Guarantees and Other Commitments and Contingencies
Guarantees and Contingent Liabilities
Franchisee Development Incentive Programs
To promote new restaurant development, Wendy’s has provided franchisees with certain incentive programs for qualifying new and existing restaurants. In July and September 2024, Wendy’s announced a new development incentive structure in the U.S. and Canada and select international markets, respectively, that provides for reductions in royalty and national advertising fees for qualifying new restaurants for two, three or four years of operation based on the number of restaurants committed to under a development agreement. Franchisees who open a restaurant on or before November 30th of the calendar year prior to the restaurant’s required open date receive a technical assistance fee waiver. Wendy’s also provides franchisees with its base-level incentive that provides for reductions in royalty and national advertising fees for up to the first two years of operation for qualifying approved replacement restaurants. From time to time, Wendy’s may modify these incentive programs. For example, subsequent to December 29, 2024, Wendy’s announced that it is offering the highest-level incentive, which provides for fee reductions for four years, to all new and existing U.S. franchisees for a limited period of time under certain circumstances.
Lease Guarantees
Wendy’s has guaranteed the performance of certain leases and other obligations, primarily from former Company-operated restaurant locations now operated by franchisees, amounting to $94,634 as of December 29, 2024. These leases extend through 2045. We have had no judgments against us as guarantor of these leases as of December 29, 2024. In the event of default by a franchise owner where Wendy’s is called upon to perform under its guarantee, Wendy’s has the ability to pursue repayment from the franchise owner. The liability recorded for our probable exposure associated with these lease guarantees was not material as of December 29, 2024.
Insurance
Wendy’s is self-insured for most workers’ compensation losses and purchases insurance for general liability and automotive liability losses, all subject to a $500 per occurrence retention or deductible limit. Wendy’s determines its liability for claims incurred but not reported for the insurance liabilities on an actuarial basis. As of December 29, 2024, the Company had $18,589 recorded for these insurance liabilities. Wendy’s is self-insured for health care claims for eligible participating employees subject to certain deductibles and limitations and determines its liability for health care claims incurred but not reported based on historical claims runoff data. As of December 29, 2024, the Company had $3,049 recorded for these health care insurance liabilities.
Letters of Credit
As of December 29, 2024, the Company had outstanding letters of credit with various parties totaling $28,659. Substantially all of the outstanding letters of credit include amounts outstanding against the 2021-1 Class A-1 Notes. See Note 9 for further information. We do not expect any material loss to result from these letters of credit.
Purchase and Capital Commitments
The Company has material purchase requirements under a beverage agreement with a vendor, a marketing agreement with two national broadcasters and an information technology agreement with a vendor. In August 2024, the Company amended its contract with the beverage vendor, which now expires upon reaching a threshold usage requirement or, if certain undertakings are not fulfilled, at the later of reaching a threshold usage requirement or December 31, 2034. Our total purchase requirements under the beverage, marketing and information technology agreements are estimated to be approximately $119,500 over the remaining life of the contracts.