UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended July 2, 2023

or

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

For the transition period from ______________ to _______________

Commission file number: 1-2207

THE WENDY’S COMPANY

(Exact name of registrant as specified in its charter)

Delaware									38-0471180
(State or other jurisdiction of incorporation or organization)									(I.R.S. Employer Identification No.)
One Dave Thomas Blvd.
Dublin,			Ohio						43017
(Address of principal executive offices)									(Zip Code)

(614) 764-3100

(Registrant’s telephone number, including area code)

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

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

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

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

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

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

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

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

Yes ☐ No ☒

There were 209,288,141 shares of The Wendy’s Company common stock outstanding as of August 2, 2023.

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THE WENDY’S COMPANY AND SUBSIDIARIES

INDEX TO FORM 10-Q

			Page
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements			4
Unaudited Condensed Consolidated Balance Sheets as of July 2, 2023 and January 1, 2023			4
Unaudited Condensed Consolidated Statements of Operations for the three and six months ended July 2, 2023 and July 3, 2022			5
Unaudited Condensed Consolidated Statements of Comprehensive Income for the three and six months ended July 2, 2023 and July 3, 2022			6
Unaudited Condensed Consolidated Statements of Stockholders’ Equity for the three and six months ended July 2, 2023 and July 3, 2022			7
Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended July 2, 2023 and July 3, 2022			9
Notes to Condensed Consolidated Financial Statements			10
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			26
Item 3. Quantitative and Qualitative Disclosures about Market Risk			41
Item 4. Controls and Procedures			41
PART II: OTHER INFORMATION			43
Item 1. Legal Proceedings			44
Item 1A. Risk Factors			45
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			45
Item 5. Other Information			45
Item 6. Exhibits			46
Signatures			47

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

THE WENDY’S COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In Thousands Except Par Value)

			July 2, 2023						January 1, 2023
ASSETS			(Unaudited)
Current assets:
Cash and cash equivalents			$	635,433					$	745,889
Restricted cash			36,091						35,203
Accounts and notes receivable, net			142,590						116,426
Inventories			6,549						7,129
Prepaid expenses and other current assets			29,925						26,963
Advertising funds restricted assets			116,858						126,673
Total current assets			967,446						1,058,283
Properties			888,798						895,778
Finance lease assets			227,994						234,570
Operating lease assets			728,362						754,498
Goodwill			773,686						773,088
Other intangible assets			1,231,823						1,248,800
Investments			35,883						46,028
Net investment in sales-type and direct financing leases			315,944						317,337
Other assets			183,817						170,962
Total assets			$	5,353,753					$	5,499,344
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt			$	29,250					$	29,250
Current portion of finance lease liabilities			19,213						18,316
Current portion of operating lease liabilities			49,161						48,120
Accounts payable			38,640						43,996
Accrued expenses and other current liabilities			132,440						116,010
Advertising funds restricted liabilities			121,217						132,307
Total current liabilities			389,921						387,999
Long-term debt			2,781,096						2,822,196
Long-term finance lease liabilities			567,475						571,877
Long-term operating lease liabilities			764,625						792,051
Deferred income taxes			275,086						270,421
Deferred franchise fees			89,729						90,231
Other liabilities			94,706						98,849
Total liabilities			4,962,638						5,033,624
Commitments and contingencies
Stockholders’ equity:
Common stock, $0.10 par value; 1,500,000 shares authorized;      470,424 shares issued; 209,969 and 213,101 shares outstanding, respectively			47,042						47,042
Additional paid-in capital			2,945,754						2,937,885
Retained earnings			408,449						414,749
Common stock held in treasury, at cost; 260,455 and 257,323 shares, respectively			(2,951,061)						(2,869,780)
Accumulated other comprehensive loss			(59,069)						(64,176)
Total stockholders’ equity			391,115						465,720
Total liabilities and stockholders’ equity			$	5,353,753					$	5,499,344

See accompanying notes to condensed consolidated financial statements.

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THE WENDY’S COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In Thousands Except Per Share Amounts)

			Three Months Ended												Six Months Ended
			July 2, 2023						July 3, 2022						July 2, 2023						July 3, 2022
			(Unaudited)
Revenues:
Sales			$	240,688					$	230,869					$	468,637					$	440,144
Franchise royalty revenue and fees			153,048						143,436						294,725						272,412
Franchise rental income			58,033						58,610						115,840						116,481
Advertising funds revenue			109,796						104,868						211,170						197,389
			561,565						537,783						1,090,372						1,026,426
Costs and expenses:
Cost of sales			201,010						197,285						397,546						382,338
Franchise support and other costs			13,787						9,912						27,047						21,728
Franchise rental expense			32,396						32,076						63,025						61,012
Advertising funds expense			109,618						110,973						211,279						208,773
General and administrative			62,742						61,637						125,018						123,983
Depreciation and amortization (exclusive of amortization of cloud computing arrangements shown separately below)			33,498						33,428						66,970						66,659
Amortization of cloud computing arrangements			2,266						—						3,848						—
System optimization losses (gains), net			6						(152)						1						(3,686)
Reorganization and realignment costs			681						156						7,489						620
Impairment of long-lived assets			78						1,860						454						2,476
Other operating income, net			(3,791)						(5,673)						(6,057)						(8,639)
			452,291						441,502						896,620						855,264
Operating profit			109,274						96,281						193,752						171,162
Interest expense, net			(31,136)						(32,125)						(62,841)						(58,490)
Loss on early extinguishment of debt			—						—						(1,266)						—
Investment (loss) income, net			(6,827)						(4)						(10,389)						2,107
Other income, net			7,573						1,238						14,909						1,445
Income before income taxes			78,884						65,390						134,165						116,224
Provision for income taxes			(19,252)						(17,239)						(34,712)						(30,671)
Net income			$	59,632					$	48,151					$	99,453					$	85,553
Net income per share:
Basic			$	.28					$	.23					$	.47					$	.40
Diluted			.28						.22						.46						.39

See accompanying notes to condensed consolidated financial statements.

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THE WENDY’S COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In Thousands)

			Three Months Ended												Six Months Ended
			July 2, 2023						July 3, 2022						July 2, 2023						July 3, 2022
			(Unaudited)
Net income			$	59,632					$	48,151					$	99,453					$	85,553
Other comprehensive income (loss):
Foreign currency translation adjustment			4,949						(7,455)						5,107						(6,337)
Other comprehensive income (loss)			4,949						(7,455)						5,107						(6,337)
Comprehensive income			$	64,581					$	40,696					$	104,560					$	79,216

See accompanying notes to condensed consolidated financial statements.

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THE WENDY’S COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In Thousands)

			Common Stock						Additional Paid-In Capital						Retained Earnings						Common Stock Held in Treasury						Accumulated Other Comprehensive Loss						Total
			(Unaudited)
Balance at January 1, 2023			$	47,042					$	2,937,885					$	414,749					$	(2,869,780)					$	(64,176)					$	465,720
Net income			—						—						39,821						—						—						39,821
Other comprehensive income			—						—						—						—						158						158
Cash dividends			—						—						(53,103)						—						—						(53,103)
Repurchases of common stock			—						—						—						(38,810)						—						(38,810)
Share-based compensation			—						4,609						—						—						—						4,609
Common stock issued upon exercises of stock options			—						808						—						1,808						—						2,616
Common stock issued upon vesting of restricted shares			—						(2,222)						—						678						—						(1,544)
Other			—						58						(22)						54						—						90
Balance at April 2, 2023			$	47,042					$	2,941,138					$	401,445					$	(2,906,050)					$	(64,018)					$	419,557
Net income			—						—						59,632						—						—						59,632
Other comprehensive income			—						—						—						—						4,949						4,949
Cash dividends			—						—						(52,612)						—						—						(52,612)
Repurchases of common stock			—						—						—						(50,183)						—						(50,183)
Share-based compensation			—						5,609						—						—						—						5,609
Common stock issued upon exercises of stock options			—						1,136						—						3,829						—						4,965
Common stock issued upon vesting of restricted shares			—						(2,182)						—						1,283						—						(899)
Other			—						53						(16)						60						—						97
Balance at July 2, 2023			$	47,042					$	2,945,754					$	408,449					$	(2,951,061)					$	(59,069)					$	391,115

See accompanying notes to condensed consolidated financial statements.

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THE WENDY’S COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY—CONTINUED

(In Thousands)

			Common Stock						Additional Paid-In Capital						Retained Earnings						Common Stock Held in Treasury						Accumulated Other Comprehensive Loss						Total
			(Unaudited)
Balance at January 2, 2022			$	47,042					$	2,898,633					$	344,198					$	(2,805,268)					$	(48,200)					$	436,405
Net income			—						—						37,402						—						—						37,402
Other comprehensive income			—						—						—						—						1,118						1,118
Cash dividends			—						—						(26,911)						—						—						(26,911)
Repurchases of common stock, including accelerated share repurchase			—						18,750						—						(18,750)						—						—
Share-based compensation			—						6,348						—						—						—						6,348
Common stock issued upon exercises of stock options			—						237						—						1,354						—						1,591
Common stock issued upon vesting of restricted shares			—						(1,989)						—						459						—						(1,530)
Other			—						63						(8)						57						—						112
Balance at April 3, 2022			$	47,042					$	2,922,042					$	354,681					$	(2,822,148)					$	(47,082)					$	454,535
Net income			—						—						48,151						—						—						48,151
Other comprehensive loss			—						—						—						—						(7,455)						(7,455)
Cash dividends			—						—						(26,635)						—						—						(26,635)
Repurchases of common stock			—						—						—						(51,950)						—						(51,950)
Share-based compensation			—						6,122						—						—						—						6,122
Common stock issued upon exercises of stock options			—						(300)						—						399						—						99
Common stock issued upon vesting of restricted shares			—						(1,178)						—						1,073						—						(105)
Other			—						53						(10)						58						—						101
Balance at July 3, 2022			$	47,042					$	2,926,739					$	376,187					$	(2,872,568)					$	(54,537)					$	422,863

See accompanying notes to condensed consolidated financial statements.

