Edgar Filing: WENDY'S/ARBY'S GROUP, INC.

form10-k_01022011.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED JANUARY 2, 2011

( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM _____________ TO ______________.

WENDY’S/ARBY’S GROUP, INC.

(Exact Name of Registrant as Specified in its Charter)

Commission File Number 1-2207

Delaware		38-0471180
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1155 Perimeter Center West, Atlanta, Georgia		30338
(Address of principal executive offices)		(Zip Code)

Registrant’s Telephone Number, Including Area Code: (678) 514-4100

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Securities Registered Pursuant to Section 12(b) of the Act:

Title of Each Class	Name of Each Exchange on Which Registered
Common Stock, $.10 par value	New York Stock Exchange

Securities Registered Pursuant to Section 12(g) of the Act: None

WENDY’S/ARBY’S RESTAURANTS, LLC.

(Exact Name of Registrant as Specified in its Charter)

Commission File Number 333-161613

Delaware		38-0471180
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1155 Perimeter Center West, Atlanta, Georgia		30338
(Address of principal executive offices)		(Zip Code)

Registrant’s Telephone Number, Including Area Code: (678) 514-4100

------------------------

Securities Registered Pursuant to Section 12(b) of the Act: None

Securities Registered Pursuant to Section 12(g) of the Act: None

Indicate by check mark if either registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Wendy’s/Arby’s Group, Inc.	ýYes □No
Wendy’s/Arby’s Restaurants, LLC	□Yes ýNo

Indicate by check mark if each registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.

Wendy’s/Arby’s Group, Inc.	□Yes ýNo
Wendy’s/Arby’s Restaurants, LLC	ýYes □No

Indicate by check mark whether each registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Wendy’s/Arby’s Group, Inc.	ýYes □No
Wendy’s/Arby’s Restaurants, LLC	□Yes ýNo*

Indicate by check mark whether each registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Wendy’s/Arby’s Group, Inc.	ýYes □No
Wendy’s/Arby’s Restaurants, LLC	□Yes □No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of each registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ý

Indicate by check mark whether the registrants are large accelerated filers, accelerated filers, non-accelerated filers or smaller reporting companies. See the definitions of "large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Wendy’s/Arby’s Group, Inc.
Large accelerated filer ý	Accelerated filer □	Non-accelerated filer □	Smaller reporting company □

Wendy’s/Arby’s Restaurants, LLC
Large accelerated filer □	Accelerated filer □	Non-accelerated filer ý	Smaller reporting company □

Indicate by check mark whether either registrant is a shell company (as defined in Rule 12b-2 of the Act). □Yes ýNo

The aggregate market value of common equity held by non-affiliates of Wendy’s/Arby’s Group, Inc. as of July 2, 2010 was approximately $1,250,922,364. As of February 25, 2011, there were 419,005,869 shares of Wendy’s/Arby’s Group, Inc. Common Stock outstanding.

As a limited liability company, Wendy’s/Arby’s Restaurants, LLC does not issue common stock but has one member’s interest issued and outstanding. Wendy’s/Arby’s Restaurants, LLC’s sole member is Wendy’s/Arby’s Group, Inc. There is no aggregate market value for Wendy’s/Arby’s Restaurants, LLC member’s interest as of February 25, 2011.

Wendy’s/Arby’s Restaurants, LLC meets the conditions set forth in General Instruction (I)(1)(a) and (b) of Form 10-K and is therefore filing this Form 10-K with the reduced disclosure format.

* Wendy’s/Arby’s Restaurants, LLC has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the period it was required to file such reports.

DOCUMENTS INCORPORATED BY REFERENCE

The information required by Part III of this Form 10-K, to the extent not set forth herein, is incorporated herein by reference from Wendy’s/Arby’s Group, Inc.’s definitive proxy statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A not later than 120 days after January 2, 2011.

Explanatory Note

This Annual Report on Form 10-K is a combined report being filed separately by Wendy’s/Arby’s Group, Inc. (“Wendy’s/Arby’s”) and Wendy’s/Arby’s Restaurants, LLC (“Wendy’s/Arby’s Restaurants”), a direct 100% owned subsidiary holding company of Wendy’s/Arby’s. Unless the context indicates otherwise, any reference in this report to the “Companies,” “we,” “us” and “our” refers to Wendy’s/Arby’s together with its direct and indirect subsidiaries, including Wendy’s/Arby’s Restaurants. Each registrant hereto is filing on its own behalf all of the information contained in this annual report that relates to such registrant. Each registrant hereto is not filing any information that does not relate to such registrant, and therefore makes no representation as to any such information.

The principal subsidiaries of Wendy’s/Arby’s Restaurants are Wendy’s International, Inc. (“Wendy’s”) and Arby’s Restaurant Group, Inc. (“Arby’s”) and their subsidiaries. Substantially all of the operating results of Wendy’s/Arby’s are derived from the operating results of Wendy’s/Arby’s Restaurants, except expenses of Wendy’s/Arby’s. Where information or an explanation is provided that is substantially the same for each company, such information or explanation has been combined in the Annual Report on Form 10-K. Where information or an explanation is not substantially the same for each company, we have provided separate information and explanation. In addition, separate financial statements for each company are included in Item 8, “Financial Statements and Supplementary Data.”

PART 1

Special Note Regarding Forward-Looking Statements and Projections

This Annual Report on Form 10-K and oral statements made from time to time by representatives of the Companies may contain or incorporate by reference certain statements that are not historical facts, including, most importantly, information concerning possible or assumed future results of operations of the Companies. Those statements, as well as statements preceded by, followed by, or that include the words “may,” “believes,” “plans,” “expects,” “anticipates,” or the negation thereof, or similar expressions, constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Reform Act”). All statements that address future operating, financial or business performance; strategies or expectations; future synergies, efficiencies or overhead savings; anticipated costs or charges; future capitalization; and anticipated financial impacts of recent or pending transactions are forward-looking statements within the meaning of the Reform Act. The forward-looking statements are based on our expectations at the time such statements are made, speak only as of the dates they are made and are susceptible to a number of risks, uncertainties and other factors. Our actual results, performance and achievements may differ materially from any future results, performance or achievements expressed or implied by our forward-looking statements. For all of our forward-looking statements, we claim the protection of the safe harbor for forward-looking statements contained in the Reform Act. Many important factors could affect our future results and could cause those results to differ materially from those expressed in, or implied by the forward-looking statements contained herein. Such factors, all of which are difficult or impossible to predict accurately, and many of which are beyond our control, include, but are not limited to, the following:

uncertainty regarding the outcome of the Companies’ exploration of strategic alternatives for the Arby’s brand and its impact on the Companies’ businesses;

competition, including pricing pressures, aggressive marketing and the potential impact of competitors’ new unit openings on sales of Wendy’s® and Arby’s® restaurants;

consumers’ perceptions of the relative quality, variety, affordability and value of the food products we offer;

food safety events, including instances of food-borne illness (such as salmonella or E. coli) involving Wendy’s or Arby’s or their respective supply chains;

consumer concerns over nutritional aspects of beef, poultry, French fries or other products we sell, or concerns regarding the effects of disease outbreaks such as “mad cow disease” and avian influenza or “bird flu”;

success of operating and marketing initiatives, including advertising and promotional efforts and new product and concept development by us and our competitors;

the impact of general economic conditions and high unemployment rates on consumer spending, particularly in geographic regions that contain a high concentration of Wendy’s or Arby’s restaurants;

changes in consumer tastes and preferences, and in discretionary consumer spending;

changes in spending patterns and demographic trends, such as the extent to which consumers eat meals away from home;

certain factors affecting our franchisees, including the business and financial viability of franchisees, with a significant number of Arby’s franchisees having experienced a prolonged period of declining sales and profitability, the timely payment of such franchisees’ obligations due to us or to national or local advertising organizations, and the ability of our franchisees to open new restaurants in accordance with their development commitments, including their ability to finance restaurant development and remodels;

changes in commodity costs (including beef and chicken), labor, supply, fuel, utilities, distribution and other operating costs;

availability, location and terms of sites for restaurant development by us and our franchisees;

development costs, including real estate and construction costs;

delays in opening new restaurants or completing remodels of existing restaurants;

the timing and impact of acquisitions and dispositions of restaurants;

our ability to successfully integrate acquired restaurant operations;

anticipated or unanticipated restaurant closures by us and our franchisees;

our ability to identify, attract and retain potential franchisees with sufficient experience and financial resources to develop and operate Wendy’s and Arby’s restaurants successfully;

availability of qualified restaurant personnel to us and to our franchisees, and the ability to retain such personnel;

our ability, if necessary, to secure alternative distribution of supplies of food, equipment and other products to Wendy’s and Arby’s restaurants at competitive rates and in adequate amounts, and the potential financial impact of any interruptions in such distribution;

availability and cost of insurance;

adverse weather conditions;

availability, terms (including changes in interest rates) and deployment of capital;

changes in, and our ability to comply with, legal, regulatory or similar requirements, including franchising laws, accounting standards, payment card industry rules, overtime rules, minimum wage rates, wage and hour laws, government-mandated health care benefits, tax legislation and menu-board labeling requirements;

the costs, uncertainties and other effects of legal, environmental and administrative proceedings;

the effects of charges for impairment of goodwill or for the impairment of other long-lived assets due to deteriorating operating results;

the effects of war or terrorist activities; and

other risks and uncertainties affecting us and our subsidiaries referred to in this Form 10-K (see especially “Item 1A. Risk Factors” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations”) and in our other current and periodic filings with the Securities and Exchange Commission.

All future written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. New risks and uncertainties arise from time to time, and it is impossible for us to predict these events or how they may affect us. We assume no obligation to update any forward-looking statements after the date of this Form 10-K as a result of new information, future events or developments, except as required by federal securities laws. In addition, it is our policy generally not to endorse any projections regarding future performance that may be made by third parties.

Item 1. Business.

Introduction

Wendy’s/Arby’s Group, Inc. (“Wendy’s/Arby’s”) is the parent company of its 100% owned subsidiary holding company Wendy’s/Arby’s Restaurants, LLC (“Wendy’s/Arby’s Restaurants”). Wendy’s/Arby’s Restaurants is the parent company of Wendy’s International, Inc. (“Wendy’s”) and Arby’s Restaurant Group, Inc. (“Arby’s”), which are the owners and franchisors of the Wendy’s® and Arby’s® restaurant systems, respectively. As used in this report, unless the context requires otherwise, the term “Companies” refers to Wendy’s/Arby’s and its direct and indirect subsidiaries, including Wendy’s/Arby’s Restaurants.

As of January 2, 2011, the Wendy’s restaurant system was comprised of 6,576 restaurants, of which 1,394 were owned and operated by the Companies. As of January 2, 2011, the Arby’s restaurant system was comprised of 3,649 restaurants, of which 1,144 were owned and operated by the Companies. References in this Form 10-K to restaurants that we “own” or that are “company-owned” include owned and leased restaurants. Wendy’s/Arby’s corporate predecessor was incorporated in Ohio in 1929 and was reincorporated in Delaware in June 1994. Effective September 29, 2008, in conjunction with the merger with Wendy’s, Wendy’s/Arby’s corporate name was changed from Triarc Companies, Inc. (“Triarc”) to Wendy’s/Arby’s Group, Inc. The Companies’ principal executive offices are located at 1155 Perimeter Center West, Atlanta, Georgia 30338, and their telephone number is (678) 514-4100. We make our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to such reports, as well as the Wendy’s/Arby’s annual proxy statement, available, free of charge, on our website as soon as reasonably practicable after such reports are electronically filed with, or furnished to, the Securities and Exchange Commission. Our website address is www.wendysarbys.com. Information contained on that website is not part of this Annual Report on Form 10-K.

Merger with Wendy’s

On September 29, 2008, Triarc and Wendy’s completed their previously announced merger (the “Wendy’s Merger”) in an all-stock transaction in which Wendy’s shareholders received 4.25 shares of Wendy’s/Arby’s Class A common stock for each Wendy’s common share owned.

In the Wendy’s Merger, approximately 377,000,000 shares of Wendy’s/Arby’s Class A common stock were issued to Wendy’s shareholders. The merger value of approximately $2.5 billion for financial reporting purposes is based on the 4.25 conversion factor of the Wendy’s outstanding shares as well as previously issued restricted stock awards, both at a value of $6.57 per share which represented the average closing market price of Triarc Class A common stock two days before and after the merger announcement date of April 24, 2008. Wendy’s shareholders held approximately 80%, in the aggregate, of Wendy’s/Arby’s outstanding Class A common stock immediately following the Wendy’s Merger. In addition, effective on the date of the Wendy’s Merger, Wendy’s/Arby’s Class B common stock was converted into Class A common stock. In connection with the May 28, 2009 amendment and restatement of Wendy’s/Arby’s Certificate of Incorporation, Class A common stock was redesignated as “Common Stock.”

The Wendy’s and Arby’s brands continue to operate independently, with headquarters in Dublin, Ohio and Atlanta, Georgia, respectively. A consolidated support center is based in Atlanta, Georgia and oversees all public company responsibilities, as well as other shared service functions.

Fiscal Year

The Companies use a 52/53 week fiscal year convention whereby their fiscal year ends each year on the Sunday that is closest to December 31 of that year. Each fiscal year generally is comprised of four 13-week fiscal quarters, although in the years with 53 weeks, including 2009, the fourth quarter represents a 14-week period.

Business Segments

We operate in two business segments, Wendy’s and Arby’s. See Note 27 of the Financial Statements and Supplementary Data included in Item 8 herein, for financial information attributable to our business segments and geographic areas.

The Wendy’s Restaurant System

Wendy’s is the third largest restaurant franchising system in the United States specializing in the hamburger sandwich segment of the quick service restaurant industry. According to Nation’s Restaurant News, Wendy’s is the fourth largest quick service restaurant chain in the United States.

Wendy’s is primarily engaged in the business of operating, developing and franchising a system of distinctive quick-service restaurants serving high quality food. At January 2, 2011, there were 6,576 Wendy’s restaurants in operation in North America and in 22 foreign countries (other than Canada) and United States territories. Of these restaurants, 1,394 were operated by Wendy’s and 5,182 by a total of 490 franchisees. See “Item 2. Properties” for a listing of the number of company-owned and franchised locations in the United States and in foreign countries and United States territories.

The revenues from our restaurant business are derived from three principal sources: (1) sales at company-owned restaurants; (2) sales of bakery items and kids’ meal promotional items to franchisees and others; and (3) franchise royalties received from all Wendy’s franchised restaurants.

Wendy’s is also a 50% partner in a Canadian restaurant real estate joint venture with Tim Hortons Inc. The joint venture owns Wendy’s/Tim Hortons combo units in Canada. As of January 2, 2011, there were 105 Wendy’s restaurants in operation that were owned by the joint venture. The Tim Hortons menu includes premium coffee, flavored cappuccinos, specialty teas, home-style soups, fresh sandwiches and fresh baked goods.

Wendy’s Restaurants

Wendy’s opened its first restaurant in Columbus, Ohio in 1969. During 2010, Wendy’s opened 9 new company-owned restaurants and closed 4 generally underperforming company-owned restaurants. In addition, Wendy’s sold 2 company-owned restaurants to its franchisees. During 2010, Wendy’s franchisees opened 69 new restaurants and closed 39 generally underperforming restaurants. In 2009, 71 franchised restaurants were closed in Japan at year-end upon the expiration of the related franchise agreement.

The following table sets forth the number of Wendy’s restaurants at the beginning and end of each year from 2008 to 2010:

	2010			2009			2008
Restaurants open at beginning of period		6,541			6,630			6,645
Restaurants opened during period		78			63			97
Restaurants closed during period		(43	)		(152	)		(112	)
Restaurants open at end of period		6,576			6,541			6,630

During the period from December 31, 2007, through January 2, 2011, 238 Wendy’s restaurants were opened and 307 generally underperforming Wendy’s restaurants were closed.

Operations

Each Wendy’s restaurant offers a relatively standard menu featuring hamburgers and filet of chicken breast sandwiches, which are prepared to order with the customer’s choice of condiments. Wendy’s menu also includes chicken nuggets, chili, baked and French fried potatoes, freshly prepared salads, soft drinks, milk, Frosty™ desserts, floats and kids’ meals. In addition, the restaurants sell a variety of promotional products on a limited basis. Wendy’s has tested breakfast in certain markets and plans to expand its breakfast initiative in 2011.

Free-standing Wendy’s restaurants generally include a pick-up window in addition to a dining room. The percentage of sales at company-owned Wendy’s restaurants through the pick-up window was 64.9%, 64.6%, and 63.8% in 2010, 2009, and 2008 respectively.

Wendy’s strives to maintain quality and uniformity throughout all restaurants by publishing detailed specifications for food products, preparation and service, continual in-service training of employees, restaurant operational audits and field visits from Wendy’s supervisors. In the case of franchisees, field visits are made by Wendy’s personnel who review operations, including quality, service and cleanliness and make recommendations to assist in compliance with Wendy’s specifications.

Generally, Wendy’s does not sell food or supplies, other than sandwich buns and kids’ meal toys, to its franchisees. However, prior to 2010, Wendy’s arranged for volume purchases of many food and supply products. Commencing in 2010, the purchasing function was transferred to a new purchasing co-op as described below in “Raw Materials and Purchasing.”

The New Bakery Co. of Ohio, Inc. (the “Bakery”), a 100% owned subsidiary of Wendy’s, is a producer of buns for some Wendy’s restaurants, and to a lesser extent for other outside parties, including one distributor to the Arby’s system. At January 2, 2011, the Bakery supplied 709 restaurants operated by Wendy’s and 2,551 restaurants operated by franchisees. As of that date, the Bakery also directly supplied 10 Arby’s restaurants on a test basis. The Bakery also manufactures and sells some products to customers in the grocery and other food service businesses.

Raw Materials and Purchasing

As of January 2, 2011, 5 independent processors (6 total production facilities) supplied all of Wendy’s hamburger in the United States. In addition, 5 independent processors (7 total production facilities) supplied all of Wendy’s chicken in the United States.

