Wendy's 2013 Annual Report Download - page 43

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Cost of Sales
Change
2013 2012
Food and paper ............................................... (0.4)% 0.1%
Restaurant labor ............................................... (0.4)% 0.2%
Occupancy, advertising and other operating costs ..................... (0.5)% (0.3)%
(1.3)% —%
The decrease in cost of sales, as a percent of sales, during 2013 was primarily due to benefits from (1) strategic
price increases on our menu items, (2) changes in the composition of our sales, (3) a decrease in breakfast advertising
expenses and (4) the favorable impact of new beverage contracts. As a percent of sales, these decreases in costs were
partially offset by increased commodity costs.
Cost of sales, as a percent of sales, remained flat in 2012 as compared to 2011. As a percent of sales, during
2012 we experienced a 1.0% increase in commodity costs and increased labor costs partially resulting from operating
initiatives, including breakfast and Image Activation. As a percent of sales, these increases were offset by the effect of
strategic price increases on our menu items, along with a decrease in breakfast advertising expenses.
General and Administrative
Change
2013 2012
Incentive compensation ......................................... $11.9 $ —
Share-based compensation ....................................... 7.0 —
Franchise incentives ............................................ 3.6 2.4
Severance expense ............................................. 2.9 —
Employee compensation and related expenses ........................ (12.8) —
Professional services ............................................ — (8.2)
Transition service agreement ..................................... — 6.8
SSG co-op formation & funding .................................. — 2.3
Other, net ................................................... (6.6) (7.9)
$ 6.0 $(4.6)
The increase in general and administrative expenses in 2013 was primarily due to increases in (1) incentive
compensation accruals due to stronger operating performance as compared to plan in 2013 versus 2012, (2) share-based
compensation as a result of the nature and timing of the recognition of the costs for the share-based compensation
component of the Company’s compensation plans, (3) franchise incentives resulting from our Image Activation
incentive program and (4) severance expense primarily as a result of the terms of a separation agreement with an
executive. These increases were partially offset by a decrease in employee compensation and related expenses primarily
due to changes in staffing.
The decrease in general and administrative expenses in 2012 was primarily due to a decrease in professional
services resulting from a decrease in contract services for information technology and tax related projects. This
decrease was partially offset by (1) the reimbursement of costs for continuing corporate and shared services incurred in
the second half of 2011 in connection with the transition service agreement related to the sale of Arby’s (these services
were completed during the fourth quarter of 2011), (2) the effect of the various franchise incentive programs in 2012
compared to 2011 and (3) the reversal of the accrual for the unpaid SSG funding commitment of $2.3 million during
the first quarter of 2011.
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