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THE WENDY’S COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)

			Six Months Ended
			July 2, 2023						July 3, 2022
			(Unaudited)
Cash flows from operating activities:
Net income			$	99,453					$	85,553
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization (exclusive of amortization of cloud computing arrangements shown separately below)			66,970						66,659
Amortization of cloud computing arrangements			3,848						—
Share-based compensation			10,218						12,470
Impairment of long-lived assets			454						2,476
Deferred income tax			4,254						7,306
Non-cash rental expense, net			19,552						16,684
Change in operating lease liabilities			(23,528)						(22,913)
Net receipt of deferred vendor incentives			6,881						5,039
System optimization losses (gains), net			1						(3,686)
Distributions received from joint ventures, net of equity in earnings			542						1,108
Long-term debt-related activities, net			5,334						3,731
Cloud computing arrangements expenditures			(16,817)						(13,213)
Changes in operating assets and liabilities and other, net			(35,658)						(63,019)
Net cash provided by operating activities			141,504						98,195
Cash flows from investing activities:
Capital expenditures			(30,164)						(30,941)
Franchise development fund			(395)						(1,312)
Dispositions			280						1,016
Notes receivable, net			1,335						2,445
Net cash used in investing activities			(28,944)						(28,792)
Cash flows from financing activities:
Proceeds from long-term debt			—						500,000
Repayments of long-term debt			(46,434)						(12,125)
Repayments of finance lease liabilities			(12,336)						(9,495)
Deferred financing costs			—						(10,232)
Repurchases of common stock			(86,930)						(51,950)
Dividends			(105,715)						(53,546)
Proceeds from stock option exercises			7,847						1,959
Payments related to tax withholding for share-based compensation			(2,708)						(1,904)
Net cash (used in) provided by financing activities			(246,276)						362,707
Net cash (used in) provided by operations before effect of exchange rate changes on cash			(133,716)						432,110
Effect of exchange rate changes on cash			2,161						(2,428)
Net (decrease) increase in cash, cash equivalents and restricted cash			(131,555)						429,682
Cash, cash equivalents and restricted cash at beginning of period			831,801						366,966
Cash, cash equivalents and restricted cash at end of period			$	700,246					$	796,648

See accompanying notes to condensed consolidated financial statements.

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THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

(1) Basis of Presentation

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

The principal 100% owned subsidiary of the Company is Wendy’s International, LLC and its subsidiaries (“Wendy’s”). The Company manages and internally reports its business in the following segments: (1) Wendy’s U.S., (2) Wendy’s International and (3) Global Real Estate & Development. See Note 17 for further information.

We report on a fiscal year consisting of 52 or 53 weeks ending on the Sunday closest to or on December 31. All three- and six-month periods presented herein contain 13 weeks and 26 weeks, respectively. All references to years, quarters and months relate to fiscal periods rather than calendar periods.

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

(2) Revenue

Disaggregation of Revenue

The following tables disaggregate revenue by segment and source:

			Wendy’s U.S.						Wendy’s International						Global Real Estate & Development						Total
Three Months Ended July 2, 2023
Sales at Company-operated restaurants			$	234,862					$	5,826					$	—					$	240,688
Franchise royalty revenue			114,921						17,207						—						132,128
Franchise fees			17,461						1,395						2,064						20,920
Franchise rental income			—						—						58,033						58,033
Advertising funds revenue			101,509						8,287						—						109,796
Total revenues			$	468,753					$	32,715					$	60,097					$	561,565
Three Months Ended July 3, 2022
Sales at Company-operated restaurants			$	227,903					$	2,966					$	—					$	230,869
Franchise royalty revenue			108,872						16,141						—						125,013
Franchise fees			15,986						1,167						1,270						18,423
Franchise rental income			—						—						58,610						58,610
Advertising funds revenue			97,679						7,189						—						104,868
Total revenues			$	450,440					$	27,463					$	59,880					$	537,783

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THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

			Wendy’s U.S.						Wendy’s International						Global Real Estate & Development						Total
Six Months Ended July 2, 2023
Sales at Company-operated restaurants			$	457,494					$	11,143					$	—					$	468,637
Franchise royalty revenue			221,260						33,018						—						254,278
Franchise fees			34,733						2,918						2,796						40,447
Franchise rental income			—						—						115,840						115,840
Advertising funds revenue			196,254						14,916						—						211,170
Total revenues			$	909,741					$	61,995					$	118,636					$	1,090,372
Six Months Ended July 3, 2022
Sales at Company-operated restaurants			$	434,404					$	5,740					$	—					$	440,144
Franchise royalty revenue			206,792						29,966						—						236,758
Franchise fees			31,391						2,438						1,825						35,654
Franchise rental income			—						—						116,481						116,481
Advertising funds revenue			185,164						12,225						—						197,389
Total revenues			$	857,751					$	50,369					$	118,306					$	1,026,426

Contract Balances

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

			July 2, 2023 (a)						January 1, 2023 (a)
Receivables, which are included in “Accounts and notes receivable, net” (b)			$	57,305					$	54,497
Receivables, which are included in “Advertising funds restricted assets”			71,927						70,422
Deferred franchise fees (c)			100,239						99,208

_______________

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

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

(c)The current portion of deferred franchise fees is included in “Accrued expenses and other current liabilities” and the long-term portion of deferred franchise fees is included in “Deferred franchise fees” and totaled $10,510 and $89,729, respectively, as of July 2, 2023, and $8,977 and $90,231, respectively, as of January 1, 2023.

Significant changes in deferred franchise fees are as follows:

			Six Months Ended
			July 2, 2023						July 3, 2022
Deferred franchise fees at beginning of period			$	99,208					$	97,186
Revenue recognized during the period			(6,591)						(5,037)
New deferrals due to cash received and other			7,622						6,959
Deferred franchise fees at end of period			$	100,239					$	99,108

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THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

Anticipated Future Recognition of Deferred Franchise Fees

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

Estimate for fiscal year:
2023 (a)			$	8,092
2024			5,979
2025			5,821
2026			5,690
2027			5,609
Thereafter			69,048
			$	100,239

_______________

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

(3) System Optimization Losses (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 franchisee-to-franchisee restaurant transfers (“Franchise Flips”). As of January 1, 2017, the Company achieved its plan to reduce its ongoing Company-operated restaurant ownership to approximately 5% of the total system. While the Company has no plans to move its ownership away from approximately 5% of the total system, the Company expects to continue to optimize the Wendy’s system through Franchise Flips, as well as evaluating strategic acquisitions of franchised restaurants and strategic dispositions of Company-operated restaurants to existing and new franchisees, to further strengthen the franchisee base and drive new restaurant development. During the six months ended July 2, 2023 and July 3, 2022, the Company facilitated 88 and 46 Franchise Flips, respectively.

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

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

			Three Months Ended												Six Months Ended
			July 2, 2023						July 3, 2022						July 2, 2023						July 3, 2022
Post-closing adjustments on sales of restaurants (a)			$	—					$	75					$	—					$	3,522
(Loss) gain on sales of other assets, net (b)			(6)						77						(1)						164
System optimization (losses) gains, net			$	(6)					$	152					$	(1)					$	3,686

_______________

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

(b)During the six months ended July 2, 2023, the Company received net cash proceeds of $280 primarily from the sale of surplus and other properties. During the three and six months ended July 3, 2022, the Company received net cash proceeds of $690 and $858, respectively, primarily from the sale of surplus and other properties.

The Company also received cash proceeds of $63 and $158 during the three and six months ended July 3, 2022, respectively, related to a note receivable issued in connection with the sale of the Manhattan Company-operated restaurants.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

Assets Held for Sale

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

(4) Reorganization and Realignment Costs

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

			Three Months Ended												Six Months Ended
			July 2, 2023						July 3, 2022						July 2, 2023						July 3, 2022
Organizational redesign			$	670					$	—					$	7,407					$	—
Other reorganization and realignment plans			11						156						82						620
Reorganization and realignment costs			$	681					$	156					$	7,489					$	620

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 expects to hold its general and administrative expense in 2023 and 2024 relatively flat compared with 2022. The Company expects to incur total costs of approximately $11,000 to $13,000 related to the Organizational Redesign Plan. During the six months ended July 2, 2023, the Company recognized costs totaling $7,407, which primarily included severance and related employee costs and share-based compensation. The Company expects to incur additional costs aggregating approximately $3,500 to $5,500, comprised of (1) severance and related employee costs of approximately $2,500, (2) recruitment and relocation costs of approximately $800, (3) third-party and other costs of approximately $300 and (4) share-based compensation of approximately $1,000. The Company expects costs related to the Organizational Redesign Plan to continue into 2026, with approximately three-fourths of the total costs to be recognized during 2023.

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

			Three Months Ended						Six Months Ended
			July 2, 2023						July 2, 2023
Severance and related employee costs			$	21					$	5,560
Recruitment and relocation costs			86						164
Third-party and other costs			386						731
			493						6,455
Share-based compensation (a)			177						952
Total organizational redesign			$	670					$	7,407

_______________

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

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

As of July 2, 2023, the accruals for the Organizational Redesign Plan are included in “Accrued expenses and other current liabilities” and “Other liabilities” and totaled $3,038 and $117, respectively. The table below presents a rollforward of our accruals for the Organizational Redesign Plan.

