, respectively, from our diluted net income per share calculation as they would have had anti-dilutive effects.

(13) Stockholders’ Equity

12 unchanged sentences

Number of shares at end of year 266,590 265,027 257,323

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

Repurchases of Common Stock

In January 2023, our Board of Directors authorized a repurchase program for up to $ 500,000 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 2023, the Company repurchased 9,107 shares under the January 2023 Authorization with an aggregate purchase price of $ 190,000 , of which $ 573 was accrued as of December 31, 2023, and excluding excise tax of $ 1,744 and commissions of $ 127 .

During 2024, the Company repurchased 4,305 shares under the January 2023 Authorization with an aggregate purchase price of $ 75,000 , excluding excise tax of $ 564 and commissions of $ 60 .

During 2024, the Company paid $ 1,742 in excise tax on shares repurchased during 2023.

As of December 29, 2024, the Company had $ 235,000 of availability remaining under the January 2023 Authorization.

Subsequent to December 29, 2024 through February 19, 2025, the Company repurchased 3,391 shares under the January 2023 Authorization with an aggregate purchase price of $ 50,393 , excluding applicable excise tax and commissions.

During 2023, the Company repurchased $ 9,107 shares under the January 2023 Authorization with an aggregate purchase price of $ 190,000 , of which $ 573 was accrued as of December 31, 2023, and excluding excise tax of $ 1,744 and commissions of $ 127 .

In February 2022, our Board of Directors authorized a repurchase program for up to $ 100,000 of our common stock through February 28, 2023, when and if market conditions warranted and to the extent legally permissible (the “February 2022 Authorization”).

3 unchanged sentences

In February 2020, our Board of Directors authorized a repurchase program for up to $ 100,000 of our common stock through February 28, 2021, when and if market conditions warranted and to the extent legally permissible (the “February 2020 Authorization”).

In July 2020, the Company’s Board of Directors approved an extension of the February 2020 Authorization by one year, through February 28, 2022.

In July 2020, the Company’s Board of Directors approved an extension of the February 2020 Authorization

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

by one year, through February 28, 2022.

In addition, during 2021, the Board of Directors approved increases totaling $ 200,000 to the February 2020 Authorization, resulting in an aggregate authorization of $ 300,000 that continued to expire on February 28, 2022.

4 unchanged sentences

In total, 5,625 shares were delivered under the 2021 ASR Agreement at an average purchase price of $ 22.22 per share.

In addition to the shares repurchased in connection with the 2021 ASR Agreement, during 2021, the Company repurchased 6,577 shares with an aggregate purchase price of $ 142,715 , excluding commissions of $ 93 , under the February 2020 Authorization.

After taking into consideration these repurchases, with the completion of the 2021 ASR Agreement in February 2022 described above, the Company completed the February 2020 Authorization.

Preferred Stock

6 unchanged sentences

Balance at end of period $ ( 74,753 ) $ ( 58,375 ) $ ( 64,176 )

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

(14) Share-Based Compensation

11 unchanged sentences

The aggregate intrinsic value of an option is the amount by which the fair value of the underlying stock exceeds its exercise price.

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

The following table summarizes stock option activity during 2024:

2 unchanged sentences

Life in Years Aggregate

Outstanding at January 1, 2023

Outstanding at December 31, 2023

10,490 $ 19.55

21 unchanged sentences

The expected dividend yield represents the Company’s annualized average yield for regular quarterly dividends declared prior to the respective stock option grant dates.

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

The Black-Scholes Model has limitations on its effectiveness including that it was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable and that the model requires the use of highly subjective assumptions, such as expected stock price volatility.

5 unchanged sentences

The fair value of Restricted Shares granted is determined using the fair market value of the Company’s common stock on the date of grant, as set forth in the applicable plan document.

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

The following table summarizes activity of Restricted Shares during 2024:

1 unchanged sentence

Grant Date Fair Value

Non-vested at January 1, 2023

Non-vested at December 31, 2023

1,372 $ 20.42

7 unchanged sentences

The Company grants performance-based awards to certain officers and key employees.

The vesting of these awards is contingent upon meeting one or more defined operational or financial goals (a performance condition) or common stock share prices (a market condition).

The vesting of these awards is contingent upon meeting one or more defined operational or financial goals (a performance condition) or relative common stock share prices (a market condition).

The quantity of shares awarded ranges from 0 % to 200 % of “Target,” as defined in the award agreement as the midpoint number of shares, based on the level of achievement of the performance and market conditions.

11 unchanged sentences

(a) The Monte Carlo method assumes a reinvestment of dividends.

Share-based compensation expense is recorded ratably for market condition awards during the requisite service period and is not reversed, except for forfeitures, at the vesting date regardless of whether the market condition is met.