Wendy’s and its franchisees have not experienced any material shortages of food, equipment, fixtures or other products that are necessary to maintain restaurant operations. Wendy’s anticipates no such shortages of products and believes that alternate suppliers are available. Suppliers to the Wendy’s system must comply with United States Department of Agriculture (“USDA”) and United States Food and Drug Administration (“FDA”) regulations governing the manufacture, packaging, storage, distribution and sale of all food and packaging products.

During the 2009 fourth quarter, Wendy’s entered into a purchasing co-op relationship agreement (the “Co-op Agreement”) to establish a new Wendy’s purchasing co-op, Quality Supply Chain Co-op, Inc. (“QSCC”). QSCC manages food and related product purchases and distribution services for the Wendy’s system in the United States and Canada. Through QSCC, Wendy’s and Wendy’s franchisees purchase food, proprietary paper and operating supplies under national contracts with pricing based upon total system volume.

During the 2010 second quarter, QSCC and ARCOP, Inc. (“ARCOP”), Arby’s independent purchasing cooperative, in consultation with Wendy’s/Arby’s Restaurants, established the Strategic Sourcing Group Co-op, LLC (“SSG”). SSG was formed to manage and operate purchasing programs which combine the purchasing power of both Wendy’s and Arby’s company-owned and franchised restaurants to create buying efficiencies for certain non-perishable goods, equipment and services.

Should a sale of Arby’s occur as discussed in “The Arby’s Restaurant System” herein, under the change of control provisions in the agreement that established SSG, the activities of SSG would be wound up. In the wind up process, the assets, personnel and functions of SSG would be transferred to QSCC and ARCOP as such parties and Wendy’s/Arby’s Restaurants agree. In contemplation of a possible sale, the parties are in discussion regarding the dissolution of SSG and transferring SSG’s assets, personnel and functions to QSCC and ARCOP.

Trademarks and Service Marks

Wendy’s or its subsidiaries have registered certain trademarks and service marks in the United States Patent and Trademark Office and in international jurisdictions, some of which include Wendy’s®, Old Fashioned Hamburgers® and Quality Is Our Recipe®. Wendy’s believes that these and other related marks are of material importance to its business. Domestic trademarks and service marks expire at various times from 2011 to 2020, while international trademarks and service marks have various durations of 10 to 15 years. Wendy’s generally intends to renew trademarks and service marks that are scheduled to expire.

Wendy’s entered into an Assignment of Rights Agreement with the company’s founder, R. David Thomas, and his wife dated as of November 5, 2000 (the “Assignment”). Wendy’s had used Mr. Thomas, who was Senior Chairman of the Board until his death on January 8, 2002, as a spokesperson and focal point for its products and services for many years. With the efforts and attributes of Mr. Thomas, Wendy’s has, through its extensive investment in the advertising and promotional use of Mr. Thomas’ name, likeness, image, voice, caricature, endorsement rights and photographs (the “Thomas Persona”), made the Thomas Persona well known in the United States and throughout North America and a valuable asset for both Wendy’s and Mr. Thomas’ estate. Under the terms of the Assignment, Wendy’s acquired the entire right, title, interest and ownership in and to the Thomas Persona, including the sole and exclusive right to commercially use the Thomas Persona.

Seasonality

Wendy’s restaurant operations are moderately seasonal. Wendy’s average restaurant sales are normally higher during the summer months than during the winter months. Because the business is moderately seasonal, results for any quarter are not necessarily indicative of the results that may be achieved for any other quarter or for the full fiscal year.

Competition

Each Wendy’s restaurant is in competition with other food service operations within the same geographical area. The quick-service restaurant segment is highly competitive and includes well-established competitors such as McDonald’s®, Burger King®, Taco Bell®, Kentucky Fried Chicken® and Arby’s®. Wendy’s competes with other restaurant companies and food outlets, primarily through the quality, variety, convenience, price, and value perception of food products offered. The number and location of units, quality and speed of service, attractiveness of facilities, effectiveness of marketing and new product development by Wendy’s and its competitors are also important factors. The price charged for each menu item may vary from market to market (and within markets)

depending on competitive pricing and the local cost structure. Wendy’s also competes within the food service industry and the quick service restaurant sector not only for customers, but also for personnel, suitable real estate sites and qualified franchisees.

Wendy’s competitive position is differentiated by a focus on quality, its use of fresh, never frozen ground beef in the United States and Canada and certain other countries, its unique and diverse menu, its promotional products, its choice of condiments and the atmosphere and decor of its restaurants.

Many of the leading restaurant chains have focused on new unit development as one strategy to increase market share through increased consumer awareness and convenience. This has led to increased competition for available development sites and higher development costs for those sites, although the recent decline in commercial real estate values has somewhat offset those costs. Competitors also employ marketing strategies such as frequent use of price discounting, frequent promotions and heavy advertising expenditures. Continued price discounting in the quick service restaurant industry and the emphasis on value menus has had and could continue to have an adverse impact on Wendy’s. In addition, the growth of fast casual chains and other in-line competitors could cause some fast food customers to “trade up” to a more traditional dining out experience while keeping the benefits of quick service dining.

Other restaurant chains have also competed by offering high quality sandwiches made with fresh ingredients and artisan breads and there are several emerging restaurant chains featuring high quality food served at in-line locations. Several chains have also sought to compete by targeting certain consumer groups, such as capitalizing on trends toward certain types of diets (e.g., low carbohydrate or low trans fat) by offering menu items that are promoted as being consistent with such diets.

Additional competitive pressures for prepared food purchases come from operators outside the restaurant industry. A number of major grocery chains offer fresh deli sandwiches and fully prepared food and meals to go as part of their deli sections. Some of these chains also have in-store cafes with service counters and tables where consumers can order and consume a full menu of items prepared especially for that portion of the operation. Additionally, convenience stores and retail outlets at gas stations frequently offer sandwiches and other foods.

Quality Assurance

Wendy’s quality assurance program is designed to verify that the food products supplied to our restaurants are processed in a safe, sanitary environment and in compliance with our food safety and quality standards. Wendy’s quality assurance personnel conduct multiple on-site sanitation and production audits throughout the year at all of our core menu product processing facilities, which include beef, poultry, pork, buns, French fries, Frosty™ dessert ingredients, and produce. Animal welfare audits are also conducted every year at all beef, poultry, and pork facilities to confirm compliance with our required animal welfare and handling policies and procedures. In addition to our facility audit program, weekly samples of beef, poultry, and other core menu products from our distribution centers are randomly sampled and analyzed by a third party laboratory to test conformance to our quality specifications. Each year, Wendy’s representatives conduct unannounced inspections of all company and franchise restaurants to test conformance to our sanitation, food safety, and operational requirements. Wendy’s has the right to terminate franchise agreements if franchisees fail to comply with quality standards.

Acquisitions and Dispositions of Wendy’s Restaurants

Wendy’s has from time to time acquired the interests of and sold Wendy’s restaurants to franchisees, and it is anticipated that the company may have opportunities for such transactions in the future. Wendy’s generally retains a right of first refusal in connection with any proposed sale of a franchisee’s interest. Wendy’s will continue to sell and acquire restaurants in the future where prudent.

Franchised Restaurants

As of January 2, 2011, Wendy’s franchisees operated 5,182 Wendy’s restaurants in 49 states, Canada and 22 other countries and United States territories.

The rights and obligations governing the majority of franchised restaurants operating in the United States are set forth in the Wendy’s Unit Franchise Agreement. This document provides the franchisee the right to construct, own and operate a Wendy’s restaurant upon a site accepted by Wendy’s and to use the Wendy’s system in connection with the operation of the restaurant at that site. The Unit Franchise Agreement provides for a 20-year term and a 10-year renewal subject to certain conditions. Wendy’s has in the past franchised under different agreements on a multi-unit basis; however, Wendy’s now generally grants new Wendy’s franchises on a unit-by-unit basis.

The Wendy’s Unit Franchise Agreement requires that the franchisee pay a royalty of 4% of sales, as defined in the agreement, from the operation of the restaurant. The agreement also typically requires that the franchisee pay Wendy’s a technical assistance fee. In the United States, the standard technical assistance fee required under a newly executed Unit Franchise Agreement is currently $25,000 for each restaurant.

The technical assistance fee is used to defray some of the costs to Wendy’s in providing technical assistance in the development of the Wendy’s restaurant, initial training of franchisees or their operator and in providing other assistance associated with the opening of the Wendy’s restaurant. In certain limited instances (like the regranting of franchise rights or the relocation of an existing restaurant),

Wendy’s may charge a reduced technical assistance fee or may waive the technical assistance fee. Wendy’s does not select or employ personnel on behalf of franchisees.

Wendy’s has announced a program to encourage the development of new restaurants in the United States. Under the program, provided certain conditions are met, the technical assistance fee for franchised restaurants opened from April 2011 through December 2013 will be reduced to $15,000, and royalties paid on sales from those restaurants will be reduced to 2% for the first 12 months and to 3% for the second 12 months. After 24 months, the monthly royalty rate reverts to the prevailing 4% rate for the remaining term of the franchise agreement.

Wendy’s currently does not offer any financing arrangements, or enter into guarantees of financing arrangements, to franchisees seeking to build new franchised units. However, Wendy’s had previously made such financing available to qualified franchisees and Wendy’s had guaranteed payment on a portion of the loans made by third-party lenders to those franchisees.

Effective February 2011, certain lenders are offering financing to Wendy’s United States franchisees to purchase new equipment and smallwares and modify other equipment needed to implement Wendy’s new hamburger product roll out. Wendy’s has agreed to subsidize a portion of the interest that would otherwise be payable by the franchisees participating in this financing program. The financing program is expected to end in September 2011.

See “Management Discussion and Analysis – Liquidity and Capital Resources – Guarantees and Other Contingencies” in Item 7 herein, for further information regarding guarantee obligations.

Franchised restaurants are required to be operated under uniform operating standards and specifications relating to the selection, quality and preparation of menu items, signage, decor, equipment, uniforms, suppliers, maintenance and cleanliness of premises and customer service. Wendy’s monitors franchisee operations and inspects restaurants periodically to ensure that required practices and procedures are being followed.

See Note 5 and Note 23 of the Financial Statements and Supplementary Data included in Item 8 herein, and the information under “Management’s Discussion and Analysis” in Item 7 herein, for further information regarding reserves, commitments and contingencies involving franchisees.

Advertising and Marketing

In the United States and Canada, Wendy’s advertises nationally on network and cable television programs, including nationally televised events. Locally in the United States and Canada, Wendy’s primarily advertises through regional network and cable television, radio and newspapers. Wendy’s participates in two national advertising funds established to collect and administer funds contributed for use in advertising through television, radio, newspapers, the Internet and a variety of promotional campaigns. Separate national advertising funds are administered for Wendy’s United States and Canadian locations. Contributions to the national advertising funds are required to be made from both company-owned and franchised restaurants and are based on a percent of restaurant retail sales. In addition to the contributions to the national advertising funds, Wendy’s requires additional contributions to be made for both company-owned and franchised restaurants based on a percent of restaurant retail sales for the purpose of local and regional advertising programs. Required franchisee contributions to the national advertising funds and for local and regional advertising programs are governed by the Wendy’s Unit Franchise Agreement. Required contributions by company-owned restaurants for advertising and promotional programs are at the same percent of retail sales as franchised restaurants within the Wendy’s system. Currently the contribution rate for United States and Canadian restaurants is generally 3% of retail sales for national advertising and 1% of retail sales for local and regional advertising.

See Note 26 of the Financial Statements and Supplementary Data included in Item 8 herein, for further information regarding advertising.

International Operations and Franchising

As of January 2, 2011, Wendy’s had 136 company-owned and 232 franchised restaurants in Canada and 325 franchised restaurants in 22 other countries and U.S. territories. Wendy’s is aggressively pursuing international development opportunities. Since the second quarter of 2009, new development agreements have been announced for Wendy’s locations in Singapore, Trinidad and Tobago and 8 other eastern Caribbean countries, Argentina, and the Philippines and dual branded Wendy’s and Arby’s locations in the United Arab Emirates and 11 other countries in the Middle East and North Africa, and the Russian Federation. In March 2011, Wendy’s also announced that it had entered into a joint venture to develop Wendy’s restaurants in Japan. Wendy’s has granted development rights in the certain countries and U. S. territories listed under Item 2 of this Form 10-K.

Wendy’s Restaurants of Canada Inc. (“WROC”), a 100% owned subsidiary of Wendy’s, holds master franchise rights for Canada. The rights and obligations governing the majority of franchised restaurants operating in Canada are set forth in a Single Unit Sub-Franchise Agreement. This document provides the franchisee the right to construct, own and operate a Wendy’s restaurant upon a site accepted by WROC and to use the Wendy’s system in connection with the operation of the restaurant at that site. The Single Unit Sub-Franchise Agreement provides for a 20-year term and a 10-year renewal subject to certain conditions. The sub-franchisee pays to WROC a monthly royalty of 4% of sales, as defined in the agreement, from the operation of the restaurant or C$1,000, whichever

is greater. The agreement also typically requires that the franchisee pay WROC a technical assistance fee. The standard technical assistance fee is currently C$35,000 for each restaurant.

Franchisees who wish to operate Wendy’s restaurants outside the United States and Canada enter into agreements with Wendy’s that generally provide franchise rights for each restaurant for an initial term of 10 years or 20 years, depending on the country, and typically include a 10-year renewal provision, subject to certain conditions. The agreements license the franchisee to use the Wendy’s trademarks and know-how in the operation of a Wendy’s restaurant at a specified location. Generally, the franchisee pays Wendy’s a technical assistance fee or an other per restaurant fee and monthly fees based on a percentage of gross monthly sales of each restaurant. In certain foreign markets, Wendy’s may grant the franchisee exclusivity to develop a territory in exchange for the franchisee undertaking to develop a specified number of new Wendy’s restaurants in the territory based on a negotiated schedule. In these instances, the franchisee generally pays Wendy’s an upfront development fee, annual development fees or a per restaurant fee. In certain circumstances, Wendy’s may grant a franchisee the right to sub-franchise in a stated territory, subject to certain conditions.

Wendy’s also continually evaluates non-franchise opportunities for development of Wendy’s restaurants in international markets, including through joint ventures with third parties and opening company-owned restaurants.

The Arby’s Restaurant System

Arby’s is the largest restaurant franchising system specializing in the roast beef sandwich segment of the quick service restaurant industry. According to Nation’s Restaurant News, Arby’s is the second largest sandwich chain restaurant in the United States. In January 2011, Wendy’s/Arby’s announced that it is exploring strategic alternatives for the Arby’s brand, including a sale of the brand.

As the franchisor of the Arby’s restaurant system, Arby’s, through its subsidiaries, owns and licenses the right to use the Arby’s brand name and trademarks in the operation of Arby’s restaurants. Arby’s provides Arby’s franchisees with services designed to increase both the revenue and profitability of their Arby’s restaurants. The most important of these services are providing strategic leadership for the brand, product development, quality control, operational training and counseling regarding site selection.

At January 2, 2011, there were 3,649 Arby’s restaurants in operation in North America and in 3 foreign countries (other than Canada). Of these restaurants, 1,144 were operated by Arby’s and 2,505 by a total of 460 franchisees. See “Item 2. Properties” for a listing of the number of company-owned and franchised locations in the United States and in foreign countries.

The revenues from the Arby’s restaurant business are derived from two principal sources: sales at company-owned restaurants and franchise royalties received from all Arby’s franchised restaurants.

Arby’s also owns the T.J. Cinnamons® concept, which consists of gourmet cinnamon rolls, gourmet coffees and other related products. As of January 2, 2011, there were a total of 90 T.J. Cinnamons outlets, 82 of which are dual-branded with domestic Arby’s restaurants.

Arby’s Restaurants

Arby’s opened its first restaurant in Boardman, Ohio in 1964. During 2010, Arby’s closed 17 generally underperforming company-owned restaurants. In addition, Arby’s sold 8 company-owned restaurants to its franchisees. During 2010, Arby’s franchisees opened 44 new Arby’s restaurants and closed 96 generally underperforming Arby’s restaurants. In addition, during 2010, Arby’s franchisees closed 18 T.J. Cinnamons outlets 14 of which were located in Arby’s units and 4 others not dual-branded with Arby’s units.

The following table sets forth the number of Arby’s restaurants at the beginning and end of each year from 2008 to 2010:

	2010			2009			2008
Restaurants open at beginning of period		3,718			3,756			3,688
Restaurants opened during period		44			59			127
Restaurants closed during period		(113	)		(97	)		(59	)
Restaurants open at end of period		3,649			3,718			3,756

During the period from December 31, 2007, through January 2, 2011, 230 Arby’s restaurants were opened and 269 generally underperforming Arby’s restaurants were closed.

Operations

In addition to various slow-roasted roast beef sandwiches, Arby’s offers an extensive menu of chicken, turkey and ham sandwiches, snack items and salads, including its Market Fresh® line of premium sandwiches and fresh salads made with premium ingredients, and Toasted Subs. In 2010, Arby’s implemented its everyday value menu. In addition, the restaurants sell a variety of promotional products on a limited basis.

Free-standing Arby’s restaurants generally include a pick-up window in addition to a dining room. The percentage of sales at company-owned Arby’s restaurants through the pick-up window was 58.2%, 57.2%, and 57.7% in 2010, 2009, and 2008 respectively.

Generally, Arby’s does not sell food or supplies to Arby’s franchisees.

Raw Materials and Purchasing

As of January 2, 2011, 3 independent meat processors (5 total production facilities) supplied all of Arby’s beef for roasting in the United States. Franchise operators are required to obtain beef for roasting from these approved suppliers.

Arby’s and its franchisees have not experienced any material shortages of food, equipment, fixtures or other products that are necessary to maintain restaurant operations. Arby’s anticipates no such shortages of products and believes that alternate suppliers are available.

ARCOP negotiates contracts with approved suppliers on behalf of Arby’s and Arby’s franchisees. Suppliers to the Arby’s system must comply with USDA and FDA regulations governing the manufacture, packaging, storage, distribution and sale of all food and packaging products. Generally, franchisees may obtain other products, including food, ingredients, paper goods, equipment and signs, from any source that meets Arby’s specifications and approval. Through ARCOP, Arby’s and Arby’s franchisees purchase food, beverage, proprietary paper and operating supplies under national contracts with pricing based upon total system volume.

