Wendy's 2012 Annual Report Download - page 38

On June 29, 2011, The Wendy’s Company and TASCO entered into an agreement to extend the Aircraft
Lease Agreement for an additional one year period (expiring on June 30, 2012) and an increased monthly rent of
$13,000. On June 30, 2012, The Wendy’s Company and TASCO entered into an extension of that lease agreement
that extended the lease term to July 31, 2012 and effective as of August 1, 2012, entered into an amended and
restated aircraft lease agreement (the “2012 Lease”) that will expire on January 5, 2014. Under the 2012 Lease, all
expenses related to the ownership, maintenance and operation of the aircraft will be paid by TASCO, subject to the
limitation that if the amount of annual ongoing maintenance, hangar, insurance and other expenses, or the estimated
amount of other scheduled maintenance expenses, exceeds the amounts stated in the 2012 Lease, then TASCO can
either pay such amounts or terminate the 2012 Lease. In addition, if extraordinary and/or unscheduled repairs and/or
maintenance for the aircraft become necessary and the estimated cost thereof exceeds the amount stated in the 2012
Lease, then TASCO can either pay such amounts or terminate the 2012 Lease. In the event of termination, TASCO
will not be obligated to perform or pay for such repairs and/or maintenance following the date of termination.
Franchisee Incentive Programs
Franchise Image Activation Incentive Program
In order to encourage franchisees to participate in Wendy’s Image Activation program, which includes
innovative exterior and interior restaurant designs for new and reimaged restaurants, Wendy’s initiated a cash
incentive program for franchisees during the third quarter of 2012. In January 2013, the program was expanded to
include variable cash incentives for Tier 1, 2, and 3 remodels and to allow for a maximum of $0.1 million each, for up
to three incentives per franchisee. The cash incentive program is for the reimaging of restaurants completed in 2013
and totals $10.0 million.
North America Incentive Program
In order to promote new unit development, Wendy’s has established a franchisee assistance program for its
North American franchisees that provides (with certain exceptions) for reduced technical assistance fees and a sliding
scale of royalties for the first two years of operation for qualifying locations opened between April 1, 2011 and
December 31, 2013. For the years ended December 30, 2012 and January 1, 2012, the effect on franchise revenues
was not material and we do not expect the effect on future franchise revenues to be material.
Canadian Lease Guarantee Program
Wendy’s Canadian subsidiary has established a lease guarantee program to promote new franchisee unit
development for up to an aggregate of C$5.0 million for periods of up to five years. Franchisees pay the Canadian
subsidiary a nominal fee for the guarantee.
Japan Joint Venture Guarantee
In 2012, Wendy’s (1) provided a guarantee to certain lenders to our joint venture in Japan (the “Japan JV”) for
which our joint venture partners have agreed, should it become necessary, to reimburse and otherwise indemnify us
for their 51% share of the guarantee and (2) agreed to reimburse and otherwise indemnify our joint venture partners
for our 49% share of the guarantee by our joint venture partners of a line of credit granted by a different lender to the
Japan JV to fund working capital requirements. As of December 30, 2012, our portion of these contingent obligations
totaled approximately $3.0 million based upon then current rates of exchange. The fair value of our guarantees is
immaterial.
In early 2013, the joint venture partners agreed on a plan to finance anticipated future cash requirements of the
Japan JV. As determined by the amount of future capital contributions by each of the partners, Wendy’s may become
the majority owner of the Japan JV. The Japan JV and the effect of the noncontrolling interest in the Japan JV would
then be included in the Wendy’s consolidated financial statements from the date that Wendy’s became the majority
owner, or otherwise assumed day-to-day control of the Japan JV’s operations.
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