Wendy's 2011 Annual Report Download - page 123

THE WENDY’S COMPANY AND SUBSIDIARIES
WENDY’S RESTAURANTS, LLC AND SUBSIDIARIES
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(In Thousands Except Per Share Amounts)
reserves. The payments by Wendy’s under the Wendy’s Co-op were expensed in 2009 and included in “General
and administrative.” Wendy’s made payments of $305 and $15,195 in 2011 and 2010, respectively. In
connection with the ongoing operations of QSCC during 2010, QSCC reimbursed Wendy’s $913 for amounts
Wendy’s had paid primarily for payroll-related expenses for certain Canadian QSCC purchasing employees.
Since the third quarter of 2010, all QSCC members (including Wendy’s) pay sourcing fees to third party vendors
on products which are sourced through QSCC. Such sourcing fees are remitted by these vendors to QSCC and
are the primary means of funding QSCC’s operations. Should QSCC’s sourcing fees exceed its expected needs,
QSCC’s board of directors may return some or all of the excess to its members in the form of a patronage
dividend. Wendy’s recorded the anticipated cash portion of its share of patronage dividends of $2,033 and $325
in 2011 and 2010, respectively, which are included as a reduction of “Cost of sales.”
(b) On April 5, 2010, QSCC and the Arby’s independent purchasing cooperative (“ARCOP”) in consultation with
Wendy’s Restaurants, established Strategic Sourcing Group Co-op, LLC (“SSG”). SSG was formed to manage
and operate purchasing programs for certain non-perishable goods, equipment, and services. Wendy’s Restaurants
had committed to pay approximately $5,145 of SSG expenses, which were expensed in 2010 and included in
“General and administrative,” and were to be paid over a 24 month period through March 2012. However, in
anticipation of the sale of Arby’s, effective April 2011, SSG was dissolved and its activities were transferred to
QSCC and ARCOP and the remaining accrued commitment of $2,275 was reversed and credited to “General
and administrative.”
(c) Effective January 4, 2010, QSCC subleased approximately 9,333 square feet of office space from Wendy’s.
Effective January 1, 2011, Wendy’s and QSCC entered into a sublease amendment which increased the office
space subleased to QSCC to 14,333 square feet for a one year period for a revised annual base rental of $176 with
five one-year renewal options. On July 5, 2011, QSCC renewed the lease for a one year period ending
December 31, 2012. During the period from April 2010 to April 2011, SSG leased 2,300 square feet of office
space from a subsidiary of Wendy’s Restaurants. The Companies received $180 and $113 of sublease income
from QSCC and $23 and $24 of sublease income from SSG during 2011 and 2010, respectively.
Transactions with the Management Company
(d) The Wendy’s Company and the Management Company entered into a new services agreement (the “New
Services Agreement”), which commenced on July 1, 2009 and expired on June 30, 2011. Under the New Services
Agreement, the Management Company assisted us with strategic merger and acquisition consultation, corporate
finance and investment banking services and related legal matters. The Companies paid approximately $2,465
and $5,368 in 2010 and 2009, respectively, in fees for corporate finance advisory services under the New Service
Agreement in connection with the negotiation and execution of the Credit Agreement in 2010 and the issuance
of the Senior Notes in 2009.
In addition, The Wendy’s Company paid the Management Company a service fee of $250 per quarter, in
connection with the New Services Agreement until it expired on June 30, 2011. The Wendy’s Company incurred
service fees of $500, $1,000 and $500 in 2011, 2010 and 2009, respectively, which are included in “General and
administrative.”
(e) In connection with its 2007 restructuring, The Wendy’s Company entered into an agreement with the
Management Company for the provision of services under a two-year transition services agreement (the “Services
Agreement”), effective June 30, 2007, pursuant to which the Management Company provided The Wendy’s
Company with a range of professional and strategic services. Under the Services Agreement, which expired on
June 30, 2009 and was superseded by the New Services Agreement, The Wendy’s Company paid the
Management Company $3,000 per quarter for the first year of services and $1,750 per quarter for the second
year of services. The Wendy’s Company incurred $3,500 of such service fees for 2009 which are included in
“General and administrative.”
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