During the 2010 second quarter, ARCOP and QSCC, in consultation with Wendy’s/Arby’s Restaurants, established the SSG. SSG was formed to manage and operate purchasing programs which combine the purchasing power of both Wendy’s and Arby’s company-owned and franchised restaurants to create buying efficiencies for certain non-perishable goods, equipment and services.

Should a sale of Arby’s occur as discussed in “The Arby’s Restaurant System” herein, under the change of control provisions in the agreement that established SSG, the activities of the SSG would be wound up. In the wind up process, the assets, personnel and functions of SSG would be transferred to QSCC and ARCOP as such parties and Wendy’s/Arby’s Restaurants agree. In contemplation of a possible sale, the parties are in discussion regarding the dissolution of SSG and transferring SSG’s assets, personnel and functions to QSCC and ARCOP.

Trademarks and Service Marks

Arby’s, through its subsidiaries, owns several trademarks that it considers to be material to its restaurant business, including Arby’s®, Arby’s Market Fresh®, Market Fresh®, Horsey Sauce®, Arby’s Sauce®, and Sidekickers®. Arby’s believes that these and other related marks are of material importance to its business. Domestic trademarks and service marks expire at various times from 2011 to 2020, while international trademarks and service marks have various durations of 10 to 15 years. Arby’s generally intends to renew trademarks and service marks that are scheduled to expire.

Seasonality

Arby’s restaurant operations are not significantly impacted by seasonality. However, Arby’s restaurant revenues are somewhat lower in the first quarter.

Competition

Arby’s faces direct and indirect competition from numerous well-established competitors, including national and regional non-burger sandwich chains, such as Panera Bread®, Subway® and Quiznos®, as well as hamburger chains, such as McDonald’s®, Burger King® and Wendy’s®, and other quick service restaurant chains, such as Taco Bell®, Chick-Fil-A® and Kentucky Fried Chicken®. In addition, Arby’s competes with locally owned restaurants, drive-ins, diners and other similar establishments. Key competitive factors in the quick service restaurant industry are price, quality of products, convenience, quality and speed of service, advertising, brand awareness, restaurant location, and attractiveness of facilities. Arby’s also competes within the food service industry and the quick service restaurant sector not only for customers, but also for personnel, suitable real estate sites and qualified franchisees.

Many of the leading restaurant chains have focused on new unit development as one strategy to increase market share through increased consumer awareness and convenience. This has led to increased competition for available development sites and higher development costs for those sites, although the recent decline in commercial real estate values has somewhat offset those costs. Competitors also employ marketing strategies such as frequent use of price discounting, frequent promotions, and heavy advertising expenditures. Continued price discounting in the quick service restaurant industry and the emphasis on value menus has had and could

continue to have an adverse impact on Arby’s. In addition, the growth of fast casual chains and other in-line competitors could cause some fast food customers to “trade up” to a more traditional dining out experience while keeping the benefits of quick service dining.

Other restaurant chains have also competed by offering high quality sandwiches made with fresh ingredients and artisan breads, and there are several emerging restaurant chains featuring high quality food served at in-line locations. Several chains have also sought to compete by targeting certain consumer groups, such as capitalizing on trends toward certain types of diets (e.g., low carbohydrate or low trans fat) by offering menu items that are promoted as being consistent with such diets.

Quality Assurance

Arby’s has developed a quality assurance program designed to maintain standards and the uniformity of menu offerings at all Arby’s restaurants. Arby’s assigns a quality assurance employee to each of the independent facilities that process beef for domestic Arby’s restaurants. The quality assurance employee inspects the beef for quality, uniformity and to assure compliance with quality and safety requirements of the USDA and the FDA. In addition, Arby’s periodically evaluates randomly selected samples of beef and other products from its supply chain. Each year, Arby’s representatives conduct announced and unannounced inspections of operations of a number of franchisees to ensure that required policies, practices and procedures are being followed. Arby’s field representatives also provide a variety of on-site consulting services to franchisees. Arby’s has the right to terminate franchise agreements if franchisees fail to comply with quality standards.

Acquisitions and Dispositions of Arby’s Restaurants

Arby’s has from time to time acquired the interests of and sold Arby’s restaurants to franchisees, and it is anticipated that the company may have opportunities for such transactions in the future. Arby’s will continue to sell and acquire restaurants in the future where prudent.

Franchised Restaurants

As of January 2, 2011, Arby’s franchisees operated 2,505 Arby’s restaurants in 47 states, Canada and 3 other countries.

Arby’s offers franchises for the development of both single and multiple “traditional” and “non-traditional” restaurant locations. The initial term of the typical “traditional” franchise agreement is 20 years. As compared to traditional restaurants, non-traditional restaurants generally occupy a smaller retail space, offer no or very limited seating, may cater to a captive audience, have a limited menu, and possibly have reduced services, labor and storage and different hours of operation. Arby’s generally grants new Arby’s franchises on a unit-by-unit basis. All franchisees are required to execute standard franchise agreements. Arby’s standard United States franchise agreement for new Arby’s traditional restaurant franchises currently requires an initial $37,500 franchise fee for the first franchised unit, $25,000 for each subsequent unit and a monthly royalty payment equal to 4.0% of restaurant sales for the term of the franchise agreement. Arby’s non-traditional restaurant franchise agreement requires an initial $12,500 franchise fee for the first and all subsequent units, and a monthly royalty payment ranging from 4.0% to 7.0%, depending upon the non-traditional restaurant category. Franchisees of traditional restaurants typically pay a $10,000 commitment fee, and franchisees of non-traditional restaurants typically pay a $12,500 commitment fee, which is credited against the franchise fee during the development process for a new restaurant.

Arby’s currently does not offer any financing arrangements to franchisees seeking to build new franchised units.

In 2007, in order to increase development of traditional Arby’s restaurants in selected markets, our Select Market Incentive (“SMI”) program was introduced. Arby’s franchise agreement for participants in the SMI program currently requires an initial $27,500 franchise fee for the first franchised unit, $15,000 for each subsequent unit and a monthly royalty payment equal to 1.0% of restaurant sales for the first 36 months the unit is open. After 36 months, the monthly royalty rate reverts to the prevailing 4% rate for the remaining term of the agreement. The commitment fee is $5,000 per restaurant, which is credited against the franchise fee during the development process. The SMI program remains in effect and does not have a stated expiration date. However, Arby’s has the right to discontinue offering the program at any time.

Because royalty rates of less than 4% are still in effect under certain older franchise agreements, the average royalty rate paid by United States Arby’s franchisees was approximately 3.6% in each of 2010, 2009 and 2008.

Franchised restaurants are required to be operated under uniform operating standards and specifications relating to the selection, quality and preparation of menu items, signage, decor, equipment, uniforms, suppliers, maintenance and cleanliness of premises and customer service. Arby’s monitors franchisee operations and inspects restaurants periodically to ensure that required practices and procedures are being followed.

Advertising and Marketing

Arby’s advertises nationally on cable television networks. In addition, from time to time, Arby’s will sponsor a nationally televised event or participate in a promotional tie-in for a movie. Locally, Arby’s primarily advertises through regional network and cable television, radio and newspapers. The AFA Service Corporation (“AFA”), an independent membership corporation in which every domestic Arby’s franchisee is required to participate, was formed to create advertising and perform marketing for the Arby’s system. Arby’s Chief Marketing Officer currently serves as president of AFA. AFA is managed by Arby’s pursuant to a Management Agreement, as described below. AFA is funded primarily through member dues. From January 2010 and through March 2010, Arby’s and most domestic Arby’s franchisees paid 1.2% of sales as dues to AFA. Beginning in April 2010 and for the remainder of 2010, the AFA Board approved a dues increase based on a tiered rate structure for the payment of the advertising and marketing service fee ranging between 1.4% and 3.6% of sales. As a result, the average Arby’s advertising and marketing service fee percentage from April 2010 to the end of the 2010 fiscal year was approximately 2.3%. In addition, Arby’s partially subsidized the top two rate tiers in 2010 thereby decreasing franchisees’ effective advertising and marketing service fee percentages. This subsidy required payments by Arby’s of approximately $2.6 million to AFA in 2010. Beginning in January 2011 and for the remainder of 2011, the AFA Board approved a modified tiered rate structure for the payment of the advertising and marketing service fee ranging between 1.25% and 3.5%. Arby’s will partially subsidize the top two rate tiers in 2011 thereby decreasing franchisees’ effective advertising and marketing service fee percentages. This subsidy is expected to require payments by Arby’s of approximately $2.9 million for 2011. Domestic franchisee participants in the SMI program pay an extra 1% premium on the advertising and marketing service fee (2.2% total through March 2010 and based on the tiered rate structure, an extra 1% on the advertising and marketing service fee through December 2011) up to a maximum of 3% as AFA dues for the first 36 months of operation; their AFA dues then revert to the standard advertising and marketing service fee rate without the 1% premium.

Effective October 2005, Arby’s and AFA entered into a management agreement (the “Management Agreement”) pursuant to which Arby’s assumed general responsibility for the day-to-day operations of AFA, including preparing annual operating budgets, developing the brand marketing strategy and plan, recommending advertising and media buying agencies, and implementing all marketing/media plans. Arby’s performs these tasks subject to the approval of AFA’s Board of Directors. Under the Management Agreement, Arby’s is obligated to pay for the general and administrative costs of AFA, other than the cost of an annual audit of AFA and certain other expenses specifically retained by AFA. Under the Management Agreement, Arby’s is also required to provide AFA with appropriate office space at no cost to the AFA. The Management Agreement with AFA continues in effect until terminated by Arby’s upon one year’s prior written notice or by AFA upon six months’ prior written notice. See Note 24 of the Financial Statements and Supplementary Data included in Item 8 herein, for further information on AFA.

In addition to their contributions to AFA, Arby’s and its domestic franchisees are also required to spend a reasonable amount, but not less than 3% of sales of their Arby’s restaurants, for local advertising; however, with the new AFA tiered rate structure discussed above, any AFA dues paid above 1.2% will be credited against the local advertising spend requirements. Most existing franchise agreements now require, and new franchise agreements will require, domestic franchisees to spend a minimum aggregate advertising amount of 4.2% of sales for national and local advertising, which includes the advertising and marketing fee. The amount of expenditures for local advertising is divided between (i) individual local market advertising expenses and (ii) expenses of a cooperative area advertising program. Contributions to the cooperative area advertising program, in which both company-owned and franchisee-owned restaurants participate, are determined by the local cooperative participants and are generally in the range of 3% to 5% of sales. Domestic franchisee participants in our SMI program are not, however, required to make any expenditure for local advertising until their restaurants have been in operation for 36 months.

Canadian Arby’s franchisees contribute to the Arby’s Franchise Association of Canada (“AFAC”), an independent membership corporation in which every Canadian Arby’s franchisee is required to participate, which was formed to create advertising and perform marketing for the Arby’s system in Canada. Effective May 2006, Arby’s and AFAC entered into a management agreement (the “Canadian Management Agreement”) pursuant to which Arby’s assumed general responsibility for the day-to-day operations of AFAC, including preparing annual operating budgets, developing the brand marketing strategy and plan, recommending advertising and media buying agencies, and implements all marketing/media plans. Arby’s performs these tasks subject to the approval of AFAC’s Board of Directors. Under the Canadian Management Agreement, Arby’s is obligated to pay for the general and administrative costs of AFAC, other than the cost of an annual audit of AFAC and certain other expenses specifically retained by AFAC. AFAC is funded primarily through member dues. Through August 2010, most Canadian franchisees paid 3% of sales as dues to AFAC. Beginning in September 2010, most Canadian franchisees pay 1.25% of sales as dues to AFAC.

In addition to their contributions to AFAC, Canadian Arby’s franchisees were required through August 2010 to contribute 2.25% of sales for local advertising. Beginning in September 2010, Canadian Arby’s franchisees are now required to contribute 4% of sales for local advertising. However, Canadian franchisees participating in the Canadian Incentive Program (“CIP”) are not required to contribute to local advertising for the first 36 months after a restaurant is opened.

See Note 26 of the Financial Statements and Supplementary Data included in Item 8 herein, for further information regarding advertising.

International Operations and Franchising

As of January 2, 2011, Arby’s had 106 franchised restaurants in Canada and 20 franchised restaurants in 3 other countries. In June 2010, Arby’s announced a new development agreement for Turkey. Arby’s has granted development rights in the countries listed under Item 2 of this Form 10-K.

Arby’s is also the franchisor for the Arby's brand in Canada. The rights and obligations governing the franchised restaurants operating in Canada are set forth in a franchise agreement. This document provides the licensee the right to own and operate an Arby’s restaurant upon a site accepted by Arby’s and to use the Arby’s system in connection with the operation of the restaurant at that site. The traditional franchise agreement provides for a 20-year term and offers a renewal term subject to certain conditions. The franchisee pays to Arby’s a monthly royalty of 4% of sales, as defined in the agreement, from the operation of the restaurant. The agreement also typically requires that the franchisee pay Arby’s a franchise fee. The standard franchise fee is currently C$42,500 for the first restaurant and C$27,500 for each subsequent restaurant.

In 2007, in order to increase development of traditional Arby’s restaurants in selected Canadian markets, the CIP was introduced. Arby’s franchise agreement for participants in the CIP currently requires an initial C$27,500 franchise fee for the first franchised unit, C$12,500 for each subsequent unit, and a monthly royalty payment equal to 1.0% of restaurant sales for the first 36 months the unit is open. After 36 months, the monthly royalty rate reverts to the prevailing 4% rate for the remaining term of the agreement. The commitment fee is C$5,000 per restaurant, which is credited against the franchise fee during the development process. The CIP remains in effect and does not have a stated expiration date. However, Arby’s has the right to discontinue offering the CIP at any time.

Our market entry strategy and terms for the development and operation of Arby’s restaurants in markets outside of the United States and Canada vary depending upon market conditions.

General

Governmental Regulations

Various state laws and the Federal Trade Commission regulate Wendy’s and Arby’s franchising activities. The Federal Trade Commission requires that franchisors make extensive disclosure to prospective franchisees before the execution of a franchise agreement. Several states require registration and disclosure in connection with franchise offers and sales and have “franchise relationship laws” that limit the ability of franchisors to terminate franchise agreements or to withhold consent to the renewal or transfer of these agreements. In addition, Wendy’s and Arby’s and their respective franchisees must comply with the federal Fair Labor Standards Act and similar state and local laws, the Americans with Disabilities Act (the “ADA”), which requires that all public accommodations and commercial facilities meet federal requirements related to access and use by disabled persons, and various state and local laws governing matters that include, for example, the handling, preparation and sale of food and beverages, the provision of nutritional information on menu boards, minimum wages, overtime and other working and safety conditions. Compliance with the ADA requirements could require removal of access barriers and non-compliance could result in imposition of fines by the United States government or an award of damages to private litigants. As described more fully under “Item 3. Legal Proceedings,” one of Arby’s subsidiaries was a defendant in a lawsuit alleging failure to comply with Title III of the ADA at approximately 775 company-owned restaurants acquired as part of Arby’s July 2005 acquisition of the RTM Restaurant Group (“RTM”). Under a court approved settlement of that lawsuit, we estimate that Arby’s will spend approximately $1.15 million per year of capital expenditures over a seven-year period (which commenced in 2008) to bring these restaurants into compliance with the ADA, in addition to paying certain legal fees and expenses. We do not believe that the costs related to this matter or any other costs relating to compliance with the ADA will have a material adverse effect on the Companies’ consolidated financial position or results of operations. We cannot predict the effect on our operations, particularly on our relationship with franchisees, of any pending or future legislation.

Environmental Matters

Wendy’s/Arby’s and Wendy’s/Arby’s Restaurants past and present operations are governed by federal, state and local environmental laws and regulations concerning the discharge, storage, handling and disposal of hazardous or toxic substances. These laws and regulations provide for significant fines, penalties and liabilities, sometimes without regard to whether the owner or operator of the property knew of, or was responsible for, the release or presence of the hazardous or toxic substances. In addition, third parties may make claims against owners or operators of properties for personal injuries and property damage associated with releases of hazardous or toxic substances. We cannot predict what environmental legislation or regulations will be enacted in the future or how existing or future laws or regulations will be administered or interpreted. We similarly cannot predict the amount of future expenditures that may be required to comply with any environmental laws or regulations or to satisfy any claims relating to environmental laws or regulations. We believe that our operations comply substantially with all applicable environmental laws and regulations. Accordingly, the environmental matters in which we are involved generally relate either to properties that our subsidiaries own, but on which they no longer have any operations, or properties that we or our subsidiaries have sold to third parties, but for which we or our subsidiaries remain liable or contingently liable for any related environmental costs. Our company-owned Wendy’s and Arby’s restaurants have not been the subject of any material environmental matters. Based on currently available information, including defenses available to us and/or our subsidiaries, and our current reserve levels, we do not believe that the ultimate outcome of

the environmental matters in which we are involved will have a material adverse effect on our consolidated financial position or results of operations.

Wendy’s/Arby’s and Wendy’s/Arby’s Restaurants are involved in litigation and claims incidental to our current and prior businesses. As of January 2, 2011, Wendy’s/Arby’s Restaurants had reserves for all legal and environmental matters aggregating $3.7 million, which are included in the $3.9 million reserved by Wendy’s/Arby’s for all legal and environmental matters. Although the outcome of these matters cannot be predicted with certainty and some of these matters may be disposed of unfavorably to us, based on currently available information, including legal defenses available to us, and given the aforementioned reserves and insurance coverage, we do not believe that the outcome of these legal and environmental matters will have a material adverse effect on our consolidated financial position or results of operations.

Employees

As of January 2, 2011, the Companies and their subsidiaries had approximately 64,100 employees, including approximately 6,300 salaried employees and approximately 57,800 hourly employees. We believe that our employee relations are satisfactory.

Item 1A. Risk Factors.