			Balance January 1, 2023						Charges						Payments						Balance July 2, 2023
Severance and related employee costs			$	—					$	5,560					$	(2,405)					$	3,155
Recruitment and relocation costs			—						164						(164)						—
Third-party and other costs			—						731						(731)						—
			$	—					$	6,455					$	(3,300)					$	3,155

Other Reorganization and Realignment Plans

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

(5) Investments

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

			July 2, 2023						January 1, 2023
Equity method investments			$	34,165					$	33,921
Other investments in equity securities			1,718						12,107
			$	35,883					$	46,028

Equity Method Investments

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

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

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

			Six Months Ended
			July 2, 2023						July 3, 2022
Balance at beginning of period			$	33,921					$	39,870
Equity in earnings for the period			6,343						5,736
Amortization of purchase price adjustments (a)			(1,373)						(1,455)
			4,970						4,281
Distributions received			(5,512)						(5,389)
Foreign currency translation adjustment included in “Other comprehensive income (loss)” and other			786						(674)
Balance at end of period			$	34,165					$	38,088

_______________

(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 and, during the six months ended July 3, 2022, recognized a gain of $2,107 as a result of an observable price change for a similar investment of the same issuer. During the three and six months ended July 2, 2023, the Company recorded impairment charges of $6,827 and $10,389, respectively, for the difference between the estimated fair value and the carrying value of the investment.

(6) Long-Term Debt

Long-term debt consisted of the following:

			July 2, 2023						January 1, 2023
Series 2022-1 Class A-2 Notes:
4.236% Series 2022-1 Class A-2-I Notes, anticipated repayment date 2029			$	99,000					$	99,500
4.535% Series 2022-1 Class A-2-II Notes, anticipated repayment date 2032			396,000						398,000
Series 2021-1 Class A-2 Notes:
2.370% Series 2021-1 Class A-2-I Notes, anticipated repayment date 2029			441,000						443,250
2.775% Series 2021-1 Class A-2-II Notes, anticipated repayment date 2031			637,000						640,250
Series 2019-1 Class A-2 Notes:
3.783% Series 2019-1 Class A-2-I Notes, anticipated repayment date 2026			362,000						364,000
4.080% Series 2019-1 Class A-2-II Notes, anticipated repayment date 2029			407,250						409,500
Series 2018-1 Class A-2 Notes:
3.884% Series 2018-1 Class A-2-II Notes, anticipated repayment date 2028			448,875						451,250
7% debentures, due in 2025 (a)			56,463						86,369
Unamortized debt issuance costs			(37,242)						(40,673)
			2,810,346						2,851,446
Less amounts payable within one year			(29,250)						(29,250)
Total long-term debt			$	2,781,096					$	2,822,196

_______________

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

(a)Wendy’s 7% debentures are unsecured and were reduced to fair value in connection with the 2008 merger of Triarc Companies, Inc. and Wendy’s International, Inc. (the “Wendy’s Merger”). The fair value adjustment is being accreted and the related charge included in “Interest expense, net” until the debentures mature. During the six months ended July 2, 2023, Wendy’s repurchased $31,571 in principal of its 7% debentures at par value. As a result, the Company recognized a loss on early extinguishment of debt of $1,266 during the six months ended July 2, 2023.

(7) Fair Value Measurements

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

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

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

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

Financial Instruments

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

			July 2, 2023												January 1, 2023
			Carrying Amount						Fair Value						Carrying Amount						Fair Value						Fair Value Measurements
Financial assets
Cash equivalents			$	435,451					$	435,451					$	560,682					$	560,682					Level 1
Other investments in equity securities (a)			1,718						1,718						12,107						12,107						Level 2
Financial liabilities (b)
Series 2022-1 Class A-2-I Notes			99,000						90,268						99,500						89,401						Level 2
Series 2022-1 Class A-2-II Notes			396,000						357,430						398,000						349,444						Level 2
Series 2021-1 Class A-2-I Notes			441,000						364,795						443,250						357,304						Level 2
Series 2021-1 Class A-2-II Notes			637,000						509,919						640,250						499,011						Level 2
Series 2019-1 Class A-2-I Notes			362,000						335,140						364,000						334,334						Level 2
Series 2019-1 Class A-2-II Notes			407,250						364,611						409,500						361,875						Level 2
Series 2018-1 Class A-2-II Notes			448,875						407,758						451,250						405,809						Level 2
7% debentures, due in 2025			56,463						58,067						86,369						92,367						Level 2

_______________

(a)The fair value of our other investments in equity securities is based on our review of information provided by the investment manager, which was based on observable price changes.

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

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THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

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

Non-Recurring Fair Value Measurements

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

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

Total impairment losses may also include the impact of remeasuring long-lived assets held for sale. The fair values of long-lived assets held for sale presented in the tables below represent the remaining carrying value and were estimated based on current market values. See Note 8 for further information on impairment of our long-lived assets.

									Fair Value Measurements
			July 2, 2023						Level 1						Level 2						Level 3
Held and used			$	539					$	—					$	—					$	539
Held for sale			475						—						—						475
Total			$	1,014					$	—					$	—					$	1,014

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

(8) Impairment of Long-Lived Assets

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

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

			Three Months Ended												Six Months Ended
			July 2, 2023						July 3, 2022						July 2, 2023						July 3, 2022
Company-operated restaurants			$	78					$	1,708					$	428					$	2,075
Restaurants leased or subleased to franchisees			—						—						—						194
Surplus properties			—						152						26						207
			$	78					$	1,860					$	454					$	2,476

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

(9) Income Taxes

The Company’s effective tax rate for the three months ended July 2, 2023 and July 3, 2022 was 24.4% and 26.4%, respectively. The Company’s effective tax rate varied from the U.S. federal statutory rate of 21% for the three months ended July 2, 2023 primarily due to state income taxes, including discrete changes to state deferred income taxes.

The Company’s effective tax rate for the six months ended July 2, 2023 and July 3, 2022 was 25.9% and 26.4%, respectively. The Company’s effective tax rate varied from the U.S. federal statutory rate of 21% for the six months ended July 2, 2023 primarily due to state income taxes, including discrete changes to state deferred income taxes, and a one-time adjustment to our foreign deferred income taxes related to prior periods.

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

The current portion of refundable income taxes was $14,562 and $3,236 as of July 2, 2023 and January 1, 2023, respectively, and is included in “Accounts and notes receivable, net.” There were no long-term refundable income taxes as of July 2, 2023 and January 1, 2023.

(10) Net Income Per Share

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

			Three Months Ended												Six Months Ended
			July 2, 2023						July 3, 2022						July 2, 2023						July 3, 2022
Net income			$	59,632					$	48,151					$	99,453					$	85,553
Common stock:
Weighted average basic shares outstanding			210,624						213,673						211,585						214,646
Dilutive effect of stock options and restricted shares			2,304						1,569						2,393						2,058
Weighted average diluted shares outstanding			212,928						215,242						213,978						216,704
Net income per share:
Basic			$	.28					$	.23					$	.47					$	.40
Diluted			$	.28					$	.22					$	.46					$	.39

Basic net income per share for the three and six months ended July 2, 2023 and July 3, 2022 was computed by dividing net income amounts by the weighted average number of shares of common stock outstanding. Diluted net income per share was computed by dividing net income by the weighted average number of basic shares outstanding plus the potential common share effect of dilutive stock options and restricted shares. We excluded potential common shares of 4,420 and 4,476 for the three and six months ended July 2, 2023, respectively, and 5,538 and 4,417 for the three and six months ended July 3, 2022, respectively, from our diluted net income per share calculation as they would have had anti-dilutive effects.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

(11) Stockholders’ Equity

Dividends

During each of the first and second quarters of 2023, the Company paid dividends per share of $.25. During each of the first and second quarters of 2022, the Company paid dividends per share of $.125.

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 the six months ended July 2, 2023, the Company repurchased 4,023 shares under the January 2023 Authorization with an aggregate purchase price of $88,254, of which $1,380 was accrued as of July 2, 2023, and excluding excise tax of $683 and commissions of $56. As of July 2, 2023, the Company had $411,746 of availability remaining under the January 2023 Authorization. Subsequent to July 2, 2023 through August 2, 2023, the Company repurchased 706 shares under the January 2023 Authorization with an aggregate purchase price of $15,163, excluding applicable excise tax and commissions of $10.

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”). In April 2022, the Company’s Board of Directors approved an increase of $150,000 to the February 2022 Authorization, resulting in an aggregate authorization of $250,000 that was set to expire on February 28, 2023. During the six months ended July 3, 2022, the Company repurchased 2,759 shares under the February 2022 Authorization with an aggregate purchase price of $51,911, excluding commissions of $39. In connection with the January 2023 Authorization, the remaining portion of the February 2022 Authorization was canceled.

In February 2020, our Board of Directors authorized a repurchase program for up to $100,000 of our common stock through February 28, 2021, when and if market conditions warranted and to the extent legally permissible (the “February 2020 Authorization”). In July 2020, the Company’s Board of Directors approved an extension of the February 2020 Authorization by one year, through February 28, 2022. In addition, 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. In November 2021, the Company entered into an accelerated share repurchase agreement (the “2021 ASR Agreement”) with a third-party financial institution to repurchase common stock as part of the February 2020 Authorization. Under the 2021 ASR Agreement, the Company paid the financial institution an initial purchase price of $125,000 in cash and received an initial delivery of 4,910 shares of common stock, representing an estimated 85% of the total shares expected to be delivered under the 2021 ASR Agreement. In February 2022, the Company completed the 2021 ASR Agreement and received an additional 715 shares of common stock. The total number of shares of common stock ultimately purchased by the Company under the 2021 ASR Agreement was based on the average of the daily volume-weighted average prices of the common stock during the term of the 2021 ASR Agreement, less an agreed upon discount. In total, 5,625 shares were delivered under the 2021 ASR Agreement at an average purchase price of $22.22 per share. With the completion of the 2021 ASR Agreement in February 2022 as described above, the Company completed the February 2020 Authorization.

Accumulated Other Comprehensive Loss

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

			Six Months Ended
			July 2, 2023						July 3, 2022
Balance at beginning of period			$	(64,176)					$	(48,200)
Foreign currency translation			5,107						(6,337)
Balance at end of period			$	(59,069)					$	(54,537)

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

(12) Leases

Nature of Leases

The Company operates restaurants that are located on sites owned by us and sites leased by us from third parties. In addition, the Company owns sites and leases sites from third parties, which it leases and/or subleases to franchisees. At July 2, 2023, Wendy’s and its franchisees operated 7,115 Wendy’s restaurants. Of the 414 Company-operated Wendy’s restaurants, Wendy’s owned the land and building for 159 restaurants, owned the building and held long-term land leases for 144 restaurants and held leases covering the land and building for 111 restaurants. Wendy’s also owned 488 and leased 1,189 properties that were either leased or subleased principally to franchisees. The Company also leases restaurant, office and transportation equipment.