THE WENDY’S COMPANY AND SUBSIDIARIES

1 unchanged sentence

(In Thousands Except Per Share Amounts)

The following table summarizes activity of performance shares at Target during 2024:

3 unchanged sentences

Grant Date Fair Value

Non-vested at January 1, 2023

Non-vested at December 31, 2023

608 $ 21.66 494 $ 26.68

1 unchanged sentence

Dividend equivalent units issued (a) 33 — 37 —

Vested ( 96 ) 23.37 ( 97 ) 30.31

Vested (b) ( 213 ) 20.21 — —

Forfeited ( 118 ) 21.97 ( 284 ) 24.35

4 unchanged sentences

There is no weighted average fair value associated with dividend equivalent units.

(b) Performance condition awards exclude the vesting of an additional 45 shares, which resulted from the performance of the awards exceeding Target.

The total fair value of performance condition awards that vested in 2024, 2023 and 2022 was $ 4,683 , $ 2,105 and $ 1,712 , respectively.

The total fair value of market condition awards that vested in 2023 and 2022 was $ 2,138 and $ 2,253 , respectively.

No market condition awards vested in 2024.

Share-Based Compensation

10 unchanged sentences

As of December 29, 2024, there was $ 26,868 of total unrecognized share-based compensation, which will be recognized over a weighted average amortization period of 1.62 years.

(17) Impairment of Long-Lived Assets

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

THE WENDY’S COMPANY AND SUBSIDIARIES

1 unchanged sentence

(In Thousands Except Per Share Amounts)

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

2023 2022 2021

Company-operated restaurants $ 1,316 $ 5,485 $ 1,862

Restaurants leased or subleased to franchisees — 242 189

Surplus properties 85 693 200

$ 1,401 $ 6,420 $ 2,251

(18) Retirement Benefit Plans

The Company has a 401(k) defined contribution plan (the “401(k) Plan”) for employees who meet certain minimum requirements and elect to participate.

The 401(k) Plan permits employees to contribute up to 75 % of their compensation, subject to certain limitations, and provides for matching employee contributions up to 4 % of compensation and for discretionary profit sharing contributions.

In connection with the matching contributions, the Company recognized compensation expense of $ 5,947 , $ 5,929 and $ 4,583 in 2023, 2022 and 2021, respectively.

Deferred Compensation Plan

The Company has a non-qualified, unfunded deferred compensation plan for management and highly compensated employees, whereby participants may defer all or a portion of their base compensation and certain incentive awards on a pre-tax basis.

The Company credits the amounts deferred with earnings based on the investment options selected by the participants.

The Company may also make discretionary contributions to the plan.

The total of participant deferrals was $ 1,959 and $ 1,435 at December 31, 2023 and January 1, 2023, respectively, which are included in “Other liabilities.”

Nature of Leases

The Company operates restaurants that are located on sites owned by us and sites leased by us from third parties.

In addition, the Company owns sites and leases sites from third parties, which it leases and/or subleases to franchisees.

At December 31, 2023, Wendy’s and its franchisees operated 7,240 Wendy’s restaurants.

Of the 415 Company-operated Wendy’s restaurants, Wendy’s owned the land and building for 158 restaurants, owned the building and held long-term land leases for 145 restaurants and held leases covering the land and building for 112 restaurants.

Wendy’s also owned 488 and leased 1,179 properties that were either leased or subleased principally to franchisees.

The Company also leases restaurant, office and transportation equipment.

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

Company as Lessee

The components of lease cost for 2023, 2022 and 2021 are as follows:

2023 2022 2021

Finance lease cost:

Amortization of finance lease assets $ 16,061 $ 15,440 $ 13,992

Interest on finance lease liabilities 42,624 42,918 41,419

(15) System Optimization Gains, Net

As of December 29, 2024, Company-operated restaurant ownership was approximately 5 % of the total system.

During 2024, 2023 and 2022, the Company facilitated 50 , 99 and 79 Franchise Flips, respectively.

Additionally, during 2024, the Company completed the sale of three Company-operated restaurants to franchisees and, during 2022, the Company completed the sale of one Company-operated restaurant to a franchisee.

No Company-operated restaurants were sold to franchisees during 2023.

Gains and losses recognized on dispositions are recorded to “System optimization gains, net” in our consolidated statements of operations.

Costs related to acquisitions and dispositions under our system optimization initiative are recorded to “Reorganization and realignment costs.” All other costs incurred related to facilitating Franchise Flips are recorded to “Franchise support and other costs.”