We wish to caution readers that in addition to the important factors described elsewhere in this Form 10-K, we have included below the most significant factors that have affected, or in the future could affect, our actual results and could cause our actual consolidated results during 2011, and beyond, to differ materially from those expressed in any forward-looking statements made by us or on our behalf.

Risks Related to Wendy’s/Arby’s and Wendy’s/Arby’s Restaurants

The impact and results of our announcement that Wendy’s/Arby’s is exploring strategic alternatives for the Arby’s brand, including a sale of the brand, are uncertain and cannot be determined.

In January 2011, Wendy’s/Arby’s announced that it is exploring strategic alternatives for the Arby’s brand, including a sale of the brand. There can be no assurance that the review of strategic alternatives will result in any agreement or transaction, or that if an agreement is executed, that a transaction will be consummated. We do not intend to disclose developments with respect to this review (whether or not material) unless and until the Board of Directors has approved a specific course of action or terminated the exploration of strategic alternatives. In connection with our exploration of strategic alternatives, we expect to incur expenses, including expenses in connection with the retention of key personnel and consultants. The process of exploring strategic alternatives may be disruptive to our business. The inability to effectively manage the process and any resulting agreement or transaction could materially and adversely affect our business, financial condition or results of operations.

Our success depends in part upon the continued retention of certain key personnel.

We believe that over time our success has been dependent to a significant extent upon the efforts and abilities of our senior management team. The failure by us to retain members of our senior management team could adversely affect our ability to build on the efforts we have undertaken to increase the efficiency and profitability of our businesses. The retention of members of our senior management team may be more difficult following Wendy’s/Arby’s announcement that it is exploring strategic alternatives for the Arby’s brand, including the sale of the brand.

Growth of our restaurant businesses is significantly dependent on new restaurant openings, which may be affected by factors beyond our control.

Our restaurant businesses derive earnings from sales at company-owned restaurants, franchise royalties received from franchised restaurants and franchise fees from franchise restaurant operators for each new unit opened. Growth in our restaurant revenues and earnings is significantly dependent on new restaurant openings. Numerous factors beyond our control may affect restaurant openings. These factors include but are not limited to:

our ability to attract new franchisees;

the availability of site locations for new restaurants;

the ability of potential restaurant owners to obtain financing;

the ability of restaurant owners to hire, train and retain qualified operating personnel;

construction and development costs of new restaurants, particularly in highly-competitive markets;

the ability of restaurant owners to secure required governmental approvals and permits in a timely manner, or at all; and

adverse weather conditions.

Wendy’s and Arby’s franchisees could take actions that could harm our business.

Wendy’s and Arby’s franchisees are contractually obligated to operate their restaurants in accordance with the standards set forth in agreements with them. Each brand also provides training and support to franchisees. However, franchisees are independent third parties that we do not control, and the franchisees own, operate and oversee the daily operations of their restaurants. As a result, the ultimate success and quality of any franchise restaurant rests with the franchisee. If franchisees do not successfully operate restaurants in a manner consistent with required standards, royalty payments to us will be adversely affected and the brand’s image and reputation could be harmed, which in turn could hurt our business and operating results.

Our success depends on franchisees’ participation in brand strategies.

Wendy’s and Arby’s franchisees are an integral part of our business. Each brand may be unable to successfully implement brand strategies that it believes are necessary for further growth if franchisees do not participate in that implementation. Our business and operating results could be adversely affected if a significant number of franchisees do not participate in brand strategies.

Our financial results are affected by the operating results of franchisees.

As of January 2, 2011, approximately 79% of the Wendy’s system and 69% of the Arby’s system were franchise restaurants. We receive revenue in the form of royalties, which are generally based on a percentage of sales at franchised restaurants, rent and fees from franchisees. Accordingly, a substantial portion of our financial results is to a large extent dependent upon the operational and financial success of our franchisees. If sales trends or economic conditions worsen for franchisees, their financial results may worsen and our royalty, rent and other fee revenues may decline. In addition, accounts receivable and related allowance for doubtful accounts may increase. When company-owned restaurants are sold, one of our subsidiaries is often required to remain responsible for lease payments for these restaurants to the extent that the purchasing franchisees default on their leases. During periods of declining sales and profitability of franchisees, such as have been recently experienced by a significant number of Arby’s franchisees and a minimal number of Wendy’s franchisees, the incidence of franchisee defaults for these lease payments increases and we are then required to make those payments and seek recourse against the franchisee or agree to repayment terms. Additionally, if franchisees fail to renew their franchise agreements, or if we decide to restructure franchise agreements in order to induce franchisees to renew these agreements, then our royalty revenues may decrease. Further, we may decide from time to time to acquire restaurants from franchisees that experience significant financial hardship, which may reduce our cash and equivalents.

As of January 2, 2011, there were approximately 350 Arby’s franchised restaurants with amounts payable to Arby’s for royalties, rent and/or other fees that were at least 60 days past due. The financial condition of a number of Arby’s franchisees was one of the factors that resulted in a net decrease of 44 and 31 in the number of franchised restaurants for fiscal 2010 and 2009, respectively. During those periods 96 and 74 franchised Arby’s restaurants were closed, respectively. The trend of declining sales at franchised Arby’s restaurants has resulted in decreases in royalties and other franchise revenues. In addition, Arby’s franchisee accounts receivable and related allowance for doubtful accounts have increased significantly, and may continue to grow as a result of the deteriorating financial condition of some of our franchisees. Franchisees’ financial difficulties and the closure of franchised restaurants have also caused reductions in the contributions to and extent of advertising programs. Continuation of these trends would affect our revenues and may have a material adverse effect on our results of operations and financial condition.

In December 2009, and as amended in February and August 2010, AFA entered into a revolving loan agreement with Arby’s. The terms of this agreement allow AFA to have revolving loans of up to $14.0 million outstanding with an expiration date of March 2012 and bearing interest at 7.5% per annum. In February 2011, the maximum principal amount was reduced to $11.0 million. As of January 2, 2011, the outstanding balance under this agreement was $4.5 million and there were no amounts past due. Due to declining sales and profitability of Arby’s franchisees, it is possible that our ability in the future to collect principal and interest payments from AFA could be adversely affected.

Each brand may be unable to manage effectively the acquisition and disposition of restaurants, which could adversely affect our business and financial results.

Each brand acquires restaurants from franchisees and in some cases “re-franchises” these restaurants by selling them to new or existing franchisees. The success of these transactions is dependent upon the availability of sellers and buyers, the availability of financing, and the brand’s ability to negotiate transactions on terms deemed acceptable. In addition, the operations of restaurants that each brand acquires may not be integrated successfully, and the intended benefits of such transactions may not be realized. Acquisitions of franchised restaurants pose various risks to brand operations, including:

diversion of management attention to the integration of acquired restaurant operations;

increased operating expenses and the inability to achieve expected cost savings and operating efficiencies;

exposure to liabilities arising out of sellers’ prior operations of acquired restaurants; and

incurrence or assumption of debt to finance acquisitions or improvements and/or the assumption of long-term, non-cancelable leases.

In addition, engaging in acquisitions and dispositions places increased demands on the brand’s operational and financial management resources and may require us to continue to expand these resources. If either brand is unable to manage the acquisition and disposition of restaurants effectively, its business and financial results could be adversely affected.

Arby’s does not exercise ultimate control over advertising for its restaurant system, which could harm sales and the brand.

Arby’s franchisees control the provision of national advertising and marketing services to the Arby’s franchise system through AFA, a company controlled by Arby’s franchisees. Subject to Arby’s right to protect its trademarks, AFA has the right to approve all significant decisions regarding national marketing and advertising strategies and the creative content of advertising for the Arby’s system. Although Arby’s has entered into a management agreement pursuant to which Arby’s, on behalf of AFA, manages the day-to-day operations of the AFA, many areas are still subject to ultimate approval by AFA’s independent board of directors, and the

management agreement may be terminated for any reason by Arby’s upon one year’s prior notice or by AFA upon six months prior notice. See “Item 1. Business—The Arby’s Restaurant System—Advertising and Marketing.” In addition, local cooperatives run by operators of Arby’s restaurants in a particular local area (including Arby’s) make their own decisions regarding local advertising expenditures, subject to the requirement to spend at least the specified minimum amounts. Arby’s lack of control over advertising could hurt sales and the Arby’s brand.

Neither Wendy’s nor Arby’s exercises ultimate control over purchasing for their respective restaurant system, which could harm sales or profitability and the brand.

Although Wendy’s and Arby’s ensure that all suppliers to their respective systems meet quality control standards, each brand’s franchisees control the purchasing of food, proprietary paper, equipment and other operating supplies from such suppliers through purchasing co-ops controlled by each brand’s franchisees. The co-ops negotiate national contracts for such food, equipment and supplies. Wendy’s is entitled to appoint two representatives on the board of directors of QSCC and participates in QSCC through its company-owned restaurants, but otherwise does not control the decisions and activities of QSCC except to ensure that all suppliers satisfy Wendy’s quality control standards. Arby’s is entitled to appoint one representative on the board of directors of ARCOP and participates in ARCOP through its company-owned restaurants, but otherwise does not control the decisions and activities of ARCOP except to ensure that all suppliers satisfy Arby’s quality control standards. During the 2010 second quarter, QSCC and ARCOP, in consultation with Wendy’s/Arby’s Restaurants, established SSG to manage and operate purchasing programs which combine the purchasing power of both Wendy’s and Arby’s company-owned and franchised restaurants to create buying efficiencies for certain non-perishable goods, equipment and services. If any of these co-ops does not properly estimate the product needs of its respective system, makes poor purchasing decisions, or decides to cease its operations, system sales and operating costs could be adversely affected and the financial condition of Wendy’s or Arby’s or the financial condition of each system’s franchisees could be hurt.

Should a sale of Arby’s occur as discussed in “Business - The Arby’s Restaurant System” in Item 1 herein, under the change of control provisions in the agreement that established SSG, the activities of SSG would be wound up. In the wind up process, the assets, personnel and functions of SSG would be transferred to QSCC and ARCOP as such parties and Wendy’s/Arby’s Restaurants agree. In contemplation of a possible sale, the parties are in discussion regarding the dissolution of SSG and transferring SSG’s assets, personnel and functions to QSCC and ARCOP. The dissolution of SSG could be disruptive to our business and the operations of QSCC and ARCOP, result in the loss of experienced personnel and adversely affect the financial condition of Wendy’s or Arby’s or the financial condition of each system’s franchisees.

Shortages or interruptions in the supply or delivery of perishable food products could damage the Wendy’s and/or Arby's brand reputation and adversely affect our operating results.

Each brand and its franchisees are dependent on frequent deliveries of perishable food products that meet brand specifications. Shortages or interruptions in the supply of perishable food products caused by unanticipated demand, problems in production or distribution, disease or food-borne illnesses, inclement weather or other conditions could adversely affect the availability, quality and cost of ingredients, which could lower our revenues, increase operating costs, damage brand reputation and otherwise harm our business and the businesses of our franchisees.

Food safety events, including instances of food-borne illness (such as salmonella or E. Coli) involving Wendy’s or Arby’s or their respective supply chains, could create negative publicity and adversely affect sales at either or both brands.

Food safety is a top priority, and we dedicate substantial resources to ensure that our customers enjoy safe, quality food products. However, food safety events, including instances of food-borne illness (such as salmonella or E. Coli), have occurred in the food industry in the past, and could occur in the future.

Food safety events could adversely affect the price and availability of beef, poultry or other meats. As a result, Wendy’s and/or Arby’s restaurants could experience a significant increase in food costs if there are food safety events whether or not such events involve Wendy’s or Arby’s restaurants or restaurants of competitors.

In addition, food safety events, whether or not involving Wendy’s or Arby’s, could result in negative publicity for Wendy’s and/or Arby’s or for the industry or market segments in which we operate. This negative publicity, as well as any other negative publicity concerning types of food products Wendy’s or Arby’s serves, may reduce demand for Wendy’s and/or Arby’s food and could result in a decrease in guest traffic to our restaurants as consumers shift their preferences to other products or food types. A decrease in guest traffic to our restaurants as a result of these health concerns or negative publicity could result in a decline in sales at company-owned restaurants or in royalties from sales at franchised restaurants.

Consumer concerns regarding the nutritional aspects of beef, poultry, French fries or other products we sell or concerns regarding the effects of disease outbreaks such as “mad cow disease” and avian influenza or “bird flu,” could affect demand for our products.

Changes in consumer tastes and preferences, and in discretionary consumer spending, could result in a decline in sales at company-owned restaurants and in the royalties that we receive from franchisees.

The quick service restaurant industry is often affected by changes in consumer tastes, national, regional and local economic conditions, discretionary spending priorities, demographic trends, traffic patterns and the type, number and location of competing restaurants. Our success depends to a significant extent on discretionary consumer spending, which is influenced by general economic conditions and the availability of discretionary income. Accordingly, we may experience declines in sales during economic downturns. Any material decline in the amount of discretionary spending or a decline in consumer food-away-from-home spending could hurt our revenues, results of operations, business and financial condition.

If company-owned and franchised restaurants are unable to adapt to changes in consumer preferences and trends, company-owned and franchised restaurants may lose customers and the resulting revenues from company-owned restaurants and the royalties that we receive from franchisees may decline.

The disruptions in the national and global economies and the financial markets may adversely impact our revenues, results of operations, business and financial condition.

The disruptions in the national and global economies and financial markets, and the related reductions in the availability of credit, have resulted in high unemployment rates and declines in consumer confidence and spending, and have made it more difficult for businesses to obtain financing. If such conditions persist, then they may result in significant declines in consumer food-away-from-home spending and customer traffic in our restaurants and those of our franchisees. Such conditions may also adversely impact the ability of franchisees to build or purchase restaurants, remodel existing restaurants, renew expiring franchise agreements and make timely royalty and other payments. There can be no assurance that government responses to the disruptions in the financial markets will restore consumer confidence, stabilize the markets or increase liquidity and the availability of credit. If we or our franchisees are unable to obtain borrowed funds on acceptable terms, or if conditions in the economy and the financial markets do not improve, our revenues, results of operations, business and financial condition could be adversely affected.

Additionally, we have entered into interest rate swaps and other derivative contracts as described in Note 12 to the Financial Statements and Supplementary Data included in Item 8 herein, and we may enter into additional swaps in the future. We are exposed to potential losses in the event of nonperformance by counterparties on these instruments, which could adversely affect our results of operations, financial condition and liquidity.

Changes in commodity costs (including beef and chicken), supply, fuel, utilities, distribution and other operating costs could harm results of operations.

Our profitability depends in part on our ability to anticipate and react to changes in commodity costs (including beef and chicken), supply, fuel, distribution and other operating costs. Any increase in these costs, especially beef or chicken prices, could harm operating results. In addition, each brand is susceptible to increases in these costs as a result of other factors beyond its control, such as weather conditions, global demand, food safety concerns, product recalls and government regulations. Additionally, prices for feed ingredients used to produce beef and chicken could be adversely affected by changes in global weather patterns, which are inherently unpredictable. Increases in gasoline prices would result in the imposition of fuel surcharges by our distributors, which would increase our costs. Significant increases in gasoline prices could also result in a decrease in customer traffic at our restaurants, which could adversely affect our business. We cannot predict whether we will be able to anticipate and react to changing food costs by adjusting our purchasing practices and menu prices, and a failure to do so could adversely affect our operating results. In addition, we may not seek to or be able to pass along price increases to our customers.

Competition from other restaurant companies, or poor customer experience at Wendy’s or Arby’s restaurants, could hurt our brands.

The market segments in which company-owned and franchised Wendy’s and Arby’s restaurants compete are highly competitive with respect to, among other things, price, food quality and presentation, service, location, convenience, and the nature and condition of the restaurant facility. If customers have a poor experience at a Wendy’s or Arby’s restaurant, whether at a company-owned or franchised restaurant, we may experience a decrease in guest traffic. Further, Wendy’s and Arby’s restaurants compete with a variety of locally-owned restaurants, as well as competitive regional and national chains and franchises. Several of these chains compete by offering menu items that are targeted at certain consumer groups or dietary trends. Additionally, many of our competitors have introduced lower cost, value meal menu options. Our revenues and those of our franchisees may be hurt by this product and price competition.

Moreover, new companies, including operators outside the quick service restaurant industry, may enter our market areas and target our customer base. For example, additional competitive pressures for prepared food purchases have come from deli sections and in-store cafes of a number of major grocery store chains, as well as from convenience stores and casual dining outlets. Such competitors may have, among other things, lower operating costs, better locations, better facilities, better management, better products, more effective marketing and more efficient operations. Many of our competitors have substantially greater financial, marketing, personnel and other resources than we do, which may allow them to react to changes in pricing and marketing strategies in the quick service

restaurant industry better than we can. Many of our competitors spend significantly more on advertising and marketing than we do, which may give them a competitive advantage through higher levels of brand awareness among consumers. All such competition may adversely affect our revenues and profits by reducing revenues of company-owned restaurants and royalty payments from franchised restaurants.

Current restaurant locations may become unattractive, and attractive new locations may not be available for a reasonable price, if at all.

The success of any restaurant depends in substantial part on its location. There can be no assurance that our current restaurant locations will continue to be attractive as demographic patterns change. Neighborhood or economic conditions where our restaurants are located could decline in the future, thus resulting in potentially reduced sales in those locations. In addition, rising real estate prices in some areas may restrict our ability and the ability of franchisees to purchase or lease new desirable locations. If desirable locations cannot be obtained at reasonable prices, each brand’s ability to execute its growth strategies will be adversely affected.

Wendy’s and Arby’s business could be hurt by increased labor costs or labor shortages.

Labor is a primary component in the cost of operating our company-owned restaurants. Each brand devotes significant resources to recruiting and training its managers and hourly employees. Increased labor costs due to competition, increased minimum wage or employee benefits costs (including government-mandated health care benefits) or other factors would adversely impact our cost of sales and operating expenses. In addition, each brand’s success depends on its ability to attract, motivate and retain qualified employees, including restaurant managers and staff. If either brand is unable to do so, our results of operations could be adversely affected.

