Wendy's 2013 Annual Report Download - page 39

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Company has no plans to extend or renew the lease upon expiration. The Company entered into the lease agreement
as a means of offsetting the cost of owning and operating the corporate aircraft by receiving revenue from third
parties’ use of such aircraft. Under the terms of the lease agreement, the Company pays annual management and
flight crew fees to CitationAir and reimburses CitationAir for maintenance costs and fuel usage related to the
corporate aircraft. In return, CitationAir pays a negotiated fee to the Company based on the number of hours that the
corporate aircraft is used by Jet Card members. This fee is reduced based on the number of hours that (1) the
Company uses other aircraft in the Jet Card program fleet and (2) Jet Card members who are affiliated with the
Company use the corporate aircraft or other aircraft in the Jet Card program fleet. The Company’s participation in
the aircraft management and lease agreement reduces the aggregate costs that the Company would otherwise incur in
connection with owning and operating the corporate aircraft. Under the terms of the lease agreement, the Company’s
directors have the opportunity to become Jet Card members and to use aircraft in the Jet Card program fleet at the
same negotiated fee paid by the Company as provided for under the lease agreement. During the years ended
December 29, 2013, December 30, 2012 and January 1, 2012, the Former Executives and a director, who was our
former Vice Chairman, and members of their immediate families, used their Jet Card agreements for business and
personal travel on aircraft in the Jet Card program fleet. The Management Company paid CitationAir directly, and
the Company received credit from CitationAir for charges related to such travel of approximately $1.4 million,
$1.2 million and $0.5 million during the years ended December 29, 2013, December 30, 2012 and January 1, 2012,
respectively.
TimWen lease expense and management fees
A wholly-owned subsidiary of Wendy’s leases restaurant facilities from TimWen for the operation of
Wendy’s/Tim Hortons combo units in Canada. Wendy’s paid TimWen $6.9 million, $6.9 million and $6.8 million
under such leases during 2013, 2012 and 2011, respectively, which have been included in “Costs of sales.” In
addition, TimWen paid Wendy’s a management fee under the TimWen joint venture agreement of $0.3 million
during 2013, 2012, and 2011, which has been included as a reduction to “General and administrative.”
Franchisee Incentive Programs
Franchise Image Activation Incentive Programs
Wendy’s has an incentive program for franchisees that commence Image Activation restaurant remodels or open
newly constructed Image Activation design restaurants during 2014 and for franchisees that open newly constructed
Image Activation design restaurants during 2015. The incentive program provides reductions in royalty payments for
up to the first three years after the completion of construction. In addition, the program includes cash incentives for
new and remodeled restaurants in the Image Activation design during 2014. Wendy’s anticipates the payment of
approximately $4.5 million for cash incentives under this program in 2014.
Wendy’s also had an incentive program for franchisees’ participation in Wendy’s Image Activation program
during 2013 for which the Company recognized $9.2 million of incentive expense which is included in “General and
administrative” for the year ended December 29, 2013.
Franchisee Image Activation Financing Program
In addition to the Image Activation incentive programs described above, Wendy’s has executed an agreement to
partner with a third-party lender to establish a financing program for franchisees that participate in our Image
Activation program. Under the program, the lender is providing loans to franchisees to be used for the reimaging of
restaurants according to the guidelines and specifications under the Image Activation program. To support the
program, Wendy’s has provided to the lender a $6.0 million irrevocable stand-by letter of credit, which was issued on
July 1, 2013.
Subsequent Event—Tender Offer
In January 2014, our Board of Directors authorized a new repurchase program for up to $275.0 million of our
common stock through the end of fiscal year 2014, when and if market conditions warrant and to the extent legally
permissible. As part of the repurchase program, the Board of Directors also authorized the commencement of a
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