Company as Lessee

The components of lease cost are as follows:

			Three Months Ended												Six Months Ended
			July 2, 2023						July 3, 2022						July 2, 2023						July 3, 2022
Finance lease cost:
Amortization of finance lease assets			$	4,058					$	4,106					$	8,121					$	8,170
Interest on finance lease liabilities			10,743						10,693						21,493						21,338
			14,801						14,799						29,614						29,508
Operating lease cost			21,429						22,324						42,878						42,985
Variable lease cost (a)			17,519						16,456						33,600						31,259
Short-term lease cost			1,461						1,405						2,967						2,838
Total operating lease cost (b)			40,409						40,185						79,445						77,082
Total lease cost			$	55,210					$	54,984					$	109,059					$	106,590

_______________

(a)Includes expenses for executory costs of $10,172 and $9,245 for the three months ended July 2, 2023 and July 3, 2022, respectively, and $20,020 and $18,853 for the six months ended July 2, 2023 and July 3, 2022, respectively, for which the Company is reimbursed by sublessees.

(b)Includes $32,329 and $32,071 for the three months ended July 2, 2023 and July 3, 2022, respectively, and $62,927 and $60,996 for the six months ended July 2, 2023 and July 3, 2022, respectively, recorded to “Franchise rental expense” for leased properties that are subsequently leased to franchisees. Also includes $7,546 and $7,479 for the three months ended July 2, 2023 and July 3, 2022, respectively, and $15,411 and $14,773 for the six months ended July 2, 2023 and July 3, 2022, respectively, recorded to “Cost of sales” for leases for Company-operated restaurants.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

Company as Lessor

The components of lease income are as follows:

			Three Months Ended												Six Months Ended
			July 2, 2023						July 3, 2022						July 2, 2023						July 3, 2022
Sales-type and direct-financing leases:
Selling profit			$	1,072					$	1,677					$	1,201					$	2,157
Interest income (a)			7,868						7,753						15,730						15,493
Operating lease income			40,629						42,174						82,785						85,488
Variable lease income			17,404						16,436						33,055						30,993
Franchise rental income (b)			$	58,033					$	58,610					$	115,840					$	116,481

_______________

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

(b)Includes sublease income of $42,961 and $43,689 recognized during the three months ended July 2, 2023 and July 3, 2022, respectively, and $85,912 and $86,854 recognized during the six months ended July 2, 2023 and July 3, 2022, respectively. Sublease income includes lessees’ variable payments to the Company for executory costs of $10,115 and $9,250 for the three months ended July 2, 2023 and July 3, 2022, respectively, and $19,893 and $18,785 for the six months ended July 2, 2023 and July 3, 2022, respectively.

(13) Supplemental Cash Flow Information

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

			Six Months Ended
			July 2, 2023						July 3, 2022
Supplemental non-cash investing and financing activities:
Capital expenditures included in accounts payable			$	11,422					$	5,955
Finance leases			8,257						18,984

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

			July 2, 2023						January 1, 2023
Reconciliation of cash, cash equivalents and restricted cash at end of period:
Cash and cash equivalents			$	635,433					$	745,889
Restricted cash			36,091						35,203
Restricted cash, included in Advertising funds restricted assets			28,722						50,709
Total cash, cash equivalents and restricted cash			$	700,246					$	831,801

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

(14) Transactions with Related Parties

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

TimWen Lease and Management Fee Payments

A wholly-owned subsidiary of Wendy’s leases restaurant facilities from TimWen, which are then subleased to franchisees for the operation of Wendy’s/Tim Hortons combo units in Canada. Wendy’s paid TimWen $10,140 and $9,601 under these lease agreements during the six months ended July 2, 2023 and July 3, 2022, respectively, which has been recorded to “Franchise rental expense.” In addition, TimWen paid Wendy’s a management fee under the TimWen joint venture agreement of $121 and $111 during the six months ended July 2, 2023 and July 3, 2022, respectively, which has been included as a reduction to “General and administrative.”

Transactions with Yellow Cab

Certain family members and affiliates of Mr. Nelson Peltz, our Chairman, and Mr. Peter May, our Senior Vice Chairman, as well as Mr. Matthew Peltz, our Vice Chairman, hold indirect, minority ownership interests in Yellow Cab Holdings, LLC (“Yellow Cab”) and operating companies managed by Yellow Cab, a Wendy’s franchisee, that as of July 2, 2023 owned and operated 83 Wendy’s restaurants. During the six months ended July 2, 2023 and July 3, 2022, the Company recognized $7,411 and $6,476, respectively, in royalty, advertising fund, lease and other income from Yellow Cab and related entities. As of July 2, 2023 and January 1, 2023, $1,130 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.”

Transactions with AMC

In February 2023, Ms. Kristin Dolan, a director of the Company, was appointed as the Chief Executive Officer of AMC Networks Inc. (“AMC”). During the six months ended July 2, 2023, the Company purchased approximately $1,200 of advertising time from a subsidiary of AMC. As of July 2, 2023, approximately $850 was due to AMC for advertising time, which is included in “Advertising funds restricted liabilities.”

(15) Guarantees and Other Commitments and Contingencies

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

Franchisee Image Activation Incentive Programs

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

Lease Guarantees

Wendy’s has guaranteed the performance of certain leases and other obligations, primarily from former Company-operated restaurant locations now operated by franchisees, amounting to $95,523 as of July 2, 2023. These leases extend through 2045. We have had no judgments against us as guarantor of these leases as of July 2, 2023. In the event of default by a franchise owner where Wendy’s is called upon to perform under its guarantee, Wendy’s has the ability to pursue repayment from the

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Table of Contents

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

franchise owner. The liability recorded for our probable exposure associated with these lease guarantees was not material as of July 2, 2023.

Letters of Credit

As of July 2, 2023, the Company had outstanding letters of credit with various parties totaling $28,847. Substantially all of the outstanding letters of credit include amounts outstanding against the 2021-1 Variable Funding Senior Secured Notes, Class A-1. We do not expect any material loss to result from these letters of credit.

(16) Legal and Environmental Matters

The Company is involved in litigation and claims incidental to our business. We provide accruals for such litigation and claims when 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. 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. In addition, most cases seek an indeterminate amount of damages and many involve multiple parties. Predicting the outcomes of settlement discussions or judicial or arbitral decisions is thus inherently difficult and future developments could cause these actions or claims, individually or in aggregate, to have a material adverse effect on the Company’s financial condition, results of operations, or cash flows of a particular reporting period.

(17) Segment Information

Revenues by segment are as follows:

			Three Months Ended												Six Months Ended
			July 2, 2023						July 3, 2022						July 2, 2023						July 3, 2022
Wendy’s U.S.			$	468,753					$	450,440					$	909,741					$	857,751
Wendy’s International			32,715						27,463						61,995						50,369
Global Real Estate & Development			60,097						59,880						118,636						118,306
Total revenues			$	561,565					$	537,783					$	1,090,372					$	1,026,426

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Table of Contents

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

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

			Three Months Ended												Six Months Ended
			July 2, 2023						July 3, 2022						July 2, 2023						July 3, 2022
Wendy’s U.S. (a)			$	142,947					$	126,999					$	268,177					$	231,823
Wendy’s International (b)			8,531						9,350						15,977						14,803
Global Real Estate & Development			26,534						27,283						51,602						54,890
Total segment profit			178,012						163,632						$	335,756					$	301,516
Unallocated franchise support and other costs			23						—						23						6
Advertising funds surplus (deficit)			1,315						(1,375)						2,421						(2,618)
Unallocated general and administrative (c)			(33,653)						(30,989)						(65,814)						(61,994)
Depreciation and amortization (exclusive of amortization of cloud computing arrangements shown separately below)			(33,498)						(33,428)						(66,970)						(66,659)
Amortization of cloud computing arrangements			(2,266)						—						(3,848)						—
System optimization (losses) gains, net			(6)						152						(1)						3,686
Reorganization and realignment costs			(681)						(156)						(7,489)						(620)
Impairment of long-lived assets			(78)						(1,860)						(454)						(2,476)
Unallocated other operating income, net			106						305						128						321
Interest expense, net			(31,136)						(32,125)						(62,841)						(58,490)
Loss on early extinguishment of debt			—						—						(1,266)						—
Investment (loss) income, net			(6,827)						(4)						(10,389)						2,107
Other income, net			7,573						1,238						14,909						1,445
Income before income taxes			$	78,884					$	65,390					$	134,165					$	116,224

_______________

(a)Wendy’s U.S. includes advertising funds expense of $2,766 and $5,322 for the three and six months ended July 3, 2022, respectively, related to the Company’s funding of incremental advertising.

(b)Wendy’s International includes advertising funds expense of $658 and $1,206 for the three and six months ended July 2, 2023, respectively, and $1,084 and $1,922 for the three and six months ended July 3, 2022, respectively, related to the Company’s funding of incremental advertising. In addition, Wendy’s International includes other international-related advertising deficit of $479 and $1,324 for the three and six months ended July 2, 2023, respectively, and $880 and $1,522 for the three and six months ended July 3, 2022, respectively.

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

(18) New Accounting Standards

New Accounting Standards

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 standard is effective beginning with our 2024 fiscal year. The Company does not expect the guidance to have a material impact on our condensed consolidated financial statements.

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Table of Contents

THE WENDY’S COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

New Accounting Standards Adopted

Reference Rate Reform

In March 2020, the 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 the three months ended July 2, 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 condensed 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. The Company adopted this amendment during the first quarter of 2023. The adoption of this guidance did not have a material impact on our condensed consolidated financial statements.