Each brand’s leasing and ownership of significant amounts of real estate exposes it to possible liabilities and losses, including liabilities associated with environmental matters.

As of January 2, 2011, Wendy’s leased or owned the land and/or the building for 1,394 Wendy’s restaurants and Arby’s leased or owned the land and/or the building for 1,144 Arby’s restaurants. Accordingly, each brand is subject to all of the risks associated with leasing and owning real estate. In particular, the value of our real property assets could decrease, and costs could increase, because of changes in the investment climate for real estate, demographic trends, supply or demand for the use of the restaurants, which may result from competition from similar restaurants in the area, and liability for environmental matters.

Each brand is subject to federal, state and local environmental, health and safety laws and regulations concerning the discharge, storage, handling, release and disposal of hazardous or toxic substances. These environmental laws provide for significant fines, penalties and liabilities, sometimes without regard to whether the owner, operator or occupant of the property knew of, or was responsible for, the release or presence of the hazardous or toxic substances. Third parties may also make claims against owners, operators or occupants of properties for personal injuries and property damage associated with releases of, or actual or alleged exposure to, such substances. A number of our restaurant sites were formerly gas stations or are adjacent to current or former gas stations, or were used for other commercial activities that can create environmental impacts. We may also acquire or lease these types of sites in the future. We have not conducted a comprehensive environmental review of all of our properties. We may not have identified all of the potential environmental liabilities at our leased and owned properties, and any such liabilities identified in the future could cause us to incur significant costs, including costs associated with litigation, fines or clean-up responsibilities. In addition, we cannot predict what environmental legislation or regulations will be enacted in the future or how existing or future laws or regulations will be administered or interpreted. We cannot predict the amount of future expenditures that may be required in order to comply with any environmental laws or regulations or to satisfy any such claims. See “Item 1. Business-General-Environmental Matters.”

Each brand leases real property generally for initial terms of 20 years with two to four additional options to extend the term of the leases in consecutive five-year increments. Many leases provide that the landlord may increase the rent over the term of the lease and any renewals thereof. Most leases require us to pay all of the costs of insurance, taxes, maintenance and utilities. We generally cannot cancel these leases. If an existing or future restaurant is not profitable, and we decide to close it, we may nonetheless be committed to perform our obligations under the applicable lease including, among other things, paying the base rent for the balance of the lease term. In addition, as each lease expires, we may fail to negotiate additional renewals or renewal options, either on commercially acceptable terms or at all, which could cause us to close stores in desirable locations.

Complaints or litigation may hurt each brand.

Wendy’s and Arby’s customers file complaints or lawsuits against us alleging that we are responsible for an illness or injury they suffered at or after a visit to a Wendy’s or Arby’s restaurant, or alleging that there was a problem with food quality or operations at a Wendy’s or Arby’s restaurant. We are also subject to a variety of other claims arising in the ordinary course of our business, including personal injury claims, contract claims, claims from franchisees (which tend to increase when franchisees experience declining sales and profitability) and claims alleging violations of federal and state law regarding workplace and employment matters, discrimination and similar matters, including class action lawsuits related to these matters. Regardless of whether any claims against us are valid or whether we are found to be liable, claims may be expensive to defend and may divert management’s attention away from operations and hurt our performance. A judgment significantly in excess of our insurance coverage for any claims could materially adversely

affect our financial condition or results of operations. Further, adverse publicity resulting from these claims may hurt us and our franchisees.

Additionally, the restaurant industry has been subject to a number of claims that the menus and actions of restaurant chains have led to the obesity of certain of their customers. Adverse publicity resulting from these allegations may harm the reputation of our restaurants, even if the allegations are not directed against our restaurants or are not valid, and even if we are not found liable or the concerns relate only to a single restaurant or a limited number of restaurants. Moreover, complaints, litigation or adverse publicity experienced by one or more of Wendy’s or Arby’s franchisees could also hurt our business as a whole.

Our current insurance may not provide adequate levels of coverage against claims that may be filed.

We currently maintain insurance we believe is adequate for businesses of our size and type. However, there are types of losses we may incur that cannot be insured against or that we believe are not economically reasonable to insure, such as losses due to natural disasters or acts of terrorism. In addition, we currently self-insure a significant portion of expected losses under workers compensation, general liability and property insurance programs. Unanticipated changes in the actuarial assumptions and management estimates underlying our reserves for these losses could result in materially different amounts of expense under these programs, which could harm our business and adversely affect our results of operations and financial condition.

Changes in legal or regulatory requirements, including franchising laws, accounting standards, payment card industry rules, overtime rules, minimum wage rates, government-mandated health care benefits, tax legislation and menu-board labeling requirements, may hurt our ability to open new restaurants or otherwise hurt our existing and future operations and results.

Each Wendy’s and Arby’s restaurant is subject to licensing and regulation by health, sanitation, safety and other agencies in the state and/or municipality in which the restaurant is located, as well as to Federal laws, rules and regulations and requirements of non-governmental entities such as payment card industry rules. State and local government authorities may enact laws, rules or regulations that impact restaurant operations and the cost of conducting those operations. For example, recent efforts to require the listing of specified nutritional information on menus and menu boards could adversely affect consumer demand for our products, could make our menu boards less appealing and could increase our costs of doing business. There can be no assurance that we and/or our franchisees will not experience material difficulties or failures in obtaining the necessary licenses or approvals for new restaurants, which could delay the opening of such restaurants in the future. In addition, more stringent and varied requirements of local governmental bodies with respect to tax, zoning, land use and environmental factors could delay or prevent development of new restaurants in particular locations.

Federal laws, rules and regulations address many aspects of our business, such as franchising, minimum wages and taxes. We and our franchisees are also subject to the Fair Labor Standards Act, which governs such matters as minimum wages, overtime and other working conditions, along with the ADA, family leave mandates and a variety of other laws enacted by the states that govern these and other employment law matters. As described more fully under “Item 3. Legal Proceedings,” one of our subsidiaries was a defendant in a lawsuit alleging failure to comply with Title III of the ADA at approximately 775 company-owned restaurants acquired as part of the RTM acquisition by Arby’s in July 2005. Under a court approved settlement of that lawsuit, Arby’s estimates that it will spend approximately $1.15 million per year of capital expenditures over a seven-year period (which commenced in 2008) to bring these restaurants into compliance with the ADA, in addition to paying certain legal fees and expenses. We cannot predict the amount of any other future expenditures that may be required in order to permit company-owned restaurants to comply with any changes in existing regulations or to comply with any future regulations that may become applicable to our businesses.

Recent Federal legislation regarding changes in government-mandated health care benefits are also anticipated to increase our costs and the costs of our franchisees and may result in significant modifications to our employment and hiring practices. Because of the absence of implementing regulations, we currently cannot predict the timing or amount of those cost increases or modifications to our business practices. However, the cost increases may be material and such modifications to our business practices may be disruptive to our operations and impact our ability to attract and retain personnel.

Our operations are influenced by adverse weather conditions.

Weather, which is unpredictable, can impact Wendy’s and Arby’s restaurant sales. Harsh weather conditions that keep customers from dining out result in lost opportunities for our restaurants. A heavy snowstorm in the Northeast or Midwest or a hurricane in the Southeast can shut down an entire metropolitan area, resulting in a reduction in sales in that area. Our first quarter includes winter months and historically has a lower level of sales at company-owned restaurants. Because a significant portion of our restaurant operating costs is fixed or semi-fixed in nature, the loss of sales during these periods hurts our operating margins, and can result in restaurant operating losses. For these reasons, a quarter-to-quarter comparison may not be a good indication of either brand’s performance or how it may perform in the future.

Due to the concentration of Wendy’s and Arby’s restaurants in particular geographic regions, our business results could be impacted by the adverse economic conditions prevailing in those regions regardless of the state of the national economy as a whole.

As of January 2, 2011, we and our franchisees operated Wendy’s or Arby’s restaurants in 50 states and 24 foreign countries. As of January 2, 2011 as detailed in “Item 2. Properties,” the 8 leading states by number of operating units were: Ohio, Florida, Texas, Michigan, Georgia, Pennsylvania, California, and North Carolina. This geographic concentration can cause economic conditions in particular areas of the country to have a disproportionate impact on our overall results of operations. It is possible that adverse economic conditions in states or regions that contain a high concentration of Wendy’s and Arby’s restaurants could have a material adverse impact on our results of operations in the future.

Wendy’s/Arby’s Restaurants and its subsidiaries are subject to various restrictions, and substantially all of their non-real estate assets are pledged and subject to certain restrictions, under a Credit Agreement.

On May 24, 2010, Wendy’s/Arby’s Restaurants entered into a $650,000 Credit Agreement which includes a $500,000 senior secured term loan facility and a $150,000 senior secured revolving credit facility. The obligations under the Credit Agreement are secured by substantially all of the non-real estate assets of Wendy’s/Arby’s Restaurants and its domestic subsidiaries (other than certain unrestricted subsidiaries), the stock of its domestic subsidiaries (other than certain unrestricted subsidiaries), 65% of the stock of certain of its foreign subsidiaries, as well as by mortgages on certain restaurant properties. The affirmative and negative covenants in the Credit Agreement include, among others, preservation of corporate existence; payment of taxes; and maintenance of insurance; and limitations on: indebtedness (including guarantee obligations of other indebtedness); liens; mergers, consolidations, liquidations and dissolutions; sales of assets; dividends and other payments in respect of capital stock; investments; payments of certain indebtedness; transactions with affiliates; changes in fiscal year; negative pledge clauses and clauses restricting subsidiary distributions; and material changes in lines of business. The financial covenants contained in the Credit Agreement are (i) a consolidated interest coverage ratio, (ii) a consolidated senior secured leverage ratio and (iii) a consolidated senior secured lease adjusted leverage ratio. The covenants generally do not restrict Wendy’s/Arby’s or any of Wendy’s/Arby’s subsidiaries that are not subsidiaries of Wendy’s/Arby’s Restaurants. If the Borrowers are unable to generate sufficient cash flow or otherwise obtain the funds necessary to make required payments of interest or principal under, or are unable to comply with covenants of, the Credit Agreement, then they would be in default under the terms of the agreement, which would preclude the payment of dividends to Wendy’s/Arby’s, restrict access to the revolving credit facility, and, under certain circumstances, permit the lenders to accelerate the maturity of the indebtedness. See Note 11 of the Financial Statements and Supplementary Data included in Item 8 herein, for further information regarding the Credit Agreement.

Wendy’s/Arby’s Restaurants and its subsidiaries have a significant amount of debt outstanding. Such indebtedness, along with the other contractual commitments of our subsidiaries, could adversely affect our business, financial condition and results of operations, as well as the ability of certain of our subsidiaries to meet payment obligations under the Senior Notes and other debt.

Certain of Wendy’s/Arby’s subsidiaries have a significant amount of debt and debt service requirements. As of January 2, 2011, on a consolidated basis, there was approximately $1.6 billion of outstanding debt.

This level of debt could have significant consequences on our future operations, including:

making it more difficult to meet payment and other obligations under the Senior Notes and other outstanding debt;

resulting in an event of default if our subsidiaries fail to comply with the financial and other restrictive covenants contained in debt agreements, which event of default could result in all of our subsidiaries’ debt becoming immediately due and payable;

reducing the availability of our cash flow to fund working capital, capital expenditures, acquisitions and other general corporate purposes, and limiting our ability to obtain additional financing for these purposes;

subjecting us to the risk of increased sensitivity to interest rate increases on our indebtedness with variable interest rates, including borrowings under the Credit Agreement;

limiting our flexibility in planning for, or reacting to, and increasing our vulnerability to, changes in our business, the industry in which we operate and the general economy; and

placing us at a competitive disadvantage compared to our competitors that are less leveraged.

In addition, certain of our subsidiaries also have significant contractual requirements for the purchase of soft drinks. Wendy’s has also provided loan guarantees to various lenders on behalf of franchisees entering into pooled debt facility arrangements for new store development and equipment financing. Certain subsidiaries also guarantee or are contingently liable for certain leases of their respective franchisees for which they have been indemnified. In addition, certain subsidiaries also guarantee or are contingently liable for certain leases of their respective franchisees for which they have not been indemnified. These commitments could have an adverse effect on our liquidity and the ability of our subsidiaries to meet payment obligations under the Senior Notes and other debt.

The ability to meet payment and other obligations under the debt instruments of our subsidiaries depends on their ability to generate significant cash flow in the future. This, to some extent, is subject to general economic, financial, competitive, legislative and regulatory factors as well as other factors that are beyond our control. We cannot assure you that our business will generate cash flow from operations, or that future borrowings will be available to us under existing or any future credit facilities or otherwise, in an amount sufficient to enable our subsidiaries to meet their payment obligations under the Senior Notes and other debt and to fund other

liquidity needs. If our subsidiaries are not able to generate sufficient cash flow to service their debt obligations, they may need to refinance or restructure debt, including the Senior Notes, sell assets, reduce or delay capital investments, or seek to raise additional capital. If our subsidiaries are unable to implement one or more of these alternatives, they may not be able to meet payment obligations under the Senior Notes and other debt and other obligations.

We and our subsidiaries may still be able to incur substantially more debt. This could exacerbate further the risks associated with our substantial leverage.

We and our subsidiaries may be able to incur substantial additional indebtedness, including additional secured indebtedness, in the future. The terms of the Senior Notes indenture and the Credit Agreement restrict, but do not completely prohibit, us or our subsidiaries from doing so. In addition, the Senior Notes indenture allows Wendy’s/Arby’s Restaurants to issue additional Senior Notes under certain circumstances, which will also be guaranteed by the guarantors of the Senior Notes. The indenture also allows Wendy’s/Arby’s Restaurants to incur certain secured debt and allows our foreign subsidiaries to incur additional debt, which would be effectively senior to the Senior Notes. In addition, the indenture does not prevent Wendy’s/Arby’s Restaurants from incurring other liabilities that do not constitute indebtedness. If new debt or other liabilities are added to our current consolidated debt levels, the related risks that we now face could intensify.

To service debt and meet its other cash needs, Wendy’s/Arby’s Restaurants will require a significant amount of cash, which may not be generated or available to it.

The ability of Wendy’s/Arby’s Restaurants to make payments on, or repay or refinance, its debt, including the Senior Notes and the Credit Agreement, and to fund planned capital expenditures, dividends and other cash needs will depend largely upon its future operating performance. Future performance, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. In addition, the ability of Wendy’s/Arby’s Restaurants to borrow funds in the future to make payments on its debt will depend on the satisfaction of the covenants in its credit facilities and other debt agreements, including the indenture governing the Senior Notes, the Credit Agreement and other agreements it may enter into in the future. Specifically, Wendy’s/Arby’s Restaurants will need to maintain specified financial ratios and satisfy financial condition tests. There is no assurance that the Wendy’s/Arby’s Restaurants business will generate sufficient cash flow from operations or that future borrowings will be available under its credit facilities or from other sources in an amount sufficient to enable it to pay its debt, including the Senior Notes and Credit Agreement, or to fund its or Wendy’s/Arby’s dividend and other liquidity needs.

We may not be able to adequately protect our intellectual property, which could harm the value of our brands and hurt our business.

Our intellectual property is material to the conduct of our business. We rely on a combination of trademarks, copyrights, service marks, trade secrets and similar intellectual property rights to protect our brands and other intellectual property. The success of our business strategy depends, in part, on our continued ability to use our existing trademarks and service marks in order to increase brand awareness and further develop our branded products in both existing and new markets. If our efforts to protect our intellectual property are not adequate, or if any third party misappropriates or infringes on our intellectual property, either in print or on the Internet, the value of our brands may be harmed, which could have a material adverse effect on our business, including the failure of our brands to achieve and maintain market acceptance. This could harm our image, brand or competitive position and, if we commence litigation to enforce our rights, cause us to incur significant legal fees.

We franchise our restaurant brands to various franchisees. While we try to ensure that the quality of our brands is maintained by all of our franchisees, we cannot assure you that these franchisees will not take actions that hurt the value of our intellectual property or the reputation of the Wendy’s and/or Arby’s restaurant system.

We have registered certain trademarks and have other trademark registrations pending in the United States and certain foreign jurisdictions. The trademarks that we currently use have not been registered in all of the countries outside of the United States in which we do business or may do business in the future and may never be registered in all of these countries. We cannot assure you that all of the steps we have taken to protect our intellectual property in the United States and foreign countries will be adequate. The laws of some foreign countries do not protect intellectual property rights to the same extent as the laws of the United States.

In addition, we cannot assure you that third parties will not claim infringement by us in the future. Any such claim, whether or not it has merit, could be time-consuming, result in costly litigation, cause delays in introducing new menu items, require costly modifications to advertising and promotional materials or require us to enter into royalty or licensing agreements. As a result, any such claim could harm our business and cause a decline in our results of operations and financial condition.

Wendy's plans to expand its new breakfast initiative in 2011. The breakfast daypart remains competitive and markets may prove difficult to penetrate.

The roll out of breakfast at Wendy’s has been accompanied by challenging competitive conditions, varied consumer tastes and discretionary spending patterns that differ from lunch, snack, dinner and late night hours. In addition, breakfast sales can cannibalize sales during other parts of the day and may have negative impacts on food and labor costs, advertising, and restaurant margins. Wendy's plans to expand its breakfast initiative in 2011. Capital investments will be required at company-owned restaurants that are

added to the breakfast initiative. In addition, franchisees will be required to make capital investments in their restaurants that participate in the breakfast initiative. As a result of all of these factors, breakfast sales and resulting profits may take longer than expected to reach targeted levels or the planned rollout of breakfast may be delayed or may not occur.

Our international operations are subject to various factors of uncertainty and there is no assurance that international operations will be profitable.

In addition to many of the risk factors described throughout this Item 1A, each brand’s business outside of the United States is subject to a number of additional factors, including international economic and political conditions, differing cultures and consumer preferences, the inability to adapt to international customer preferences, inadequate brand infrastructure within foreign countries to support our international activities, inability to obtain adequate supplies meeting our quality standards and product specifications or interruptions in obtaining such supplies, currency regulations and fluctuations, diverse government regulations and tax systems, uncertain or differing interpretations of rights and obligations in connection with international franchise agreements and the collection of royalties from international franchisees, the availability and cost of land, construction costs, other legal, financial or regulatory impediments to the development and/or operation of new restaurants, and the availability of experienced management, appropriate franchisees, and joint venture partners. Although we believe we have developed the support structure required for international growth, there is no assurance that such growth will occur or that international operations will be profitable.