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

2024 2023 2022

Operating lease cost 85,138 86,050 89,283

Variable lease cost (a) 66,859 64,473 63,853

Short-term lease cost 5,864 5,439 5,102

Total operating lease cost (b) 157,861 155,962 158,238

Total lease cost $ 216,546 $ 214,320 $ 213,649

Number of restaurants sold to franchisees 3 — 1

Proceeds from sales of restaurants (a) $ 1,808 $ — $ 79

Net assets sold (b) ( 1,081 ) — ( 141 )

Net unfavorable leases — — ( 360 )

Other ( 1 ) — 6

726 — ( 416 )

(a) Includes expenses for executory costs of $ 39,456 , $ 38,749 , and $ 39,646 for 2023, 2022 and 2021, respectively, for which the Company is reimbursed by sublessees.

(b) Includes $ 125,180 , $ 123,924 and $ 132,158 for 2023, 2022 and 2021, respectively, recorded to “Franchise rental expense” for leased properties that are subsequently leased to franchisees.

Also includes $ 30,538 , $ 29,648 and $ 23,558 for 2023, 2022 and 2021, respectively, recorded to “Cost of sales” for leases for Company-operated restaurants.

The following table includes supplemental cash flow and non-cash information related to leases:

Post-closing adjustments on sales of restaurants (c) 694 858 2,877

Gain on sales of restaurants, net 1,420 858 2,461

(Loss) gain on sales of other assets, net (d) ( 201 ) 22 4,318

System optimization gains, net $ 1,219 $ 880 $ 6,779

_______________

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from finance leases $ 42,624 $ 42,979 $ 42,277

Operating cash flows from operating leases 86,972 88,372 91,930

Financing cash flows from finance leases 21,588 17,312 13,640

Right-of-use assets obtained in exchange for lease obligations:

Finance lease liabilities 20,243 34,478 82,032

Operating lease liabilities 12,659 24,742 58,770

(a) In addition to the proceeds noted herein, the Company received cash proceeds of $ 378 during 2022 related to a note receivable issued in connection with restaurants previously sold to a franchisee.

(b) Net assets sold consisted primarily of land and equipment.

(c) 2024, 2023 and 2022 include the recognition of deferred gains of $ 800 , $ 858 and $ 3,522 , respectively, as a result of the resolution of certain contingencies related to the extension of lease terms for restaurants previously sold to franchisees.

(d) During 2024, 2023 and 2022, the Company received cash proceeds of $ 3,138 , $ 2,115 and $ 7,780 , respectively, primarily from the sale of surplus and other properties.

THE WENDY’S COMPANY AND SUBSIDIARIES

1 unchanged sentence

(In Thousands Except Per Share Amounts)

The following table includes supplemental information related to leases:

December 31, 2023 January 1,

Weighted-average remaining lease term (years):

Finance leases 14.3 15.1

Operating leases 12.6 13.7

Weighted average discount rate:

Finance leases 8.52 % 8.66 %

Operating leases 4.93 % 4.90 %

Supplemental balance sheet information:

Finance lease assets, gross $ 318,951 $ 310,686

Accumulated amortization ( 90,015 ) ( 76,116 )

Finance lease assets 228,936 234,570

Operating lease assets 705,615 754,498

The following table illustrates the Company’s future minimum rental payments for non-cancelable leases as of December 31, 2023:

Leases Operating

Fiscal Year Company-Operated Franchise

and Other Company-Operated Franchise

2024 $ 6,904 $ 55,492 $ 22,052 $ 64,636

2025 7,104 56,121 22,048 64,432

2026 7,249 57,817 22,500 63,967

2027 7,293 58,702 22,439 63,678

Assets Held for Sale

As of December 29, 2024 and December 31, 2023, the Company had assets held for sale of $ 2,833 and $ 2,689 , respectively, primarily consisting of surplus properties.

Assets held for sale are included in “Prepaid expenses and other current assets.”

(16) Reorganization and Realignment Costs

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

2024 2023 2022

Thereafter 78,045 563,716 169,965 469,484

Total minimum payments $ 113,945 $ 851,767 $ 281,227 $ 790,066

Less interest

Organizational Redesign Plan $ 8,367 $ 9,064 $ —

Other reorganization and realignment plans 161 136 698

Reorganization and realignment costs $ 8,528 $ 9,200 $ 698

Organizational Redesign

As a result of the Organizational Redesign Plan, the Company held its general and administrative expense in 2023 relatively flat compared with 2022.

Additionally, in January 2024, the Board of Directors announced the appointment of Kirk Tanner as the Company’s new President and Chief Executive Officer, effective February 5, 2024.

Tanner succeeded Todd A.