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

Introduction

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

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

Wendy’s is primarily engaged in the business of operating, developing and franchising a system of distinctive quick-service restaurants serving high quality food. Wendy’s opened its first restaurant in Columbus, Ohio in 1969. Today, Wendy’s is the second largest quick-service restaurant company in the hamburger sandwich segment in the U.S. based on traffic share, and the third largest globally with 7,115 restaurants in the U.S. and 32 foreign countries and U.S. territories as of July 2, 2023.

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

The Company is comprised of the following segments: (1) Wendy’s U.S., (2) Wendy’s International and (3) Global Real Estate & Development. Wendy’s U.S. includes the operation and franchising of Wendy’s restaurants in the U.S. and derives its revenues from sales at Company-operated restaurants and royalties, fees and advertising fund collections from franchised restaurants. Wendy’s International includes the operation and franchising of Wendy’s restaurants in countries and territories other than the U.S. and derives its revenues from sales at Company-operated restaurants and royalties, fees and advertising fund collections from franchised restaurants. Global Real Estate & Development includes real estate activity for owned sites and sites leased from third parties, which are leased and/or subleased to franchisees, and also includes our share of the income of our TimWen real estate joint venture. In addition, Global Real Estate & Development earns fees from facilitating franchisee-to-franchisee restaurant transfers (“Franchise Flips”) and providing other development-related services to franchisees. In this “Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations,” the Company reports on the segment profit for each of the three segments described above. The Company measures segment profit using segment adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”). Segment adjusted EBITDA excludes certain unallocated general and administrative expenses and other items that vary from period to period without correlation to the Company’s core operating performance. See “Results of Operations” below and Note 17 to the Condensed Consolidated Financial Statements contained in Item 1 herein for segment financial information.

The Company’s fiscal reporting periods consist of 52 or 53 weeks ending on the Sunday closest to December 31. All three- and six-month periods presented herein contain 13 weeks and 26 weeks, respectively. All references to years, quarters and months relate to fiscal periods rather than calendar periods.

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Executive Overview

Our Business

As of July 2, 2023, the Wendy’s restaurant system was comprised of 7,115 restaurants, with 5,993 Wendy’s restaurants in operation in the U.S. Of the U.S. restaurants, 403 were operated by the Company and 5,590 were operated by a total of 216 franchisees. In addition, at July 2, 2023, there were 1,122 Wendy’s restaurants in operation in 32 foreign countries and U.S. territories. Of the international restaurants, 1,111 were operated by a total of 105 franchisees and 11 were operated by the Company in the United Kingdom (the “U.K.”).

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

Wendy’s operating results are impacted by a number of external factors, including commodity costs, labor costs, intense price competition, unemployment and consumer spending levels, general economic and market trends and weather.

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

Key Business Measures

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

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

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

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

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

The Company calculates same-restaurant sales and systemwide sales growth on a constant currency basis. Constant currency results exclude the impact of foreign currency translation and are derived by translating current year results at prior year average exchange rates. The Company believes excluding the impact of foreign currency translation provides better year over year comparability.

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

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

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

Second Quarter Financial Highlights

•Revenue increased 4.4% to $561.6 million in the second quarter of 2023 compared with $537.8 million in the second quarter of 2022;

•Global same-restaurant sales increased 5.1%, U.S. same-restaurant sales increased 4.9% and international same-restaurant sales increased 7.2% compared with the second quarter of 2022. On a two-year basis, global same-restaurant sales increased 8.8%;

•Global Company-operated restaurant margin was 16.5% in the second quarter of 2023, an increase of 200 basis points compared with the second quarter of 2022; and

•Net income increased 23.7% to $59.6 million in the second quarter of 2023 compared with $48.2 million in the second quarter of 2022.

Year-to-Date Financial Highlights

•Revenue increased 6.2% to $1.1 billion in the first six months of 2023 compared with $1.0 billion in the first six months of 2022;

•Global same-restaurant sales increased 6.5%, U.S. same-restaurant sales increased 6.0% and international same-restaurant sales increased 10.3% compared with the first six months of 2022. On a two-year basis, global same-restaurant sales increased 9.6%;

•Global Company-operated restaurant margin was 15.2% in the first six months of 2023, an increase of 210 basis points compared with the first six months of 2022; and

•Net income increased 16.2% to $99.5 million in the first six months of 2023 compared with $85.6 million in the first six months of 2022.

Global Same-Restaurant Sales

Wendy’s long-term growth opportunities include driving strong same-restaurant sales momentum across all dayparts through our ownable core products, exciting menu innovation, compelling value offerings and improvements in speed, consistency and accuracy in our restaurants. Global same-restaurant sales increased 5.1% in the second quarter of 2023 and increased 8.8% on a two-year basis. Global same-restaurant sales increased 6.5% in the first six months of 2023 and increased 9.6% on a two-year basis.

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Digital

Wendy’s long-term growth opportunities include accelerated implementation of consumer-facing digital platforms and technologies. The Company has invested significant resources to focus on consumer-facing technology, including activating mobile ordering via Wendy’s mobile app, launching the Wendy’s Rewards loyalty program in the U.S. and Canada and establishing delivery agreements with third-party vendors. The Company is also partnering with key technology providers to help execute our digital, restaurant technology and enterprise technology initiatives and support our technology innovation and growth. During the second quarter of 2023, the Company revised its definition of digital sales to reflect our full digital portfolio by including in-restaurant mobile scans, in addition to our previously included delivery, mobile order and kiosk digital channels. Under the revised definition, the Company’s digital business represented approximately 12.7% and 10.9% of global systemwide sales during the six months ended July 2, 2023 and July 3, 2022, respectively.

New Restaurant Development

Wendy’s long-term growth opportunities include expanding the Company’s footprint through global restaurant expansion. To promote new restaurant development, the Company has provided franchisees with certain incentive programs for qualifying new restaurants, in addition to our $100.0 million build to suit development fund. In February 2023, the Company announced a new restaurant development incentive program in the U.S. and Canada that provides for waivers of royalty, national advertising and technical assistance fees for up to the first three years of operation for qualifying new restaurants. In addition, the Company has development agreements in place with a number of franchisees that contractually obligate such franchisees to open additional Wendy’s restaurants over a specified timeframe. During the six months ended July 2, 2023, the Company and its franchisees added 20 net new restaurants across the Wendy’s system.

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 expects to hold its general and administrative expense in 2023 and 2024 relatively flat compared with 2022. The Company expects to incur total costs of approximately $11 million to $13 million related to the Organizational Redesign Plan, of which approximately $9 million to $11 million will be cash expenditures. The cash expenditures are expected to continue into 2025, with approximately two-thirds of the total cash expenditures occurring in 2023. Costs related to the Organizational Redesign Plan are recorded to “Reorganization and realignment costs.” During the six months ended July 2, 2023, the Company recognized costs totaling $7.4 million, which primarily included severance and related employee costs and share-based compensation. The Company expects to incur additional costs aggregating approximately $3.5 million to $5.5 million, comprised of (1) severance and related employee costs of approximately $2.5 million, (2) recruitment and relocation costs of approximately $0.8 million, (3) third-party and other costs of approximately $0.3 million and (4) share-based compensation of approximately $1.0 million. The Company expects costs related to the Organizational Redesign Plan to continue into 2026, with approximately three-fourths of the total costs to be recognized during 2023.

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Results of Operations

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

			Second Quarter																		Six Months
			2023						2022						Change						2023						2022						Change
Revenues:
Sales			$	240.7					$	230.9					$	9.8					$	468.6					$	440.1					$	28.5
Franchise royalty revenue and fees			153.1						143.4						9.7						294.8						272.4						22.4
Franchise rental income			58.0						58.6						(0.6)						115.8						116.5						(0.7)
Advertising funds revenue			109.8						104.9						4.9						211.2						197.4						13.8
			561.6						537.8						23.8						1,090.4						1,026.4						64.0
Costs and expenses:
Cost of sales			201.0						197.3						3.7						397.5						382.3						15.2
Franchise support and other costs			13.8						9.9						3.9						27.0						21.7						5.3
Franchise rental expense			32.4						32.1						0.3						63.0						61.0						2.0
Advertising funds expense			109.6						111.0						(1.4)						211.3						208.8						2.5
General and administrative			62.7						61.6						1.1						125.0						124.0						1.0
Depreciation and amortization (exclusive of amortization of cloud computing arrangements shown separately below)			33.5						33.4						0.1						67.0						66.7						0.3
Amortization of cloud computing arrangements			2.3						—						2.3						3.8						—						3.8
System optimization losses (gains), net			—						(0.2)						0.2						—						(3.7)						3.7
Reorganization and realignment costs			0.7						0.2						0.5						7.5						0.6						6.9
Impairment of long-lived assets			0.1						1.9						(1.8)						0.5						2.5						(2.0)
Other operating income, net			(3.8)						(5.7)						1.9						(6.0)						(8.7)						2.7
			452.3						441.5						10.8						896.6						855.2						41.4
Operating profit			109.3						96.3						13.0						193.8						171.2						22.6
Interest expense, net			(31.1)						(32.1)						1.0						(62.8)						(58.5)						(4.3)
Loss on early extinguishment of debt			—						—						—						(1.3)						—						(1.3)
Investment (loss) income, net			(6.8)						—						(6.8)						(10.4)						2.1						(12.5)
Other income, net			7.5						1.2						6.3						14.9						1.4						13.5
Income before income taxes			78.9						65.4						13.5						134.2						116.2						18.0
Provision for income taxes			(19.3)						(17.2)						(2.1)						(34.7)						(30.6)						(4.1)
Net income			$	59.6					$	48.2					$	11.4					$	99.5					$	85.6					$	13.9