We rely on computer systems and information technology to run our business. Any material failure, interruption or security breach of our computer systems or information technology may adversely affect the operation of our business and results of operations.

We are significantly dependent upon our computer systems and information technology to properly conduct our business. A failure or interruption of computer systems or information technology could result in the loss of data, business interruptions or delays in business operations. Also, despite our considerable efforts and technological resources to secure our computer systems and information technology, security breaches, such as unauthorized access and computer viruses, may occur resulting in system disruptions, shutdowns or unauthorized disclosure of confidential information. Any security breach of our computer systems or information technology may result in adverse publicity, loss of sales and profits, penalties, competitive disadvantage, or loss resulting from misappropriation of information.

We may be required to recognize additional asset impairment and other asset-related charges.

We have significant amounts of long-lived assets, goodwill and intangible assets and have incurred impairment charges in the past with respect to those assets. In accordance with applicable accounting standards, we test for impairment generally annually, or more frequently, if there are indicators of impairment, such as:

significant adverse changes in the business climate;

current period operating or cash flow losses combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with long-lived assets;

a current expectation that more-likely-than-not (e.g., a likelihood that is more than 50%) long-lived assets will be sold or otherwise disposed of significantly before the end of their previously estimated useful life; and

a significant drop in our stock price.

Based upon future economic and capital market conditions, as well as the operating performance of our reporting units, future impairment charges could be incurred.

Risks Related to Wendy’s/Arby’s

There can be no assurance regarding whether or to what extent Wendy’s/Arby’s will pay dividends on its Common Stock in the future.

Holders of Wendy’s/Arby’s Common Stock will only be entitled to receive such dividends as its Board of Directors may declare out of funds legally available for such payments. Any dividends will be made at the discretion of the Board of Directors and will depend on Wendy’s/Arby’s earnings, financial condition, cash requirements and such other factors as the Board of Directors may deem relevant from time to time.

Because Wendy’s/Arby’s is a holding company, its ability to declare and pay dividends is dependent upon cash, cash equivalents and short-term investments on hand and cash flows from its subsidiaries. The ability of its subsidiaries to pay cash dividends and/or make loans or advances to the holding company will be dependent upon their respective abilities to achieve sufficient cash flows after satisfying their respective cash requirements, including subsidiary-level debt service and revolving credit agreements, to enable the payment of such dividends or the making of such loans or advances. The ability of any of its subsidiaries to pay cash dividends or other payments to Wendy’s/Arby’s will also be limited by restrictions in debt instruments currently existing or subsequently entered into by such subsidiaries, including the Credit Agreement and the Senior Notes indenture, which are described earlier in this Item 1A.

A substantial amount of Wendy’s/Arby’s Common Stock is concentrated in the hands of certain stockholders.

Nelson Peltz, Wendy’s/Arby’s Chairman and former Chief Executive Officer, and Peter May, Wendy’s/Arby’s Vice Chairman and former President and Chief Operating Officer, beneficially own shares of Wendy’s/Arby’s outstanding Common Stock that collectively constitute approximately 24% of its total voting power.

Messrs. Peltz and May may, from time to time, acquire beneficial ownership of additional shares of Common Stock. On November 5, 2008, in connection with the tender offer of Trian Fund Management, L.P. and certain affiliates thereof for up to 40 million shares of our Class A common stock, Wendy’s/Arby’s entered into an agreement (such agreement, as amended, the “Trian Agreement”) with Messrs. Peltz and May and several of their affiliates (the “Covered Persons”) which provides, among other things, that: (i) to the extent the Covered Persons acquire any rights in respect of our common stock so that the effect of such acquisition would increase their aggregate beneficial ownership in Wendy’s/Arby’s common stock to greater than 25%, the Covered Persons may not engage in a business combination (within the meaning of Section 203 of the Delaware General Corporation Law ) for a period of three years following the date of such occurrence unless such transaction would be subject to one of the exceptions set forth in Section 203(b)(3) through (7) (assuming for these purposes that 15% in the definition of interested stockholder contained in Section 203 was deemed to be 25%); (ii) for so long as Wendy’s/Arby’s has a class of equity securities that is listed for trading on the New York Stock Exchange or any other national securities exchange, none of the Covered Persons shall solicit proxies or submit any proposal for the vote of its stockholders or recommend or request or induce any other person to take any such actions or seek to advise, encourage or influence any other person with respect to Wendy’s/Arby’s common stock, in each case, if the result of such action would be to cause the Board of Directors to be comprised of less than a majority of independent directors; and (iii) for so long as Wendy’s/Arby’s has a class of equity securities that is listed for trading on the New York Stock Exchange or any other national securities exchange, none of the Covered Persons shall engage in certain affiliate transactions with Wendy’s/Arby’s without the prior approval of a majority of the Audit Committee or other committee of the Board of Directors that is comprised of independent directors. The Trian Agreement will terminate upon the earliest to occur of (i) the Covered Persons beneficially owning less than 15% of Wendy’s/Arby’s common stock, (ii) November 5, 2011 (with respect to clauses (ii) and (iii) of the preceding sentence), and (iii) at such time as any person not affiliated with the Covered Persons makes an offer to purchase an amount of Wendy’s/Arby’s common stock which when added to Wendy’s/Arby’s common stock already beneficially owned by such person and its affiliates and associates equals or exceeds 50% or more of outstanding Wendy’s/Arby’s common stock or all or substantially all of Wendy’s/Arby’s assets or solicits proxies with respect to a majority slate of directors.

This concentration of ownership gives Messrs. Peltz and May significant influence over the outcome of actions requiring stockholder approval. If in the future Messrs. Peltz and May were to acquire more than a majority of Wendy’s/Arby’s outstanding voting power, they would be able to determine the outcome of the election of members of the Board of Directors and the outcome of corporate actions requiring majority stockholder approval, including mergers, consolidations and the sale of all or substantially all of Wendy’s/Arby’s assets. They would also be in a position to prevent or cause a change in control of Wendy’s/Arby’s.

Wendy’s/Arby’s certificate of incorporation contains certain anti-takeover provisions and permits our Board of Directors to issue preferred stock without stockholder approval and limits its ability to raise capital from affiliates.

Certain provisions in Wendy’s/Arby’s certificate of incorporation are intended to discourage or delay a hostile takeover of control of Wendy’s/Arby’s. Wendy’s/Arby’s certificate of incorporation authorizes the issuance of shares of “blank check” preferred stock, which will have such designations, rights and preferences as may be determined from time to time by its Board of Directors. Accordingly, its Board of Directors is empowered, without stockholder approval, to issue preferred stock with dividend, liquidation, conversion, voting or other rights that could adversely affect the voting power and other rights of the holders of its common stock. The preferred stock could be used to discourage, delay or prevent a change in control of Wendy’s/Arby’s that is determined by its Board of Directors to be undesirable. Although Wendy’s/Arby’s has no present intention to issue any shares of preferred stock, it cannot assure you that it will not do so in the future.

Wendy’s/Arby’s certificate of incorporation prohibits the issuance of preferred stock to affiliates, unless offered ratably to the holders of Wendy’s/Arby’s common stock, subject to an exception in the event that Wendy’s/Arby’s is in financial distress and the issuance is approved by its audit committee. This prohibition limits the ability to raise capital from affiliates.

Risks Related to Wendy’s/Arby’s Restaurants

Wendy’s/Arby’s Restaurants is dependent on dividends and/or loans or advances from its subsidiaries to meet its debt service obligations.

The ability of Wendy’s/Arby’s Restaurants’ subsidiaries to pay cash dividends and/or make loans or advances to Wendy’s/Arby’s Restaurants will be dependent upon their respective abilities to achieve sufficient cash flows after satisfying their respective cash requirements, including subsidiary-level debt service and revolving credit agreements, to enable the payment of such dividends or the making of such loans or advances. The ability of any of its subsidiaries to pay cash dividends or other payments to Wendy’s/Arby’s Restaurants will also be limited by restrictions in debt instruments currently existing or subsequently entered into by such subsidiaries, including the Credit Agreement and the Senior Notes indenture, which are described above in this Item 1A.

Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties.

We believe that our properties, taken as a whole, are generally well maintained and are adequate for our current and foreseeable business needs.

The following table contains information about our principal office facilities as of January 2, 2011:

ACTIVE FACILITIES	FACILITIES-LOCATION	LAND TITLE	APPROXIMATE SQ. FT. OF FLOOR SPACE
Corporate and Arby’s Headquarters	Atlanta, GA	Leased	184,251*
Former Corporate Headquarters	New York, NY	Leased	31,237**
Wendy’s Headquarters	Dublin, OH	Owned	249,025***
Wendy’s Restaurants of Canada Inc.	Oakville, Ontario Canada	Leased	35,125

______________________

ARCOP, the independent Arby’s purchasing cooperative, and the Arby’s Foundation, a not-for-profit charitable foundation in which Arby’s has non-controlling representation on the board of directors, sublease approximately 4,500 and 3,800 square feet, respectively, of this space from Arby’s. In addition, SSG, the purchasing cooperative formed by ARCOP and QSCC to manage and operate purchasing programs which combine the purchasing power of both Wendy’s and Arby’s company-owned and franchised restaurants to create buying efficiencies for certain non-perishable goods, equipment and services, subleases approximately 2,300 square feet of this space from Arby’s. As discussed above in “Item 1. Business,” in contemplation of a possible sale of Arby’s, QSCC and ARCOP are in discussion regarding the dissolution of SSG and transferring SSG’s assets to them. Should such dissolution be completed, the sublease would be cancelled.

A management company formed by Messrs. Nelson Peltz, our Chairman and former Chief Executive Officer, Peter W. May, our Vice Chairman and former President and Chief Operating Officer, and Edward P. Garden, our Former Vice Chairman and a member of our Board of Directors subleases approximately 26,600 square feet of this space from us.

***

QSCC, the independent Wendy’s purchasing cooperative in which Wendy’s has non-controlling representation on the board of directors, leases approximately 9,300 square feet of this space from Wendy’s. QSCC leased an additional approximately 5,000 square feet of this space from Wendy’s effective January 4, 2011.

At January 2, 2011, Wendy’s and its franchisees operated 6,576 Wendy’s restaurants. Of the 1,394 company-owned Wendy’s restaurants, Wendy’s owned the land and building for 640 restaurants, owned the building and held long-term land leases for 474 restaurants and held leases covering land and building for 280 restaurants. Wendy’s land and building leases are generally written for terms of 10 to 25 years with one or more five-year renewal options. In certain lease agreements Wendy’s has the option to purchase the real estate. Certain leases require the payment of additional rent equal to a percentage, generally less than 6%, of annual sales in excess of specified amounts. As of January 2, 2011, Wendy’s also owned 55 and leased 212 properties that were either leased or subleased principally to franchisees. Surplus land and buildings are generally held for sale and are not material to our financial condition or results of operations.

The Bakery operates two facilities in Zanesville, Ohio that produce buns for Wendy’s restaurants and other outside parties (including certain distributors to the Arby’s system). The buns are distributed to both company-owned and franchised restaurants using primarily the Bakery’s fleet of trucks. As of January 2, 2011, the Bakery employed approximately 350 people at the two facilities that had a combined size of approximately 205,000 square feet.

As of January 2, 2011, Arby’s and its franchisees operated 3,649 Arby’s restaurants. Of the 1,144 company-owned Arby’s restaurants, Arby’s owned the land and/or the buildings with respect to 129 of these restaurants and leased or subleased the remainder. As of January 2, 2011, Arby’s also owned 14 and leased 84 properties that were either leased or subleased principally to franchisees. Our other subsidiaries also owned or leased a few inactive facilities and undeveloped properties, none of which are material to our financial condition or results of operations.

The location of company-owned and franchised restaurants as of January 2, 2011 is set forth below.

	Wendy’s				Arby’s
State	Company		Franchise		Company		Franchise
Alabama		—		96		70		32
Alaska		—		7		—		9
Arizona		46		55		—		83
Arkansas		—		64		—		44
California		56		216		28		92
Colorado		47		80		—		62
Connecticut		5		45		12		2
Delaware		—		15		—		17
Florida		186		299		90		80
Georgia		55		241		92		55
Hawaii		7	__			—		9
Idaho		—		30		—		21
Illinois		98		94		5		125
Indiana		5		173		99		80
Iowa		—		45		—		54
Kansas		11		63		—		52
Kentucky		3		140		48		84
Louisiana		56		73		—		27
Maine		5		15		—		8
Maryland		—		115		17		32
Massachusetts		71		22		—		5
Michigan		21		249		107		78
Minnesota		—		67		83		3
Mississippi		8		88		3		21
Missouri		35		56		4		81
Montana		—		17		—		19
Nebraska		—		34		—		50
Nevada		—		46		—		30
New Hampshire		4		21		—		—
New Jersey		22		118		17		10
New Mexico		—		38		—		30
New York		63		156		—		86
North Carolina		40		217		60		78
North Dakota		—		9		—		14
Ohio		76		349		102		178
Oklahoma		—		38		—		95
Oregon		19		33		21		16
Pennsylvania		78		178		88		57
Rhode Island		9		11		—		—
South Carolina		—		131		13		64
South Dakota		—		9		—		15
Tennessee		—		180		52		58
Texas		73		321		68		104
Utah		57		30		33		35
Vermont		—		5		—		—
Virginia		53		160		2		107
Washington		27		45		24		40
West Virginia		22		51		1		35
Wisconsin		—		62		4		87
Wyoming		—		14		1		15
District of Columbia		—		4		—		—
Domestic Subtotal		1,258		4,625		1,144		2,379
Canada		136		232		—		106
North America Subtotal		1,394		4,857		1,144		2,485

	Wendy’s		Arby’s
Country/Territory	Company	Franchise	Company	Franchise
Aruba	—	3	—	—
Bahamas	—	9	—	—
Cayman Islands	—	3	—	—
Costa Rica	—	7	—	—
Curacao	—	1	—	—
Dominican Republic	—	5	—	—
El Salvador	—	14	—	—
Guam	—	3	—	—
Guatemala	—	9	—	—
Honduras	—	29	—	—
Indonesia	—	27	—	—
Jamaica	—	3	—	—
Malaysia	—	8	—	—
Mexico	—	25	—	—
New Zealand	—	16	—	—
Panama	—	6	—	—
Philippines	—	31	—	—
Puerto Rico	—	72	—	—
Singapore	—	8	—	—
Qatar	—	—	—	1
Turkey	—	—	—	14
United Arab Emirates	—	5	—	5
Venezuela	—	39	—	—
U. S. Virgin Islands	—	2	—	—
International Subtotal	—	325	—	20
Grand Total	1,394	5,182	1,144	2,505

Item 3. Legal Proceedings.

In November 2002, Access Now, Inc. and Edward Resnick, later replaced by Christ Soter Tavantzis, on their own behalf and on the behalf of all those similarly situated, brought an action in the United States District Court for the Southern District of Florida against RTM Operating Company (“RTM”), which became a subsidiary of Arby’s following Arby’s acquisition of the RTM Restaurant Group in July 2005. The complaint alleged that the approximately 775 Arby’s restaurants owned by RTM and its affiliates failed to comply with Title III of the ADA. The plaintiffs requested class certification and injunctive relief requiring RTM and such affiliates to comply with the ADA in all of their restaurants. The complaint did not seek monetary damages, but did seek attorneys’ fees. Without admitting liability, RTM entered into a settlement agreement with the plaintiffs on a class-wide basis, which was approved by the court on August 10, 2006. The settlement agreement calls for the restaurants owned by RTM and certain of its affiliates to be brought into ADA compliance over an eight year period at a rate of approximately 100 restaurants per year. The settlement agreement also applies to restaurants subsequently acquired by RTM and such affiliates. Arby’s estimates that it will spend approximately $1.15 million per year of capital expenditures over a seven-year period (which commenced in 2008) to bring the restaurants into compliance under the settlement agreement, in addition to paying certain legal fees and expenses.

In addition to the legal matter described above, we are involved in other litigation and claims incidental to our current and prior businesses. As of January 2, 2011, Wendy’s/Arby’s Restaurants had reserves for all legal and environmental matters aggregating $3.7 million, which are included in the $3.9 million reserved by Wendy’s/Arby’s for all legal and environmental matters. Although the outcome of these matters cannot be predicted with certainty and some of these matters may be disposed of unfavorably to us, based on our currently available information, including legal defenses available to us, and given the aforementioned reserves and insurance coverages, we do not believe that the outcome of these legal and environmental matters will have a material adverse effect on our consolidated financial position or results of operations.

Item 4. (Removed and Reserved).

PART II

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

(Wendy’s/Arby’s)

The principal market for Wendy’s/Arby’s Common Stock is the New York Stock Exchange (symbol: WEN). The high and low market prices for Wendy’s/Arby’s Common Stock, as reported in the consolidated transaction reporting system, are set forth below:

	Market Price
Fiscal Quarters	Common Stock
	High		Low
2010
First Quarter ended April 4	$	5.22	$	4.26
Second Quarter ended July 4		5.55		3.95
Third Quarter ended October 3		4.73		3.83
Fourth Quarter ended January 2		5.09		4.28

2009
First Quarter ended March 29	$	5.80	$	3.86
Second Quarter ended June 28		5.78		3.55
Third Quarter ended September 27		5.54		3.80
Fourth Quarter ended January 3		5.04		3.95

Wendy’s/Arby’s Common Stock is entitled to one vote per share on all matters on which stockholders are entitled to vote. Wendy’s/Arby’s has no class of equity securities currently issued and outstanding except for its Common Stock. However, it is currently authorized to issue up to 100 million shares of preferred stock.

During its 2010 fiscal year, Wendy’s/Arby’s paid quarterly cash dividends of $0.015 per share on its Common Stock on March 15, 2010, June 15, 2010 and September 15, 2010. The quarterly cash dividend paid on December 15, 2010 was $0.02 per share of Common Stock.