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

The Company expects to incur total costs of approximately $ 18,000 related to the Organizational Redesign Plan, including costs related to the succession of the President and Chief Executive Officer role.

During 2024 and 2023, the Company recognized costs totaling $ 8,367 and 9,064 , respectively, which primarily included severance and related employee costs and share-based compensation.

The Company expects to incur additional costs aggregating approximately $ 600 , comprised primarily of share-based compensation.

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

The following is a summary of the costs recorded as a result of the Organizational Redesign Plan:

2024 2023 Total Incurred Since Inception

Severance and related employee costs $ 7,253 $ 6,243 $ 13,496

Recruitment and relocation costs 169 554 723

Third-party and other costs 120 996 1,116

7,542 7,793 15,335

Present value of minimum lease payments (a) (b) $ 77,285 $ 511,732 $ 209,698 $ 578,995

Share-based compensation (a) 825 1,271 2,096

Total organizational redesign $ 8,367 $ 9,064 $ 17,431

_______________

(a) The present value of minimum finance lease payments of $ 20,250 and $ 568,767 are included in “Current portion of finance lease liabilities” and “Long-term finance lease liabilities,” respectively.

(b) The present value of minimum operating lease payments of $ 49,353 and $ 739,340 are included in “Current portion of operating lease liabilities” and “Long-term operating lease liabilities,” respectively.

(a) Primarily represents the accelerated recognition of share-based compensation resulting from the termination of employees under the Organizational Redesign Plan.

THE WENDY’S COMPANY AND SUBSIDIARIES

1 unchanged sentence

(In Thousands Except Per Share Amounts)

Company as Lessor

The components of lease income for 2023, 2022 and 2021 are as follows:

2023 2022 2021

Sales-type and direct-financing leases:

Selling profit $ 2,466 $ 2,981 $ 4,244

Interest income (a) 31,412 31,298 30,648

Operating lease income 163,927 170,633 173,442

Variable lease income 66,241 63,832 63,213

Franchise rental income (b) $ 230,168 $ 234,465 $ 236,655

_______________

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

(b) Includes sublease income of $ 170,112 , $ 175,053 and $ 174,327 recognized during 2023, 2022 and 2021, respectively.

Sublease income includes lessees’ variable payments to the Company for executory costs of $ 39,350 , $ 38,733 and $ 39,650 for 2023, 2022 and 2021, respectively.

The following table illustrates the Company’s future minimum rental receipts for non-cancelable leases and subleases as of December 31, 2023:

Sales-Type and

Direct Financing Leases Operating

Fiscal Year Subleases Owned Properties Subleases Owned Properties

2024 $ 38,890 $ 2,087 $ 106,470 $ 54,946

2025 37,826 2,194 106,616 55,549

As of December 29, 2024, the accruals for the Organizational Redesign Plan are included in “Accrued expenses and other current liabilities” and “Other liabilities” and totaled $ 3,872 and $ 385 , respectively.

As of December 31, 2023, the accruals for the Organizational Redesign Plan were included in “Accrued expenses and other current liabilities.” The tables below present a rollforward of our accruals for the Organizational Redesign Plan.

Balance December 31, 2023

Charges Payments Balance December 29, 2024

Severance and related employee costs $ 1,692 $ 7,253 $ ( 4,688 ) $ 4,257

Recruitment and relocation costs — 169 ( 169 ) —

Third-party and other costs — 120 ( 120 ) —

$ 1,692 $ 7,542 $ ( 4,977 ) $ 4,257

January 1, 2023

Charges Payments Balance

December 31, 2023

Severance and related employee costs $ — $ 6,243 $ ( 4,551 ) $ 1,692

Recruitment and relocation costs — 554 ( 554 ) —

Third-party and other costs — 996 ( 996 ) —

$ — $ 7,793 $ ( 6,101 ) $ 1,692

Other Reorganization and Realignment Plans

For 2024, 2023 and 2022, costs incurred under the Company’s other reorganization and realignment plans were not material.

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

(17) Impairment of Long-Lived Assets

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

2024 2023 2022

Thereafter 399,480 25,730 783,633 542,967

Total future minimum receipts 595,735 36,618 $ 1,318,474 $ 824,465

Unearned interest income ( 288,461 ) ( 19,449 )

Net investment in sales-type and direct financing leases (a) $ 307,274 $ 17,169

Company-operated restaurants $ 9,073 $ 1,316 $ 5,485

Restaurants leased or subleased to franchisees — — 242

Surplus properties 640 85 693

$ 9,713 $ 1,401 $ 6,420

(a) The present value of minimum sales-type and direct financing rental receipts of $ 10,779 and $ 313,664 are included in “Accounts and notes receivable, net” and “Net investment in sales-type and direct financing leases,” respectively.