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			Second Quarter																								Six Months
			2023						% of Total Revenues						2022						% of Total Revenues						2023						% of Total Revenues						2022						% of Total Revenues
Revenues:
Sales			$	240.7					42.9		%				$	230.9					42.9		%				$	468.6					43.0		%				$	440.1					42.9		%
Franchise royalty revenue and fees:
Franchise royalty revenue			132.1						23.5		%				125.0						23.2		%				254.3						23.3		%				236.8						23.1		%
Franchise fees			21.0						3.7		%				18.4						3.5		%				40.5						3.7		%				35.6						3.4		%
Total franchise royalty revenue and fees			153.1						27.2		%				143.4						26.7		%				294.8						27.0		%				272.4						26.5		%
Franchise rental income			58.0						10.3		%				58.6						10.9		%				115.8						10.6		%				116.5						11.4		%
Advertising funds revenue			109.8						19.6		%				104.9						19.5		%				211.2						19.4		%				197.4						19.2		%
Total revenues			$	561.6					100.0		%				$	537.8					100.0		%				$	1,090.4					100.0		%				$	1,026.4					100.0		%
			Second Quarter																								Six Months
			2023						% of  Sales						2022						% of  Sales						2023						% of  Sales						2022						% of  Sales
Cost of sales:
Food and paper			$	75.8					31.5		%				$	76.3					33.0		%				$	149.6					31.9		%				$	144.6					32.9		%
Restaurant labor			75.3						31.3		%				73.0						31.6		%				148.9						31.8		%				143.5						32.6		%
Occupancy, advertising and other operating costs			49.9						20.7		%				48.0						20.9		%				99.0						21.1		%				94.2						21.4		%
Total cost of sales			$	201.0					83.5		%				$	197.3					85.5		%				$	397.5					84.8		%				$	382.3					86.9		%

			Second Quarter																								Six Months
			2023						% of Sales						2022						% of Sales						2023						% of Sales						2022						% of Sales
Company-operated restaurant margin:
U.S.			$	40.6					17.3		%				$	34.2					15.0		%				$	73.3					16.0		%				$	58.9					13.6		%
Global			39.7						16.5		%				33.6						14.5		%				71.1						15.2		%				57.8						13.1		%

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

			Second Quarter												Six Months
			2023						2022						2023						2022
Key business measures:
U.S. same-restaurant sales:
Company-operated			3.1		%				2.9		%				5.2		%				2.9		%
Franchised			5.0		%				2.2		%				6.1		%				1.6		%
Systemwide			4.9		%				2.3		%				6.0		%				1.7		%
International same-restaurant sales (a)			7.2		%				15.2		%				10.3		%				14.7		%
Global same-restaurant sales:
Company-operated			3.3		%				2.9		%				5.3		%				2.9		%
Franchised (a)			5.3		%				3.7		%				6.6		%				3.1		%
Systemwide (a)			5.1		%				3.7		%				6.5		%				3.1		%
Systemwide sales (b):
U.S. Company-operated			$	234.9					$	227.9					$	457.5					$	434.4
U.S. franchised			2,949.7						2,772.6						5,671.9						5,278.2
U.S. systemwide			3,184.6						3,000.5						6,129.4						5,712.6
International Company-operated			5.8						3.0						11.1						5.7
International franchised (a)			455.1						416.3						868.3						773.0
International systemwide (a)			460.9						419.3						879.4						778.7
Global systemwide (a)			$	3,645.5					$	3,419.8					$	7,008.8					$	6,491.3

_______________

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

(b)During the second quarter of 2023 and 2022, global systemwide sales increased 6.9% and 5.6%, respectively, U.S. systemwide sales increased 6.1% and 3.5%, respectively, and international systemwide sales increased 12.7% and 22.7%, respectively, on a constant currency basis. During the first six months of 2023 and 2022, global systemwide sales increased 8.4% and 4.9%, respectively, U.S. systemwide sales increased 7.3% and 3.0%, respectively, and international systemwide sales increased 16.6% and 21.1%, respectively, on a constant currency basis.

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			Second Quarter
			U.S. Company-operated						U.S. Franchised						International Company-operated						International Franchised						Systemwide
Restaurant count:
Restaurant count at April 2, 2023			403						5,586						11						1,095						7,095
Opened			1						18						—						22						41
Closed			(1)						(14)						—						(6)						(21)
Restaurant count at July 2, 2023			403						5,590						11						1,111						7,115
			Six Months
			U.S. Company-operated						U.S. Franchised						International Company-operated						International Franchised						Systemwide
Restaurant count at January 1, 2023			403						5,591						12						1,089						7,095
Opened			2						37						—						41						80
Closed			(2)						(38)						(1)						(19)						(60)
Restaurant count at July 2, 2023			403						5,590						11						1,111						7,115

Sales			Second Quarter																		Six Months
			2023						2022						Change						2023						2022						Change
Sales			$	240.7					$	230.9					$	9.8					$	468.6					$	440.1					$	28.5

The increase in sales during the second quarter and the first six months of 2023 was primarily due to (1) a 3.3% and 5.3% increase in global Company-operated same-restaurant sales of $6.5 million and $21.4 million, respectively, and (2) net new restaurant development of $4.1 million and $8.2 million, respectively. Company-operated same-restaurant sales increased due to higher average check, partially offset by a decrease in customer count.

Franchise Royalty Revenue and Fees			Second Quarter																		Six Months
			2023						2022						Change						2023						2022						Change
Franchise royalty revenue			$	132.1					$	125.0					$	7.1					$	254.3					$	236.8					$	17.5
Franchise fees			21.0						18.4						2.6						40.5						35.6						4.9
			$	153.1					$	143.4					$	9.7					$	294.8					$	272.4					$	22.4

Franchise royalty revenue during the second quarter of 2023 increased $7.1 million, of which (1) $6.4 million was due to a 5.3% increase in global franchise same-restaurant sales and (2) $2.5 million was due to net new restaurant development. Franchise royalty revenue during the first six months of 2023 increased $17.5 million, of which (1) $15.3 million was due to a 6.6% increase in global franchise same-restaurant sales and (2) $5.1 million was due to net new restaurant development. Franchise same-restaurant sales during the second quarter and the first six months of 2023 increased due to higher average check, partially offset by a decrease in customer count.

The increase in franchise fees during the second quarter and the first six months of 2023 was primarily due to (1) an increase in fees as a result of Franchise Flips and other development-related fees of $1.5 million and $1.9 million, respectively, and (2) higher fees for providing information technology services to franchisees of $1.0 million and $1.9 million, respectively.

Franchise Rental Income			Second Quarter																		Six Months
			2023						2022						Change						2023						2022						Change
Franchise rental income			$	58.0					$	58.6					$	(0.6)					$	115.8					$	116.5					$	(0.7)

The decrease in franchise rental income during the second quarter and the first six months of 2023 was primarily due to the impact of assigning certain leases to franchisees.

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Advertising Funds Revenue			Second Quarter																		Six Months
			2023						2022						Change						2023						2022						Change
Advertising funds revenue			$	109.8					$	104.9					$	4.9					$	211.2					$	197.4					$	13.8

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

Cost of Sales, as a Percent of Sales			Second Quarter																		Six Months
			2023						2022						Change						2023						2022						Change
Food and paper			31.5		%				33.0		%				(1.5)		%				31.9		%				32.9		%				(1.0)		%
Restaurant labor			31.3		%				31.6		%				(0.3)		%				31.8		%				32.6		%				(0.8)		%
Occupancy, advertising and other operating costs			20.7		%				20.9		%				(0.2)		%				21.1		%				21.4		%				(0.3)		%
			83.5		%				85.5		%				(2.0)		%				84.8		%				86.9		%				(2.1)		%

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

Franchise Support and Other Costs			Second Quarter																		Six Months
			2023						2022						Change						2023						2022						Change
Franchise support and other costs			$	13.8					$	9.9					$	3.9					$	27.0					$	21.7					$	5.3

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

Franchise Rental Expense			Second Quarter																		Six Months
			2023						2022						Change						2023						2022						Change
Franchise rental expense			$	32.4					$	32.1					$	0.3					$	63.0					$	61.0					$	2.0

The increase in franchise rental expense during the second quarter and the first six months of 2023 was primarily due to the impact of assigning fewer leases to franchisees during 2023 compared with 2022.

Advertising Funds Expense			Second Quarter																		Six Months
			2023						2022						Change						2023						2022						Change
Advertising funds expense			$	109.6					$	111.0					$	(1.4)					$	211.3					$	208.8					$	2.5

On an interim basis, advertising funds expense is recognized in proportion to advertising funds revenue. The Company expects advertising funds expense to be lower than advertising funds revenue by approximately $3.0 million for 2023, which includes the amount by which advertising funds expense exceeded advertising funds revenue in prior years (excluding the Company’s funding of incremental advertising) of approximately $5.0 million, partially offset by the Company’s incremental funding of advertising in Canada of approximately $2.0 million.

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

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General and Administrative			Second Quarter																		Six Months
			2023						2022 (a)						Change						2023						2022 (a)						Change
Incentive compensation			$	7.6					$	6.7					$	0.9					$	15.1					$	12.9					$	2.2
Professional fees			14.7						$	15.0					(0.3)						29.6						28.5						1.1
Employee compensation and benefits			31.2						30.8						0.4						65.0						64.0						1.0
Share-based compensation			5.4						6.1						(0.7)						9.3						12.5						(3.2)
Other, net			3.8						3.0						0.8						6.0						6.1						(0.1)
			$	62.7					$	61.6					$	1.1					$	125.0					$	124.0					$	1.0

_______________

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

The increase in general and administrative expenses during the second quarter of 2023 was primarily due to an increase in incentive compensation accruals, reflecting higher operating performance as compared to plan in 2023 versus 2022.

The increase in general and administrative expenses during the first six months of 2023 was primarily due to (1) an increase in incentive compensation accruals, reflecting higher operating performance as compared to plan in 2023 versus 2022, (2) higher professional fees, reflecting higher information technology-related costs and (3) higher employee compensation and benefits. These increases were partially offset by lower share-based compensation.

Depreciation and Amortization (exclusive of amortization of cloud computing arrangements shown separately below)			Second Quarter																		Six Months
			2023						2022						Change						2023						2022						Change
Restaurants			$	21.1					$	21.3					$	(0.2)					$	42.0					$	43.1					$	(1.1)
Technology support, corporate and other			12.4						12.1						0.3						25.0						23.6						1.4
			$	33.5					$	33.4					$	0.1					$	67.0					$	66.7					$	0.3

The increase in depreciation and amortization during the second quarter and the first six months of 2023 was primarily due to depreciation and amortization for technology investments and new restaurant assets, partially offset by assets becoming fully depreciated.