During its 2009 fiscal year, Wendy’s/Arby’s paid regular quarterly cash dividends of $0.015 per share of Common Stock.

During the 2011 first quarter, Wendy’s/Arby’s declared dividends of $0.02 per share to be paid on March 15, 2011 to shareholders of record as of March 1, 2011. Although Wendy’s/Arby’s currently intends to continue to declare and pay quarterly cash dividends, there can be no assurance that any additional quarterly cash dividends will be declared or paid or the amount or timing of such dividends, if any. Any future dividends will be made at the discretion of their Board of Directors and will be based on such factors as Wendy’s/Arby’s earnings, financial condition, cash requirements and other factors.

As of February 25, 2011, there were approximately 46,206 holders of record of Wendy’s/Arby’s Common Stock.

The following table provides information with respect to repurchases of shares of Wendy’s/Arby’s Common Stock by us and our “affiliated purchasers” (as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934, as amended) during the fourth fiscal quarter of 2010:

Issuer Repurchases of Equity Securities

Period	Total Number of Shares Purchased (1)		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plan (2)		Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plan (2)
October 4, 2010 through November 7, 2010		5,176	$	4.44		-	$	79,517,373
November 8, 2010 through December 5, 2010		-		-		-	$	249,517,373
December 6, 2010 through January 2, 2011		802	$	4.63		-	$	249,517,373
Total		5,978	$	4.46		-	$	249,517,373

(1)	Includes 5,978 shares reacquired by Wendy’s/Arby’s from holders of restricted stock awards to satisfy tax withholding requirements. The shares were valued at the average of the high and low trading prices of Wendy’s/Arby’s Common Stock on the vesting date of such awards.

(2)

On January 27, 2010, March 22, 2010 and May 27, 2010, Wendy’s/Arby’s Board of Directors authorized our management, when and if market conditions warrant and to the extent legally permissible, to repurchase through January 2, 2011 up to an additional $75.0 million, $50.0 million and $75.0 million, respectively, of Wendy’s/Arby’s Common Stock. On November 11, 2010, Wendy’s/Arby’s Board of Directors authorized the extension of the current stock repurchase program through January 1, 2012 and authorized the repurchase of up to an additional $170.0 million of Wendy’s/Arby’s Common Stock, bringing the total amount currently authorized to approximately $250.0 million. The stock repurchase program will allow Wendy’s/Arby’s to make repurchases as market conditions warrant and to the extent legally permissible.

(Wendy’s/Arby’s Restaurants)

As a limited liability company, Wendy’s/Arby’s Restaurants does not issue common stock. The registrant’s sole member is Wendy’s/Arby’s. There is no market for Wendy’s/Arby’s Restaurants member’s interest. It has no securities authorized for issuance under equity compensation plans.

A total of $443.7 million and $115.0 million of intercompany cash dividends were paid to Wendy’s/Arby’s in 2010 and 2009, respectively.

(Wendy’s/Arby’s and Wendy’s/Arby’s Restaurants)

The Companies’ ability to meet their cash requirements is primarily dependent upon their cash and cash equivalents on hand and cash flows from Wendy’s and Arby’s, including loans and cash dividends. Additionally, Wendy’s/Arby’s ability to meet its cash requirements is also dependent upon payments by Wendy’s and Arby’s under a tax sharing agreement. The Companies’ cash requirements include, but are not limited to, interest and principal payments on their indebtedness. Under the terms of the Credit Agreement (see “Item 1A. Risk Factors—Risks Related to Wendy’s and Arby’s Businesses – Wendy’s/Arby’s Restaurants and its subsidiaries, are subject to various restrictions, and substantially all of their non-real estate assets are pledged subject to certain restrictions, under a Credit Agreement”), there are restrictions on the ability of Wendy’s/Arby’s Restaurants and its subsidiaries to pay any dividends or make any loans or advances to Wendy’s/Arby’s. The ability of Wendy’s and Arby’s to pay cash dividends to the Companies or make any loans or advances, as well as to make payments under the tax sharing agreement to Wendy’s/Arby’s is also dependent upon their ability to achieve sufficient cash flows after satisfying their cash requirements, including debt service. As of January 2, 2011, under the terms of the Credit Agreement, there was $25.6 million available for the payment of dividends directly to Wendy’s/Arby’s from Wendy’s/Arby’s Restaurants, Wendy’s, or Arby’s. See Note 11 of the Financial Statements and Supplementary Data included in Item 8 herein, and “Management’s Discussion and Analysis – Results of Operations and Liquidity and Capital Resources” in Item 7 herein, for further information on the Credit Agreement.

Item 6. Selected Financial Data.

(Wendy’s/Arby’s)

	Year Ended (1)
	January 2, 2011			January 3, 2010			December 28, 2008(2)			December 30, 2007(2)			December 31, 2006(2)
(In Millions, except per share amounts)

Sales	$	3,045.3		$	3,198.3		$	1,662.3		$	1,113.4		$	1,073.3
Franchise revenues		371.1			382.5			160.5			87.0			82.0
Asset management and related fees		-			-			-			63.3			88.0
Revenues		3,416.4			3,580.8			1,822.8			1,263.7			1,243.3
Operating profit (loss)		132.4	(5)		112.0	(6)		(413.6	) (7)		19.9	(8)		44.6
(Loss) income from continuing operations		(4.3	) (5)		3.5	(6)		(482.0	) (7)		15.1	(8)		0.7	(9)
Income from discontinued operations		-			1.6			2.2			1.0			-
Net (loss) income		(4.3	) (5)		5.1	(6)		(479.8	) (7)		16.1	(8)		(10.9	) (9)
Basic and diluted income (loss) per share (3):
Continuing operations:
Common stock		(.01	)		.01			(3.06	)		.15			(.13	)
Class B common stock		N/A			N/A			(1.26	)		.17			(.13	)
Discontinued operations:
Common stock		N/A			-			.01			.01			N/A
Class B common stock		N/A			N/A			.02			.01			N/A
Net (loss) income
Common stock		(.01	)		.01			(3.05	)		.16			(.13	)
Class B common stock		N/A			N/A			(1.24	)		.18			(.13	)
Cash dividends per share:
Common stock		.07			.06			.26			.32			.77
Class B common stock		N/A			N/A			.26			.36			.81
Weighted average shares outstanding (4):
Common stock		426.3			466.2			137.7			28.8			27.3
Class B common stock		N/A			N/A			48.0			63.5			59.3

	January 2, 2011			January 3, 2010			December 28, 2008(2)			December 30, 2007(2)			December 31, 2006(2)
	(In Millions)
Working capital (deficiency)	$	333.3		$	403.8		$	(121.7	)	$	(36.9	)	$	161.2
Properties		1,551.3			1,619.2			1,770.4			504.9			488.5
Total assets		4,732.7			4,975.4			4,645.6			1,454.6			1,560.4
Long-term debt, including current portion		1,572.4			1,522.9			1,111.6			739.3			720.0
Stockholders’ equity		2,163.2			2,336.3			2,383.4			449.8			492.0

(1)

Wendy’s/Arby’s reports on a fiscal year consisting of 52 or 53 weeks ending on the Sunday closest to December 31. Except for the 2009 fiscal year, which contained 53 weeks, each of Wendy’s/Arby’s fiscal years presented above contained 52 weeks. All references to years relate to fiscal years rather than calendar years. The financial position and results of operations of Wendy’s are included commencing with the date of the Wendy’s Merger, September 29, 2008. Immediately prior to the Wendy’s Merger, each share of our Class B common stock was converted into Class A common stock on a one for one basis. In connection with the May 28, 2009 amendment and restatement of Wendy’s/Arby’s Certificate of Incorporation, Wendy’s/Arby’s former Class A common stock is now referred to as “Common Stock.” Deerfield & Company LLC (“Deerfield”), in which Wendy’s/Arby’s held a 63.6% capital interest from July 22, 2004 through its sale on December 21, 2007, Deerfield Opportunities Fund, LLC, which commenced on October 4, 2004 and in which our investment was effectively redeemed on September 29, 2006, and DM Fund LLC, which commenced on March 1, 2005 and in which Wendy’s/Arby’s investment was effectively redeemed on December 31, 2006, reported on a calendar year ending on December 31 through their respective sale or redemption dates.

(2)

Selected financial data reflects the changes related to the adoption of the following accounting standards:

(a) As of December 29, 2008, Wendy’s/Arby’s adopted new accounting guidance related to non-controlling interests (formerly referred to as minority interests). This adoption resulted in the retrospective reclassification of minority interests from its former presentation as a liability to “Stockholders’ equity.” The reclassifications were $0.l million, $0.9 million, and $14.2 million for 2008, 2007 and 2006 respectively. Additionally, in accordance with the new guidance, the loss from continuing operations in 2006 excludes the effect of income attributable to non-controlling interests of $11.5 million. Income attributable to non-controlling interests in 2008 and 2007 was not material.

(b) As of January 1, 2007, Wendy’s/Arby’s utilized a recognition threshold and measurement attribute for financial statement recognition and measurement of potential tax benefits associated with tax positions taken or expected to be taken in income tax returns. Wendy’s/Arby’s utilized a two-step process of evaluating a tax position, whereby an entity first determines if it is more likely than not that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. A tax position that meets the more-likely-than-not recognition threshold is then measured for purposes of financial statement recognition as the largest amount of benefit that is greater than 50 percent likely of being realized upon being effectively settled. There was no effect on the 2007 or prior period statements of operations. However, there was a net reduction of $2.3 million in stockholders’ equity as of January 1, 2007.

(3)

For the purposes of calculating income per share amounts for 2007, net income was allocated between the shares of Wendy’s/Arby’s Class A common stock and Wendy’s/Arby’s Class B common stock based on the actual dividend payment ratio. For the purposes of calculating loss per share, the net loss for all years through 2008 was allocated equally between Class A common stock and Class B common stock.

(4)

The number of shares used in the calculation of diluted income per share in 2009 and 2007 consist of the weighted average common shares outstanding for each class of common stock and potential shares of common stock reflecting the effect of 483 dilutive stock options and nonvested restricted shares for 2009 and 129 for Wendy’s/Arby’s Class A common stock and 759 for Wendy’s/Arby’s Class B common stock for 2007. The number of shares used in the calculation of diluted income (loss) per share is the same as basic income (loss) per share for 2010, 2008 and 2006 since all potentially dilutive securities would have had an antidilutive effect based on the loss from continuing operations for these years.

(5)

Reflects certain significant charges recorded during 2010 as follows: $69.4 million charged to operating profit for impairment of long-lived assets other than goodwill; $43.0 million charged to loss from continuing operations and net loss related to these charges; and $16.2 million charged to loss from continuing operations and net loss related to costs incurred for the early extinguishment of debt, which was comprised of a premium payment required to redeem the Wendy’s 6.25% senior notes, the write-off of the unaccreted discount of the Wendy’s 6.25% senior notes, and the write-off of deferred costs associated with the repayment of the Wendy’s/Arby’s Restaurants prior senior secured term loan.

(6)

Reflects significant charges recorded in 2009 of $82.1 million charged to operating profit for impairment of long-lived assets other than goodwill and $50.9 million charged to income from continuing operations and net income related to these charges.

(7)

Reflects certain significant charges and credits recorded during 2008 as follows: $460.1 million charged to operating loss consisting of a goodwill impairment for the Arby’s company-owned restaurant reporting unit; $484.0 million charged to loss from continuing operations and net loss representing the aforementioned $460.1 million charged to operating loss and other than temporary losses on investments of $112.7 million partially offset by $88.8 million of income tax benefit related to the above charges.

(8)

Reflects certain significant charges and credits recorded during 2007 as follows: $45.2 million charged to operating profit, consisting of facilities relocation and restructuring costs of $85.4 million less $40.2 million from the gain on sale of Wendy’s/Arby’s interest in Deerfield; $16.6 million charged to income from continuing operations and net income representing the aforementioned $45.2 million charged to operating profit offset by $15.8 million of income tax benefit related to the above charge, and a $12.8 million previously unrecognized prior year contingent tax benefit related to certain severance obligations to certain of Wendy’s/Arby’s former executives.

(9)

Reflects a significant charge recorded during 2006 as follows: $9.0 million charged to loss from continuing operations and net loss representing a $14.1 million loss on early extinguishments of debt related to conversions or effective conversions of Wendy’s/Arby’s 5% convertible notes due 2023 and prepayments of term loans under Wendy’s/Arby’s senior secured term loan facility, partially offset by an income tax benefit of $5.1 million related to the above charge.

(Wendy’s/Arby’s Restaurants)

Omitted pursuant to General Instruction I of Form 10-K.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

This “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of Wendy’s/Arby’s Group, Inc. (“Wendy’s/Arby’s”) and Wendy’s/Arby’s Restaurants, LLC (“Wendy’s/Arby’s Restaurants”) should be read in conjunction with the consolidated financial statements and the related notes that appear elsewhere within this report. Certain statements we make under this Item 7 constitute “forward-looking statements” under the Private Securities Litigation Reform Act of 1995. See “Special Note Regarding Forward-Looking Statements and Projections” in “Part 1” preceding “Item 1 - Business.” You should consider our forward-looking statements in light of the risks discussed under the heading “Risk Factors” in Item 1A above, as well as our consolidated financial statements, related notes, and other financial information appearing elsewhere in this report and our other filings with the Securities and Exchange Commission.

Except where otherwise indicated, this discussion relates to the consolidated financial statements for both Wendy’s/Arby’s and Wendy’s/Arby’s Restaurants (the “Companies”). References herein to Wendy’s/Arby’s corporate (“Corporate”) represents Wendy’s/Arby’s parent company functions only and their effect on the consolidated results of operations and financial condition.

Wendy’s/Arby’s is the parent company of its 100% owned subsidiary holding company Wendy’s/Arby’s Restaurants. Wendy’s/Arby’s Restaurants is the parent company of Wendy’s International, Inc. (“Wendy’s”) and Arby’s Restaurant Group, Inc. (“Arby’s”), which are the owners and franchisors of the Wendy’s® and Arby’s® restaurant systems, respectively. On September 29, 2008, Wendy’s/Arby’s (formerly Triarc Companies, Inc. or “Triarc”) completed the merger (the “Wendy’s Merger”) with Wendy’s described below under “Introduction and Executive Overview – Merger with Wendy’s International, Inc.”

Wendy’s/Arby’s Restaurants sole asset at formation consisted of the contribution by Wendy’s/Arby’s of its investment in Wendy’s. In March 2009, Wendy’s/Arby’s contributed its longstanding investment in Arby’s to Wendy’s/Arby’s Restaurants. Wendy’s/Arby’s Restaurants has no operations other than those of Wendy’s and Arby’s and their respective subsidiaries.

The Wendy’s Merger was completed on the first day of our 2008 fourth quarter and the results of operations of Wendy’s are included in our results beginning in the fourth quarter of 2008. The results of operations discussed below for 2008 are not indicative of future results due to the consummation of the Wendy’s Merger.

Introduction and Executive Overview

Our Business

We currently manage and internally report our operations as two business segments: the operation and franchising of Wendy’s restaurants, including its wholesale bakery operations, and the operation and franchising of Arby’s restaurants. As of January 2, 2011, the Wendy’s restaurant system was comprised of 6,576 restaurants, of which 1,394 were owned and operated by the Companies. As of January 2, 2011, the Arby’s restaurant system was comprised of 3,649 restaurants, of which 1,144 were owned and operated by the Companies. The 2,538 Wendy’s and Arby’s company-owned restaurants are located principally in the United States and to a lesser extent in Canada (the “North America Restaurants”). In January 2011, we announced that we are exploring strategic alternatives for Arby’s, including a sale of the brand.

Wendy’s and Arby’s revenues and operating results have been impacted by a number of factors, including generally negative sales and traffic trends in the restaurant industry, high unemployment, negative general economic trends and intense price competition.

We continue to believe there are long-term growth opportunities for our brands. Wendy’s opportunities include (1) product innovation, (2) a continued emphasis on our everyday value menu, (3) expanding dayparts, (4) modernizing our facilities, (5) new unit development, and (6) expanding internationally. Our Arby’s opportunities include (1) our value strategy, which includes our everyday affordability proposition, (2) our remodeling program, (3) a new brand positioning to be introduced in 2011, and (4) product innovation.

As of January 2, 2011, there were approximately 350 Arby’s franchised restaurants with amounts payable to Arby’s for royalties, rent and/or other fees that were at least 60 days past due. The financial condition of a number of Arby’s franchisees was one of the factors that resulted in a net decrease of 44 and 31 in the number of franchised restaurants for fiscal 2010 and 2009, respectively. During those periods 96 and 74 franchised Arby’s restaurants were closed, respectively. The trend of declining sales at franchised Arby’s restaurants has resulted in decreases in royalties and other franchise revenues. In addition, Arby’s franchisee accounts receivable and related allowance for doubtful accounts have increased significantly, and may continue to grow, as a result of the continued deteriorating financial condition of some of our franchisees. Franchisees’ financial difficulties and the closure of franchised restaurants have also caused reductions in the contributions to and extent of advertising programs. Continuation of these trends would affect our revenues and may have a material adverse effect on our results of operations and financial condition.

Restaurant business revenues for 2010 include: (1) $2,946.8 million of sales from company-owned restaurants, (2) $98.5 million from the sale of bakery items and kids’ meal promotion items to our franchisees, (3) $345.0 million from royalty income from franchisees, and (4) $26.1 million of other franchise related revenue and other revenues. Most of our Wendy’s and Arby’s royalty agreements provided for royalties of 4.0% of franchise revenues for the year ended January 2, 2011.

Key Business Measures

We track our results of operations and manage our business using the following key business measures:

Same-Store Sales

We report Wendy’s North America Restaurants same-store sales commencing after a store has been open for at least 15 continuous months as of the beginning of the fiscal year. Arby’s North America Restaurants same-store sales are reported after a store has been open for 15 continuous months. These methodologies are consistent with the metrics used by our management for internal reporting and analysis. Same-store sales exclude the impact of currency translation.