The present value of minimum sales-type and direct financing rental receipts includes a net investment in unguaranteed residual assets of $ 590 .

(18) Retirement Benefit Plan

The Company has a 401(k) defined contribution plan (the “401(k) Plan”) for employees who meet certain minimum requirements and elect to participate.

In connection with the matching contributions, the Company recognized compensation expense of $ 6,228 , $ 5,947 and $ 5,929 in 2024, 2023 and 2022, respectively.

THE WENDY’S COMPANY AND SUBSIDIARIES

1 unchanged sentence

(In Thousands Except Per Share Amounts)

Properties owned by the Company and leased to franchisees and other third parties under operating leases include:

December 31, 2023 January 1, 2023

Land $ 260,125 $ 260,650

Buildings and improvements 296,242 291,659

Restaurant equipment 1,701 1,701

558,068 554,010

Accumulated depreciation and amortization ( 198,429 ) ( 187,269 )

$ 359,639 $ 366,741

(19) Supplemental Cash Flow Information

The following table includes supplemental cash flow information for 2024, 2023 and 2022:

2023 January 1,

2024 December 31,

2023 January 1,

Long-term debt-related activities, net:

(Gain) loss on early extinguishment of debt $ ( 2,283 ) $ — $ 17,917

Gain on early extinguishment of debt $ — $ ( 2,283 ) $ —

Accretion of long-term debt 675 755 1,194

8 unchanged sentences

The following table includes a reconciliation of cash, cash equivalents and restricted cash for 2024, 2023 and 2022:

2023 January 1,

2024 December 31,

2023 January 1,

6 unchanged sentences

Capital expenditures related to the fund are included in “Franchise development fund” in the consolidated statements of cash flows.

(20) Guarantees and Other Commitments and Contingencies

Guarantees and Contingent Liabilities

Franchisee Development Incentive Programs

To promote new restaurant development, Wendy’s has provided franchisees with certain incentive programs for qualifying new and existing restaurants.

In July and September 2024, Wendy’s announced a new development incentive structure in the U.S.

and Canada and select international markets, respectively, that provides for reductions in royalty and national advertising fees for qualifying new restaurants for two, three or four years of operation based on the number of restaurants committed to under a development agreement.

Franchisees who open a restaurant on or before November 30th of the calendar year prior to the restaurant’s required open date receive a technical assistance fee waiver.

Wendy’s also provides franchisees with its base-level incentive that provides for reductions in royalty and national advertising fees for up to the first two years of operation for qualifying approved replacement restaurants.

From time to time, Wendy’s may modify these incentive programs.

For example, subsequent to December 29, 2024, Wendy’s announced that it is offering the highest-level incentive, which provides for fee reductions for four years, to all new and existing U.S.

franchisees for a limited period of time under certain circumstances.

THE WENDY’S COMPANY AND SUBSIDIARIES

1 unchanged sentence

(In Thousands Except Per Share Amounts)

(21) Guarantees and Other Commitments and Contingencies

Guarantees and Contingent Liabilities

Franchisee Image Activation Incentive Programs

To promote new restaurant development, Wendy’s has provided franchisees with certain incentive programs for qualifying new restaurants.

In February 2023, Wendy’s announced a new restaurant development incentive program in the U.S.

and Canada that provides for waivers of royalty, national advertising and technical assistance fees for up to the first three years of operation for qualifying new restaurants (“Pacesetter”).

Wendy’s previously offered and will continue to offer a restaurant development incentive program that provides for reductions in royalty and national advertising fees for up to the first two years of operation for qualifying new restaurants (“Groundbreaker”).

and Canadian franchisees may elect either the Pacesetter program or the Groundbreaker program when committing to new multi-unit development agreements or adding incremental commitments to existing development agreements.

Wendy’s also provides franchisees with the option of an early 20 -year or 25 -year renewal of their franchise agreement upon completion of reimaging utilizing certain approved Image Activation reimage designs.

Lease Guarantees

15 unchanged sentences

Purchase and Capital Commitments

Beverage Agreement

The Company has an agreement with a beverage vendor, which provides fountain beverage products and certain marketing support funding to the Company and its franchisees.

This agreement requires minimum purchases of certain fountain beverages (“Fountain Beverages”) by the Company and its franchisees at agreed upon prices until the total contractual gallon volume usage is reached.

This agreement also provides for an annual advance to be paid to the Company based on the vendor’s expectation of the Company’s annual Fountain Beverages usage, which is amortized over actual usage during the year.

In January 2019, the Company amended its contract with the beverage vendor, which now expires at the later of reaching a minimum usage requirement or December 31, 2025.