Amortization of Cloud Computing Arrangements			Second Quarter																		Six Months
			2023						2022						Change						2023						2022						Change
Amortization of cloud computing arrangements			$	2.3					$	—					$	2.3					$	3.8					$	—					$	3.8

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

System Optimization Losses (Gains), Net			Second Quarter																		Six Months
			2023						2022						Change						2023						2022						Change
System optimization losses (gains), net			$	—					$	(0.2)					$	0.2					$	—					$	(3.7)					$	3.7

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

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Reorganization and Realignment Costs			Second Quarter																		Six Months
			2023						2022						Change						2023						2022						Change
Organizational redesign			$	0.7					$	—					$	0.7					$	7.4					$	—					$	7.4
Other reorganization and realignment plans			—						0.2						(0.2)						0.1						0.6						(0.5)
			$	0.7					$	0.2					$	0.5					$	7.5					$	0.6					$	6.9

During the first six months ended July 2, 2023, the Company recognized costs totaling $7.4 million under the Organizational Redesign Plan, which primarily included severance and related employee costs of $5.6 million and share-based compensation of $1.0 million. See Note 4 to the Condensed Consolidated Financial Statements contained in Item 1 herein for further information.

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

Impairment of Long-Lived Assets			Second Quarter																		Six Months
			2023						2022						Change						2023						2022						Change
Impairment of long-lived assets			$	0.1					$	1.9					$	(1.8)					$	0.5					$	2.5					$	(2.0)

The decrease in impairment of long-lived assets during the second quarter and the first six months of 2023 was primarily due to higher impairment charges in the prior year as a result of the deterioration in operating performance of certain Company-operated restaurants.

Other Operating Income, Net			Second Quarter																		Six Months
			2023						2022						Change						2023						2022						Change
Lease buyout			$	0.1					$	(1.3)					$	1.4					(0.1)						(2.1)						$	2.0
Gains on sales-type leases			(1.1)						(1.7)						0.6						(1.2)						(2.2)						1.0
Other, net			(2.8)						(2.7)						(0.1)						(4.7)						(4.4)						(0.3)
			$	(3.8)					$	(5.7)					$	1.9					$	(6.0)					$	(8.7)					$	2.7

The decrease in other operating income, net during the second quarter and the first six months of 2023 was primarily due to (1) lower lease buyout activity and (2) lower gains on sales-type leases.

Interest Expense, Net			Second Quarter																		Six Months
			2023						2022						Change						2023						2022						Change
Interest expense, net			$	31.1					$	32.1					$	(1.0)					$	62.8					$	58.5					$	4.3

The decrease in interest expense, net during the second quarter of 2023 was primarily due to the impact of repurchasing $31.6 million in principal of the Company’s 7% debentures during the first quarter of 2023. The increase in interest expense, net during the first six months of 2023 was primarily due to the impact of completing a debt financing transaction under the Company’s securitized financing facility in the first quarter of 2022, partially offset by the impact of repurchasing $31.6 million in principal of the Company’s 7% debentures during the first quarter of 2023.

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

During the first quarter of 2023, the Company incurred a loss on early extinguishment of debt of $1.3 million due to the repurchase of $31.6 million in principal of the Company’s 7% debentures.

Investment (Loss) Income, Net			Second Quarter																		Six Months
			2023						2022						Change						2023						2022						Change
Investment (loss) income, net			$	(6.8)					$	—					$	(6.8)					$	(10.4)					$	2.1					$	(12.5)

During the second quarter and the first six months of 2023, the Company recorded a loss of $6.8 million and $10.4 million, respectively, due to impairment charges for the difference between the estimated fair value and the carrying value of an investment in equity securities. During the first six months of 2022, the Company recognized a gain of $2.1 million on an investment in equity securities as a result of an observable price change.

Other Income, Net			Second Quarter																		Six Months
			2023						2022						Change						2023						2022						Change
Other income, net			$	7.5					$	1.2					$	6.3					$	14.9					$	1.4					$	13.5

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

Provision for Income Taxes			Second Quarter																		Six Months
			2023						2022						Change						2023						2022						Change
Income before income taxes			$	78.9					$	65.4					$	13.5					$	134.2					$	116.2					$	18.0
Provision for income taxes			(19.3)						(17.2)						(2.1)						(34.7)						(30.6)						(4.1)
Effective tax rate on income			24.4		%				26.4		%				(2.0)		%				25.9		%				26.4		%				(0.5)		%

Our effective tax rates for the second quarter and the first six months of 2023 and 2022 were impacted by variations in income before income taxes, adjusted for recurring items such as non-deductible expenses and state income taxes, as well as non-recurring discrete items. The decrease in the effective tax rate for the second quarter of 2023 compared with the second quarter of 2022 was primarily due to a decrease in the tax effects of our foreign operations and additional net income from our national advertising funds which are not subject to tax. The decrease in the effective tax rate for the first six months of 2023 compared with the first six months of 2022 was primarily due to (1) net income from our national advertising funds not subject to tax, (2) a decrease in the tax effects of our foreign operations and (3) an increase in the benefit from share-based compensation. These benefits were partially offset by a one-time adjustment to our foreign deferred income taxes related to prior periods.

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Segment Information

See Note 17 to the Condensed Consolidated Financial Statements contained in Item 1 herein for further information regarding the Company’s segments.

Wendy’s U.S.

			Second Quarter																		Six Months
			2023						2022						Change						2023						2022						Change
Sales			$	234.9					$	227.9					$	7.0					$	457.5					$	434.4					$	23.1
Franchise royalty revenue			114.9						108.9						6.0						221.3						206.8						14.5
Franchise fees			17.5						16.0						1.5						34.6						31.4						3.2
Advertising fund revenue			101.5						97.6						3.9						196.3						185.2						11.1
Total revenues			$	468.8					$	450.4					$	18.4					$	909.7					$	857.8					$	51.9
Segment profit			$	142.9					$	127.0					$	15.9					$	268.2					$	231.8					$	36.4

The increase in Wendy’s U.S. revenues during the second quarter and the first six months of 2023 was primarily due to an increase in same-restaurant sales. Same-restaurant sales increased during the second quarter and the first six months of 2023 primarily due to higher average check, partially offset by a decrease in customer count.

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

Wendy’s International

			Second Quarter																		Six Months
			2023						2022						Change						2023						2022						Change
Sales			$	5.8					$	3.0					$	2.8					$	11.1					$	5.7					$	5.4
Franchise royalty revenue			17.2						16.1						1.1						33.0						30.0						3.0
Franchise fees			1.4						1.2						0.2						3.0						2.4						0.6
Advertising fund revenue			8.3						7.2						1.1						14.9						12.3						2.6
Total revenues			$	32.7					$	27.5					$	5.2					$	62.0					$	50.4					$	11.6
Segment profit			$	8.5					$	9.4					$	(0.9)					$	16.0					$	14.8					$	1.2

The increase in Wendy’s International revenues during the second quarter and the first six months of 2023 was primarily due to (1) net new restaurant development in the U.K. and (2) an increase in same-restaurant sales. Same-restaurant sales increased during the second quarter and the first six months of 2023 due to (1) higher average check and (2) an increase in customer count.

The decrease in Wendy’s International segment profit during the second quarter of 2023 was primarily due to (1) an increase in franchise support and other costs and (2) the Company’s investments to support the entry into the U.K. market and additional inflationary pressures in the U.K. These changes were partially offset by higher revenues.

The increase in Wendy’s International segment profit during the first six months of 2023 was primarily due to higher revenues. This increase was partially offset by (1) higher franchise support and other costs and (2) the Company’s investments to support the entry into the U.K. market and inflationary pressures in the U.K.

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Global Real Estate & Development

			Second Quarter																		Six Months
			2023						2022						Change						2023						2022						Change
Franchise fees			$	2.1					$	1.3					$	0.8					$	2.8					$	1.8					$	1.0
Franchise rental income			58.0						58.6						(0.6)						115.8						116.5						(0.7)
Total revenues			$	60.1					$	59.9					$	0.2					$	118.6					$	118.3					$	0.3
Segment profit			$	26.5					$	27.3					$	(0.8)					$	51.6					$	54.9					$	(3.3)

The increase in Global Real Estate & Development revenues during the second quarter and the first six months of 2023 was primarily due to higher fees as a result of Franchise Flips and other development-related fees.

The decrease in Global Real Estate & Development segment profit during the second quarter and the first six months of 2023 was primarily due to (1) lower gains on sales-type leases and (2) an increase in franchise rental expense. These changes were partially offset by higher revenues.

Liquidity and Capital Resources

Cash Flows

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

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

•capital expenditures of approximately $45.0 million to $55.0 million, resulting in total anticipated cash capital expenditures for the year of approximately $75.0 million to $85.0 million;

•cash dividends aggregating approximately $104.6 million as discussed below in “Dividends;”

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

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

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

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

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

			Six Months
			2023						2022						Change
Net cash provided by (used in):
Operating activities			$	141.5					$	98.2					$	43.3
Investing activities			(28.9)						(28.8)						(0.1)
Financing activities			(246.3)						362.7						(609.0)
Effect of exchange rate changes on cash			2.1						(2.4)						4.5
Net (decrease) increase in cash, cash equivalents and restricted cash			$	(131.6)					$	429.7					$	(561.3)

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Operating Activities

Cash provided by operating activities consists primarily of net income, adjusted for non-cash expenses such as depreciation and amortization, deferred income tax and share-based compensation, and the net change in operating assets and liabilities. Cash provided by operating activities was $141.5 million and $98.2 million in the first six months of 2023 and 2022, respectively. The change was primarily due to (1) higher net income, adjusted for non-cash expenses, and (2) a decrease in payments for incentive compensation. These changes were partially offset by an increase in cash paid for income taxes.