Beverage purchases made by the Company under this agreement during 2023, 2022 and 2021 were $ 11,893 , $ 10,545 and $ 9,709 , respectively.

The Company estimates future annual purchases to be approximately $ 12,400 in 2024 and $ 12,700 in 2025 based on current pricing and the expected ratio of usage at Company-

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

operated restaurants to franchised restaurants.

As of December 31, 2023, $ 3,906 was due to the beverage vendor and is included in “Accounts payable,” principally for annual estimated payments that exceeded usage under this agreement.

Marketing Agreement

The Company has an agreement with two national broadcasters that grants the Company certain marketing and media rights.

Costs incurred by the Company under this agreement were approximately $ 16,000 , $ 12,000 and $ 15,000 in 2023, 2022, and 2021, respectively, which are included in “Advertising funds expense.” The Company’s unconditional purchase obligations under the agreement are approximately $ 16,300 in 2024 and $ 12,700 in 2025.

The Company has material purchase requirements under a beverage agreement with a vendor, a marketing agreement with two national broadcasters and an information technology agreement with a vendor.

In August 2024, the Company amended its contract with the beverage vendor, which now expires upon reaching a threshold usage requirement or, if certain undertakings are not fulfilled, at the later of reaching a threshold usage requirement or December 31, 2034.

Our total purchase requirements under the beverage, marketing and information technology agreements are estimated to be approximately $ 119,500 over the remaining life of the contracts.

(21) Transactions with Related Parties

11 unchanged sentences

QSCC manages, for the Wendy’s system in the U.S.

and Canada, contracts for the purchase and distribution of food, proprietary paper, operating supplies and equipment under national agreements with pricing based upon total system volume.

and Canada, contracts for the purchase and distribution of food, proprietary paper, operating supplies and equipment under national

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

agreements with pricing based upon total system volume.

QSCC’s supply chain management facilitates continuity of supply and provides consolidated purchasing efficiencies while monitoring and seeking to minimize possible obsolete inventory throughout the Wendy’s supply chain in the U.S.

1 unchanged sentence

Such sourcing fees are remitted by these vendors to QSCC and are the primary means of funding QSCC’s operations.

In addition, QSCC collects certain rebates, price variance and other recoveries, technology fees, convention fees and other funding from third-party vendors as part of the administration and management of the Wendy’s supply chain in the U.S.

Should QSCC’s sourcing fees exceed its expected needs, QSCC’s board of directors may return some or all of the excess to its members in the form of a patronage dividend.

Wendy’s recorded its share of patronage dividends of $ 363 , $ 427 and $ 279 in 2023, 2022 and 2021, respectively, which are included as a reduction of “Cost of sales.”

Wendy’s recorded its share of patronage dividends of $ 3,493 in 2024, of which $ 2,909 is included in “Other operating income, net” and $ 584 is included as a reduction of “Cost of sales.” Wendy’s recorded its share of patronage dividends of $ 363 and $ 427 in 2023 and 2022, respectively, which are included as a reduction of “Cost of sales.”

(b) Pursuant to a lease agreement, Wendy’s leased 14,493 square feet of office space to QSCC for an annual base rent of $ 217 .

4 unchanged sentences

Wendy’s paid TimWen $ 21,409 , $ 20,894 and $ 19,927 under these lease agreements during 2024, 2023 and 2022, respectively, which has been recorded to “Franchise rental expense.” In addition, TimWen paid Wendy’s a management fee under the TimWen joint venture agreement of $ 237 , $ 241 and $ 233 during 2024, 2023 and 2022, respectively, which has been included as a reduction to “General and administrative.”

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

Transactions with Yellow Cab

(d) Certain family members and affiliates of Mr.

Nelson Peltz, our Chairman, and Mr.

Peter May, our Senior Vice Chairman, as well as Mr.

Matthew Peltz, our Vice Chairman, hold indirect, minority ownership interests in Yellow Cab Holdings, LLC (“Yellow Cab”) and operating companies managed by Yellow Cab, a Wendy’s franchisee, that as of December 31, 2023 owned and operated 83 Wendy’s restaurants (including 54 restaurants acquired from NPC during the first quarter of 2021).

(d) Certain family members and/or affiliates of Mr.

Nelson Peltz, our former Chairman and Chairman Emeritus, Mr.

Peter May, our Senior Vice Chairman, and Mr.

Matthew Peltz, our Vice Chairman, hold minority ownership interests in Yellow Cab Holdings, LLC (“Yellow Cab”), a Wendy’s franchisee that, as of December 29, 2024 owned and operated 89 Wendy’s restaurants, and/or certain of the operating companies managed by Yellow Cab.

During 2024, 2023 and 2022, the Company recognized $ 15,417 , $ 14,757 and $ 13,404 , respectively, in royalty, advertising fund, lease and other income from Yellow Cab and related entities.

As of December 31, 2023 and January 1, 2023, $ 1,153 and $ 1,125 , respectively, was due from Yellow Cab for such income, which is included in “Accounts and notes receivable, net” and “Advertising funds restricted assets.”

In all transactions involving Yellow Cab, the Company’s standard franchisee recruiting and approval processes were followed, no modifications were made to the Company’s standard franchise agreements or related documents, and all deal terms and transaction documents were negotiated and executed on an arm’s-length basis, consistent with the Company’s comparable franchise transactions and relationships.

As of December 29, 2024 and December 31, 2023, $ 1,132 and $ 1,153 , respectively, was due from Yellow Cab for such income, which is included in “Accounts and notes receivable, net” and “Advertising funds restricted assets.”

Transactions with AMC

1 unchanged sentence

Kristin Dolan, a director of the Company, was appointed as Chief Executive Officer of AMC Networks Inc.

During 2023, the Company purchased approximately $ 2,366 of advertising time from a subsidiary of AMC.

During 2024 and 2023, the Company purchased approximately $ 2,010 and $ 2,366 , respectively, of advertising time from a subsidiary of AMC.

The Company’s advertising spend with AMC was made in the ordinary course of business and approved on an arm’s-length basis, consistent with the Company’s comparable advertising decisions.

As of December 31, 2023, approximately $ 584 was due to AMC for advertising time, which is included in “Advertising funds restricted liabilities.”

As of December 29, 2024 and December 31, 2023, approximately $ 17 and $ 584 , respectively, was due to AMC for advertising time, which is included in “Advertising funds restricted liabilities.”

(22) Legal and Environmental Matters

1 unchanged sentence

We provide accruals for such litigation and claims when we determine it is probable that a liability has been incurred and the loss is reasonably estimable.

The Company believes it has adequate accruals for all of our legal and environmental matters.

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

believes it has adequate accruals for all of our legal and environmental matters.

We cannot estimate the aggregate possible range of loss for our existing litigation and claims due to various reasons, including, but not limited to, many proceedings being in preliminary stages, with various motions either yet to be submitted or pending, discovery yet to occur, and significant factual matters unresolved.

5 unchanged sentences

In addition to the contributions to the Advertising Funds, Company-operated and franchised restaurants make additional contributions to other local and regional advertising programs.

Restricted assets and liabilities of the Advertising Funds at December 31, 2023 and January 1, 2023 are as follows:

December 31, 2023 January 1, 2023

Restricted assets and liabilities of the Advertising Funds at December 29, 2024 and December 31, 2023 are as follows:

December 29, 2024 December 31, 2023

Cash and cash equivalents $ 18,615 $ 36,931

5 unchanged sentences

Advertising funds restricted liabilities $ 100,212 $ 120,558

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

Advertising expenses included in “Cost of sales” totaled $ 39,051 , $ 38,837 and $ 37,418 in 2024, 2023 and 2022, respectively.

8 unchanged sentences

Properties 841,143 54,635 895,778

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

(25) Segment Information

The Company is comprised of the following segments:

The Company is comprised of the following reportable and operating segments:

(1) Wendy’s U.S., (2) Wendy’s International and (3) Global Real Estate & Development.

5 unchanged sentences

In addition, Global Real Estate & Development earns fees from facilitating Franchise Flips and providing other development-related services to franchisees.

The Company measures segment profit using segment adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”).

Segment adjusted EBITDA excludes certain unallocated general and administrative expenses and other items that vary from period to period without correlation to the Company’s core operating performance.

When the Company’s chief operating decision maker reviews balance sheet information, it is at a consolidated level.

The Company measures profit using segment adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”), which 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.

The Company’s President and Chief Executive Officer is the chief operating decision maker (the “CODM”) and uses segment adjusted EBITDA predominantly in periodic reviews of performance and during the annual budget and forecasting process.

The CODM considers segment adjusted EBITDA when making decisions about allocating resources to the segments.

When the CODM reviews balance sheet information, it is at a consolidated level.

The accounting policies of the Company’s segments are the same as those described in Note 1.