Investing Activities

Cash used in investing activities was $28.9 million and $28.8 million in the first six months of 2023 and 2022, respectively. The change was primarily due to lower proceeds from notes receivable of $1.1 million, partially offset by a decrease in expenditures associated with the Company’s franchise development fund of $0.9 million.

Financing Activities

Cash (used in) provided by financing activities was $(246.3) million and $362.7 million in the first six months of 2023 and 2022, respectively. The first six months of 2023 was primarily comprised of (1) dividends of $105.7 million, (2) repurchases of common stock of $86.9 million and (3) long-term debt activities of $46.4 million, reflecting the impact of repurchases of the Company’s 7% debentures during the first quarter of 2023. The first six months of 2022 was primarily comprised of long-term debt activities of $477.6 million, reflecting the impact of the completion of the Company’s debt financing transaction during the first quarter of 2022, partially offset by (1) dividends of $53.5 million and (2) repurchases of common stock of $52.0 million.

Long-Term Debt, Including Current Portion

During the six months ended July 2, 2023, Wendy’s repurchased $31.6 million in principal of its 7% debentures at par value.

We may from time to time seek to repurchase additional portions of our outstanding long-term debt, including our 7% debentures and/or our senior secured notes, through open market purchases, privately negotiated transactions or otherwise. In December 2022, our Board of Directors authorized debt repurchases of up to $25.0 million and, in February 2023, our Board of Directors authorized additional debt repurchases of up to $50.0 million through February 2024, resulting in total debt repurchase authorizations of up to $75.0 million. As of July 2, 2023, the Company had completed the December 2022 debt repurchase authorization and had $43.4 million remaining under the February 2023 authorization. Such repurchases, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. Whether or not to repurchase any additional debt and the size and timing of any such repurchases will be determined at our discretion.

Except as described above, there were no material changes to the Company’s debt obligations since January 1, 2023. The Company was in compliance with its debt covenants as of July 2, 2023. See Note 6 to the Condensed Consolidated Financial Statements contained in Item 1 herein for further information related to our long-term debt obligations.

Dividends

On March 15, 2023 and June 15, 2023, the Company paid quarterly cash dividends per share of $.25, aggregating $105.7 million. On August 9, 2023, the Company announced a dividend of $.25 per share to be paid on September 15, 2023 to stockholders of record as of September 1, 2023. If the Company pays regular quarterly cash dividends for the remainder of 2023 at the same rate as declared in the third quarter of 2023, the Company’s total cash requirement for dividends for the remainder of 2023 will be approximately $104.6 million based on the number of shares of its common stock outstanding at August 2, 2023. The Company currently intends to continue to declare and pay quarterly cash dividends; however, there can be no assurance that any additional quarterly dividends will be declared or paid or of the amount or timing of such dividends, if any.

Stock Repurchases

In January 2023, our Board of Directors authorized a repurchase program for up to $500.0 million of our common stock through February 28, 2027, when and if market conditions warrant and to the extent legally permissible (the “January 2023 Authorization”). In connection with the January 2023 Authorization, the remaining portion of the previous February 2022 authorization for $250.0 million was canceled. During the six months ended July 2, 2023, the Company repurchased

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4.0 million shares under the January 2023 Authorization with an aggregate purchase price of $88.3 million, of which $1.4 million was accrued as of July 2, 2023, and excluding excise tax of $0.7 million and commissions of $0.1 million. As of July 2, 2023, the Company had $411.7 million of availability remaining under the January 2023 Authorization. Subsequent to July 2, 2023 through August 2, 2023, the Company repurchased 0.7 million shares under the January 2023 Authorization with an aggregate purchase price of $15.2 million, excluding applicable excise tax and commissions.

Cloud Computing Arrangements

In addition to the anticipated cash requirements for capital expenditures noted above in “Cash Flows,” the Company expects to spend approximately $30.0 million during 2023 on cloud computing arrangements (“CCA”), primarily related to the Company’s human capital management system implementation. The Company’s cash expenditures related to CCA amounted to $16.8 million during the six months ended July 2, 2023.

General Inflation, Commodities and Changing Prices

Inflationary pressures on labor and commodity price increases directly impacted our consolidated results of operations during the six months ended July 2, 2023, and we expect this to continue throughout the remainder of 2023. We attempt to manage any inflationary costs and commodity price increases through selective menu price increases and product mix. Delays in implementing such menu price increases and competitive pressures may limit our ability to recover such cost increases in the future. Inherent volatility experienced in certain commodity markets, such as those for beef, chicken, pork, cheese and grains, could have a significant effect on our results of operations and may have an adverse effect on us in the future. The extent of any impact will depend on our ability to manage such volatility through product mix and selective menu price increases.

Seasonality

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

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

During the three months ended July 2, 2023, certain of the Company’s subsidiaries executed amendments to the 2021-1 Variable Funding Senior Secured Notes, Class A-1 (the “Class A-1 Notes”) and the U.S. advertising fund revolving line of credit to transition from the London Interbank Offered Rate (“LIBOR”) to the Secured Overnight Financing Rate (“SOFR”), plus any applicable margin. The Company continues to be exposed to interest rate increases under its Class A-1 Notes, its U.S. advertising fund revolving line of credit and certain other lines of credit; however, the Company had no outstanding borrowings under such lines of credit as of July 2, 2023.

Except as described above, there were no significant changes from the information contained in the Company’s Form 10-K for the fiscal year ended January 1, 2023.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

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

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Changes in Internal Control Over Financial Reporting

There were no changes in the internal control over financial reporting of the Company during the second quarter of 2023 that materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

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

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PART II. OTHER INFORMATION

Special Note Regarding Forward-Looking Statements and Projections

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

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

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

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

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

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

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

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

•our ability to protect our intellectual property;

•food safety events or health concerns involving our products;

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

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

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

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

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

•changes in commodity and other operating costs;

•shortages or interruptions in the supply or distribution of our products and other risks associated with our independent supply chain purchasing co-op;

•the impact of increased labor costs or labor shortages;

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

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

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

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

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

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

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

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

•risks associated with our organizational redesign; and

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

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

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

Item 1. Legal Proceedings.

The Company is involved in litigation and claims incidental to our business. We provide accruals for such litigation and claims when we determine it is probable that a liability has been incurred and the loss is reasonably estimable. The Company believes it has adequate accruals for all of its legal and environmental matters. We cannot estimate the aggregate possible range of loss for our existing litigation and claims 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. In addition, most cases seek an indeterminate amount of damages and many involve multiple parties. Predicting the outcomes of settlement discussions or judicial or arbitral decisions is thus inherently difficult and future developments could cause these actions or claims, individually or in aggregate, to have a material adverse effect on the Company’s financial condition, results of operations, or cash flows of a particular reporting period.

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Item 1A. Risk Factors.

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

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

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

Issuer Repurchases of Equity Securities

Period			Total Number of Shares Purchased (1)			Average Price Paid per Share			Total Number of Shares Purchased as Part of Publicly Announced Plans			Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans (2)
April 3, 2023 through May 7, 2023			1,181,296			$22.00			1,170,672			$435,470,503
May 8, 2023 through June 4, 2023			543,082			$22.86			540,310			$423,121,514
June 5, 2023 through July 2, 2023			545,111			$22.01			517,788			$411,745,914
Total			2,269,489			$22.21			2,228,770			$411,745,914

(1)Includes 40,719 shares of common stock reacquired by the Company from holders of share-based awards to satisfy certain requirements associated with the vesting or exercise of the respective award. The shares were valued at the fair market value of the Company’s common stock on the vesting or exercise date of such awards, as set forth in the applicable plan document.

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

Subsequent to July 2, 2023 through August 2, 2023, the Company repurchased 0.7 million shares under the January 2023 Authorization with an aggregate purchase price of $15.2 million, excluding applicable excise tax and commissions.

Item 5. Other Information.

On May 17, 2023, the Company filed a Form 8-K announcing the voting results from its 2023 Annual Meeting of Stockholders, including with respect to the advisory resolution on the frequency of future advisory votes on executive compensation. In light of such voting results, the Company will hold an advisory vote on the executive compensation of the Company’s named executive officers every year until the next required advisory vote on the frequency of advisory votes on executive compensation.

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Item 6. Exhibits.

EXHIBIT NO.			DESCRIPTION
10.1			First Amendment to the Class A-1 Note Purchase Agreement, dated as of May 23, 2023, by and among Wendy’s Funding, LLC as Master Issuer, each of Quality Is Our Recipe, LLC, Wendy’s Properties, LLC and Wendy’s SPV Guarantor, LLC, as Guarantors, Wendy’s International, LLC, as Manager, the conduit investors party thereto, the financial institutions party thereto, certain funding agents, and Coöperatieve Rabobank, U.A., New York Branch, as L/C Provider, Swingline Lender and Administrative Agent.*
31.1			Certification of the Chief Executive Officer of The Wendy’s Company, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
31.2			Certification of the Chief Financial Officer of The Wendy’s Company, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
32.1			Certifications of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
101			The following financial information from The Wendy’s Company’s Quarterly Report on Form 10-Q for the quarter ended July 2, 2023 formatted in Inline eXtensible Business Reporting Language: (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statements of Comprehensive Income, (iv) the Condensed Consolidated Statements of Stockholders’ Equity, (v) the Condensed Consolidated Statements of Cash Flows, and (vi) Notes to Condensed Consolidated Financial Statements.
104			The cover page from The Wendy’s Company’s Quarterly Report on Form 10-Q for the quarter ended July 2, 2023, formatted in Inline XBRL and contained in Exhibit 101.

_______________

*			Filed herewith.

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SIGNATURES

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

			THE WENDY’S COMPANY (Registrant)
Date: August 9, 2023			By: /s/ Gunther Plosch
			Gunther Plosch
			Chief Financial Officer
			(On behalf of the registrant)
Date: August 9, 2023			By: /s/ Suzanne M. Thuerk
			Suzanne M. Thuerk
			Chief Accounting Officer
			(Principal Accounting Officer)

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