Revenues by segment are as follows:

See Note 3 for a reconciliation of segment revenue to total revenue.

revenue, significant segment expenses and segment adjusted EBITDA are as follows:

2024 2023 2022

revenue $ 1,859,745 $ 1,815,845 $ 1,750,242

Cost of sales 755,265 767,150 756,744

Franchise support and other costs 54,047 47,554 39,398

Advertising fund expense (a) 441,508 396,743 391,491

General and administrative 79,664 75,734 81,951

Other segment items (b) 3,307 312 160

adjusted EBITDA $ 525,954 $ 528,352 $ 480,498

_______________

Wendy’s International 130,548 106,705 86,369

Global Real Estate & Development 235,185 238,558 243,133

Total revenues $ 2,181,578 $ 2,095,505 $ 1,896,998

(a) Includes advertising fund expense of $ 20,000 and $ 11,000 for 2024 and 2022, respectively, related to the Company funding of incremental advertising.

There was no funding of incremental advertising during 2023.

(b) Other segment items primarily include lease buyout activity for 2024, 2023 and 2022.

THE WENDY’S COMPANY AND SUBSIDIARIES

1 unchanged sentence

(In Thousands Except Per Share Amounts)

Wendy’s International revenue, significant segment expenses and segment adjusted EBITDA are as follows:

2024 2023 2022

Wendy’s International revenue $ 144,690 $ 130,548 $ 106,705

Wendy’s International expense

Cost of sales 27,946 27,343 16,425

Advertising funds expense (a) 39,330 35,604 30,944

General and administrative 26,048 26,226 26,643

Other segment items (b) 8,098 5,671 2,261

Wendy’s International adjusted EBITDA $ 43,268 $ 35,704 $ 30,432

_______________

(a) Includes advertising fund expense of $ 1,919 , $ 2,401 and $ 4,116 for 2024, 2023 and 2022, respectively, related to the Company’s funding of incremental advertising.

In addition, includes other international-related advertising deficit of $ 827 , $ 950 and $ 1,099 for 2024, 2023 and 2022, respectively.

(b) Other segment items primarily include franchise support and other costs.

Global Real Estate & Development revenue, significant segment expenses and segment adjusted EBITDA are as follows:

2024 2023 2022

Global Real Estate & Development revenue $ 242,057 $ 235,185 $ 238,558

Global Real Estate & Development expense

Franchise rental expense 127,446 125,371 124,083

General and administrative 15,301 15,660 16,282

Other segment items (a) ( 9,277 ) ( 9,330 ) ( 10,507 )

Global Real Estate & Development adjusted EBITDA $ 108,587 $ 103,484 $ 108,700

_______________

(a) Other segment items primarily include equity in earnings from our TimWen joint venture, franchise support and other costs and gains on sales-type leases.

Equity in earnings from our TimWen joint venture was $ 11,607 , $ 10,819 and $ 9,422 for 2024, 2023 and 2022, respectively.

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

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

2024 2023 2022

(a) $ 528,352 $ 480,498 $ 450,117

Wendy’s International (b) 35,704 30,432 27,386

$ 525,954 $ 528,352 $ 480,498

Wendy’s International 43,268 35,704 30,432

Global Real Estate & Development 108,587 103,484 108,700

Total segment profit 667,540 619,630 583,616

Total segment adjusted EBITDA 677,809 667,540 619,630

Unallocated franchise support and other costs ( 1,316 ) ( 831 ) ( 742 )

Advertising funds surplus (deficit) 2,702 4,344 ( 8,325 )

Unallocated general and administrative (c) ( 132,344 ) ( 130,103 ) ( 116,273 )

Unallocated general and administrative (a) ( 134,195 ) ( 132,344 ) ( 130,103 )

Depreciation and amortization (exclusive of amortization of cloud computing arrangements shown separately below) ( 143,234 ) ( 135,789 ) ( 133,414 )

5 unchanged sentences

Interest expense, net ( 123,881 ) ( 124,061 ) ( 122,319 )

Gain (loss) on early extinguishment of debt 2,283 — ( 17,917 )

Investment (loss) income, net ( 10,358 ) 2,107 39

Gain on early extinguishment of debt — 2,283 —

Investment income (loss), net 11 ( 10,358 ) 2,107

Other income, net 24,924 29,570 10,403

1 unchanged sentence

_______________

(a) Wendy’s U.S.

includes advertising funds expense of $ 11,000 and $ 25,000 for 2022 and 2021, respectively, related to the Company funding of incremental advertising.

(b) Wendy’s International includes advertising fund expense of $ 2,401 and $ 4,116 for 2023 and 2022, respectively, related to the Company’s funding of incremental advertising.

In addition, Wendy’s International includes other international-related advertising deficit of $ 950 and $ 1,099 for 2023 and 2022, respectively.

Net income of our TimWen equity method investment is included in segment profit for the Global Real Estate & Development segment and totaled $ 10,819 , $ 9,422 and $ 11,203 during 2023, 2022 and 2021, respectively .

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

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

1 unchanged sentence

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 8. Financial Statements and Supplementary Data