Restaurant Margin

We define restaurant margin as sales from company-owned restaurants less cost of sales divided by sales from company-owned restaurants. Cost of sales includes food and paper, restaurant labor, and occupancy, advertising and other operating costs. Sales and cost of sales exclude amounts related to bakery items and kids’ meal promotion items sold to franchisees. Restaurant margin is influenced by factors such as restaurant openings and closures, price increases, the effectiveness of our advertising and marketing initiatives, featured products, product mix, the level of our fixed and semi-variable costs, and fluctuations in food and labor costs.

Merger with Wendy’s International, Inc.

On September 29, 2008, Wendy’s/Arby’s completed the Wendy’s Merger in an all-stock transaction in which Wendy’s shareholders received 4.25 shares of Wendy’s/Arby’s Class A common stock for each share of Wendy’s common stock owned. Immediately prior to the Wendy’s Merger, each share of Wendy’s/Arby’s Class B common stock was converted into Class A common stock on a one for one basis (the “Conversion”). As a result of the May 28, 2009 amendment and restatement of Wendy’s/Arby’s Certificate of Incorporation, Wendy’s/Arby’s Class A common stock is now referred to as “Common Stock.”

Credit Agreement

As further described in “Liquidity and Capital Resources – Long-term Debt – Credit Agreement” below, on May 24, 2010, Wendy’s/Arby’s Restaurants, entered into a $650.0 million Credit Agreement (the “Credit Agreement”), which includes a $500.0 million senior secured term loan facility (the “Term Loan”) and a $150.0 million senior secured revolving credit facility (the “Credit Facility”).

The Companies recognized a loss on early extinguishment of debt of $26.2 million in the second quarter of 2010 primarily related to the repayment of the Wendy’s 6.25% senior notes from the proceeds of the Term Loan. This loss consisted of (1) a $15.0 million premium payment required to redeem the Wendy’s 6.25% senior notes, (2) $5.5 million for the write-off of the unaccreted discount of the Wendy’s 6.25% senior notes (recorded in connection with the Wendy’s Merger), and (3) $5.7 million for the write-off of deferred costs associated with the repayment of the prior senior secured term loan.

Senior Notes

On June 23, 2009, Wendy’s/Arby’s Restaurants issued $565.0 million principal amount of Senior Notes (the “Senior Notes”). The Senior Notes will mature on July 15, 2016 and accrue interest at 10.00% per annum, payable semi-annually on January 15 and July 15, the first payment of which was made on January 15, 2010. The Senior Notes were issued at 97.533% of the principal amount, representing a yield to maturity of 10.50% and resulting in net proceeds of $551.1 million. The $13.9 million discount is being accreted and the related charge included in “Interest expense” until the Senior Notes mature. The Senior Notes are fully and unconditionally guaranteed, jointly and severally, on an unsecured basis by certain direct and indirect domestic subsidiaries of Wendy’s/Arby’s Restaurants (collectively, the “Guarantors”).

Deerfield

(Wendy’s/Arby’s)

On December 21, 2007, Wendy’s/Arby’s sold its 63.6% capital interest in Deerfield & Company, LLC (“Deerfield”), an asset management business and a subsidiary of Wendy’s/Arby’s until its sale, to Deerfield Capital Corp (“DFR”) (the “Deerfield Sale”). The Deerfield Sale resulted in non-cash proceeds to Wendy’s/Arby’s aggregating $134.6 million, consisting of (1) 9.6 million convertible preferred shares (the “Preferred Stock”) of a subsidiary of DFR with an estimated fair value of $88.4 million at the date of the Deerfield Sale and (2) $48.0 million principal amount of series A senior secured notes of DFR due in December 2012 (the “DFR Notes”) with an estimated fair value of $46.2 million at the date of the Deerfield Sale.

On March 11, 2008, DFR stockholders approved the one-for-one conversion of all its outstanding convertible preferred stock into DFR common stock, which converted the Preferred Stock held by Wendy’s/Arby’s into a like number of shares of DFR common stock. On March 11, 2008, Wendy’s/Arby’s Board of Directors approved the distribution of the shares of DFR common stock then held by

Wendy’s/Arby’s to Wendy’s/Arby’s stockholders. The distribution in the form of a dividend, which was valued at $14.5 million, was paid in 2008 to holders of record of Wendy’s/Arby’s then outstanding Class A common stock and Class B common stock.

In March 2008, in response to unanticipated credit and liquidity events in the first quarter of 2008, DFR announced that it was repositioning its investment portfolio to focus on agency-only residential mortgage-backed securities and away from its principal investing segment to its asset management segment with its fee-based revenue streams. In addition, it stated that during the first quarter of 2008, its portfolio was adversely impacted by deterioration of the global credit markets and, as a result, it sold $2.8 billion of its agency and $1.3 billion of its AAA-rated non-agency mortgage backed securities and reduced the net notional amount of interest rate swaps used to hedge a portion of its mortgage-backed securities by $4.2 billion, all at a net after-tax loss of $294.3 million to DFR.

Based on these events described above and their negative effect on the market price of DFR common stock, Wendy’s/Arby’s concluded that the fair value and, therefore, the carrying value of its investment in the DFR common shares was impaired. As a result, as of March 11, 2008 Wendy’s/Arby’s recorded an other than temporary loss, which is included in “Other than temporary losses on investments,” for the year ended December 28, 2008 of $68.1 million. As a result of the subsequent distribution of the DFR common stock, the income tax loss that resulted from the decline in value of $68.1 million was not deductible for income tax purposes and no income tax benefit was recorded related to this loss.

During the fourth quarter of 2008, Wendy’s/Arby’s recognized an allowance for collectability of $21.2 million to reduce the then carrying amount of the DFR Notes to $25.0 million. On June 9, 2010, pursuant to a March 2010 agreement between Wendy’s/Arby’s and DFR, Wendy’s/Arby’s received cash proceeds of $31.3 million, including interest, in consideration for the repayment and cancellation of the DFR Notes. The proceeds represented 64.1% of the $48.0 million aggregate principal amount of the DFR Notes. Wendy’s/Arby’s recognized income of $4.9 million during the year ended January 2, 2011 as the repayment proceeds exceeded the carrying value of the DFR Notes. This gain is included in “Investment income (expense), net.”

Related Party Transactions

Supply Chain Relationship Agreement

QSCC’s supply chain management facilitates the continuity of supply and provides consolidated purchasing efficiencies while monitoring and seeking to minimize possible obsolete inventory throughout the Wendy’s North America supply chain. The system’s purchasing function for 2009 and prior was performed and paid for by Wendy’s. In order to facilitate the orderly transition of the 2010 purchasing function for North America operations, Wendy’s transferred certain contracts, assets and certain Wendy’s purchasing employees to QSCC in the first quarter of 2010. Pursuant to the terms of the Co-op Agreement, Wendy’s was required to pay $15.5 million to QSCC over an 18 month period through May 2011 in order to provide funding for start-up costs, operating expenses and cash reserves. The required payments by Wendy’s under the Co-op Agreement were expensed in the fourth quarter of 2009 and included in “General and administrative.” Wendy’s made payments of $15.2 million in 2010. In addition to the initial funding by Wendy’s, since the third quarter of 2010, all QSCC members (including Wendy’s) began paying sourcing fees on products sourced through QSCC. Such sourcing fees will be the primary means of funding QSCC’s operations after the initial funding by Wendy’s is completed. In connection with the ongoing operations of QSCC during 2010, QSCC reimbursed Wendy’s $0.9 million for amounts Wendy’s had paid primarily for payroll-related expenses for certain Canadian QSCC purchasing employees. Effective January 4, 2010, the QSCC leased 9,333 square feet of office space from Wendy’s for a two year period for an average annual rental of $0.1 million with five one-year renewal options.

ARCOP, Inc. (“ARCOP”), a not-for-profit purchasing cooperative, negotiates contracts with approved suppliers on behalf of Arby’s and Arby’s franchisees and operates under a previously established agreement similar to the Wendy’s Co-op Agreement.

Revolving credit facilities

In December 2009, and as amended in February and August 2010, AFA Service Corporation (“AFA”) entered into a revolving loan agreement with Arby’s. The terms of this agreement allow AFA to have revolving loans of up to $14.0 million outstanding with an expiration date of March 2012 and bearing interest at 7.5% per annum. In February 2011, the maximum principal amount of revolving loans was reduced to $11.0 million. As of January 2, 2011, the outstanding revolving loan balance was $4.5 million.

Strategic Sourcing Group Agreement

On April 5, 2010, QSCC and ARCOP, in consultation with Wendy’s/Arby’s Restaurants, established Strategic Sourcing Group Co-op, LLC (“SSG”). SSG was formed to manage and operate purchasing programs which combine the purchasing power of both Wendy’s and Arby’s company-owned and franchised restaurants to create buying efficiencies for certain non-perishable goods, equipment and services.

In order to facilitate the orderly transition of this purchasing function for the Companies’ North America operations, Wendy’s/Arby’s Restaurants transferred certain contracts, assets and certain Wendy’s/Arby’s Restaurants purchasing employees to SSG in the second quarter of 2010. Wendy’s/Arby’s Restaurants had committed to pay approximately $5.2 million of SSG expenses, which were expensed in 2010 and included in “General and administrative,” and was to be paid over a 24 month period through March 2012. We made payments of $2.0 million in 2010. Effective April 5, 2010, the SSG leased 2,300 square feet of office space from Arby’s until December 31, 2016, unless terminated earlier, for an annual base rental of $51 thousand.

Should a sale of Arby’s occur as discussed in “Introduction and Executive Overview – Our Business” herein, under the change of control provisions in the agreement that established SSG, the activities of SSG would be wound up. In the wind up process, the assets, personnel and functions of SSG would be transferred to QSCC and ARCOP as such parties and Wendy’s/Arby’s Restaurants agree. In contemplation of a possible sale, the parties are in discussion regarding the dissolution of SSG and transferring SSG’s assets, personnel and functions to QSCC and ARCOP.

(Wendy’s/Arby’s)

Equities Account

In 2005, Wendy’s/Arby’s invested $75.0 million in brokerage accounts (the “Equities Account”), which were managed by a management company (the “Management Company”) formed by the Chairman and then Chief Executive Officer and the Vice Chairman and then President and Chief Operating Officer of Wendy’s/Arby’s (the “Former Executives”) and a director, who is Wendy’s/Arby’s former Vice Chairman (collectively with the Former Executives, the “Principals”). The Equities Account was invested principally in equity securities, cash equivalents and equity derivatives of a limited number of publicly-traded companies. In addition, the Equities Account sold securities short and invested in market put options in order to lessen the impact of significant market downturns.

On June 10, 2009, Wendy’s/Arby’s and the Management Company entered into a withdrawal agreement (the “Withdrawal Agreement”) which provided that Wendy’s/Arby’s would be permitted to withdraw all amounts in the Equities Account on an accelerated basis (the “Early Withdrawal”) effective no later than June 26, 2009. Prior to the Withdrawal Agreement and as a result of an investment management agreement with the Management Company, which was terminated on June 26, 2009, Wendy’s/Arby’s had not been permitted to withdraw any amounts from the Equities Account until December 31, 2010, although $47.0 million was released from the Equities Account in 2008 subject to an obligation to return that amount to the Equities Account by a specified date. In consideration for obtaining such Early Withdrawal right, Wendy’s/Arby’s agreed to pay the Management Company $5.5 million (the “Withdrawal Fee”), was not required to return the $47.0 million referred to above and was no longer obligated to pay investment management and incentive fees to the Management Company. The Equities Account investments were liquidated in June 2009 for $37.4 million (the “Equities Sale”), of which $31.9 million was received by Wendy’s/Arby’s, net of the Withdrawal Fee, and for which Wendy’s/Arby’s realized a gain of $2.3 million in 2009, which are both included in “Investment income (expense), net.”

Sublease of New York Office Space

In July 2008 and July 2007, Wendy’s/Arby’s entered into agreements under which the Management Company is subleasing office space on two of the floors of Wendy’s/Arby’s former New York headquarters. During the second quarter of 2010, Wendy’s/Arby’s and the Management Company entered into an amendment to the sublease, effective April 1, 2010, pursuant to which the Management Company’s early termination right was cancelled in exchange for a reduction in rent. Under the terms of the amended sublease, the sublease is not cancelable prior to the expiration of the prime lease and the Management Company pays rent to Wendy’s/Arby’s in an amount that covers substantially all of Wendy’s/Arby’s rent obligations under the prime lease for the subleased space.

Services Agreements

Wendy’s/Arby’s and the Management Company entered into a new services agreement (the “New Services Agreement”), which commenced on July 1, 2009 and will continue until June 30, 2011, unless sooner terminated. Under the New Services Agreement, the Management Company assists Wendy’s/Arby’s with strategic merger and acquisition consultation, corporate finance and investment banking services and related legal matters. Pursuant to the terms of this agreement, Wendy’s/Arby’s is paying the Management Company a service fee of $0.25 million per quarter, payable in advance commencing July 1, 2009. In addition, in the event the Management Company provides substantial assistance to Wendy’s/Arby’s in connection with a merger or acquisition, corporate finance and/or similar transaction that is consummated at any time during the period commencing on the date the New Services Agreement was executed and ending six months following the expiration of its term, Wendy’s/Arby’s will negotiate a success fee to be paid to the Management Company which is reasonable and customary for such transactions.

Under a prior services agreement which commenced on June 30, 2007 and expired on June 30, 2009, (the “Services Agreement”) the Management Company provided a broader range of professional and strategic services to Wendy’s/Arby’s in connection with its 2007 restructuring and the related transition of executive management responsibilities.

The Companies paid approximately $2.5 million and $5.4 million in 2010 and 2009, respectively, in fees for corporate finance advisory services under the New Services Agreement in connection with the negotiation and execution of the Credit Agreement in 2010 and the issuance of the Senior Notes in 2009.

Liquidation Services Agreement

On June 10, 2009, Wendy’s/Arby’s and the Management Company entered into a liquidation services agreement (the “Liquidation Services Agreement”) pursuant to which the Management Company assists Wendy’s/Arby’s in the sale, liquidation or other disposition of its cost investments and DFR Notes (the “Legacy Assets”), which are not related to the Equities Account. As of the date of the Liquidation Services Agreement, the Legacy Assets were valued at $36.6 million (the “Target Amount”), of which $5.1 million was owned by Wendy’s/Arby’s Restaurants. The Liquidation Services Agreement, which expires June 30, 2011, required Wendy’s/Arby’s to pay the Management Company a fee of $0.9 million in two installments in June 2009 and 2010, which is being amortized over the term of the agreement and included in “General and administrative.” In addition, in the event that any or all of the Legacy Assets are sold, liquidated or otherwise disposed of and the aggregate net proceeds to us are in excess of the Target Amount, Wendy’s/Arby’s would be required to pay the Management Company a success fee equal to 10% of the aggregate net proceeds in excess of the Target Amount. Assuming a current liquidation of all remaining Legacy Assets, the aggregate proceeds ($32.2 million as of January 2, 2011 primarily related to the cancellation and repayment of the DFR Notes) would not be expected to be in excess of the Target Amount.

Aircraft Agreement

In August 2007, Wendy’s/Arby’s entered into time share agreements under which the Former Executives and the Management Company used two Wendy’s/Arby’s corporate aircraft in exchange for payment of certain incremental flight and related costs of such aircraft. Those time share agreements expired during the second quarter of 2009 and, in the third quarter of 2009, one of the aircraft was sold to an unrelated third party.

In June 2009, Wendy’s/Arby’s and TASCO, LLC (an affiliate of the Management Company) (“TASCO”) entered into an aircraft lease agreement (the “Aircraft Lease Agreement”) for the other aircraft that was previously under a time share agreement. The Aircraft Lease Agreement originally provided that Wendy’s/Arby’s would lease such corporate aircraft to TASCO from July 1, 2009 until June 30, 2010. On June 24, 2010, Wendy’s/Arby’s and TASCO renewed the Aircraft Lease Agreement for an additional one year period (expiring June 30, 2011). Under the Aircraft Lease Agreement, TASCO pays $10 thousand per month for such aircraft plus substantially all operating costs of the aircraft including all costs of fuel, inspection, servicing and storage, as well as operational and flight crew costs relating to the operation of the aircraft, and all transit maintenance costs and other maintenance costs required as a result of TASCO’s usage of the aircraft. Wendy’s/Arby’s continues to be responsible for calendar-based maintenance and any extraordinary and unscheduled repairs and/or maintenance for the aircraft, as well as insurance and other costs. The Aircraft Lease Agreement may be terminated by Wendy’s/Arby’s without penalty in the event it sells the aircraft to a third party, subject to a right of first refusal in favor of the Management Company with respect to such a sale.

Presentation of Financial Information

The Companies’ fiscal reporting periods consist of 52 or 53 weeks ending on the Sunday closest to December 31 and are referred to herein as (1) “the year ended January 2, 2011” or “2010”, which consisted of 52 weeks, (2) “the year ended January 3, 2010” or “2009”, which consisted of 53 weeks and (3) “the year ended December 28, 2008” or “2008” which consisted of 52 weeks. All references to years and quarters relate to fiscal periods rather than calendar periods. Certain percentage changes between these years are considered not measurable or non meaningful (“n/m”).

Results of Operations

For each of Wendy’s/Arby’s and Wendy’s/Arby’s Restaurants, the following tables included throughout Item 7 set forth the consolidated results of operations for the years ended January 2, 2011, January 3, 2010, and December 28, 2008 (dollars in millions, except company-owned average unit volumes which are in thousands):

(Wendy’s/Arby’s)

	2010						2009						2008
	Amount			Change			Amount			Change			Amount
Revenues:
Sales	$	3,045.3		$	(153.0	)	$	3,198.3		$	1,536.0		$	1,662.3
Franchise revenues		371.1			(11.4	)		382.5			222.0			160.5
		3,416.4			(164.4	)		3,580.8			1,758.0			1,822.8
Costs and expenses:
Cost of sales		2,610.8			(117.6	)		2,728.4			1,312.9			1,415.5
General and administrative		416.6			(36.1	)		452.7			204.0			248.7
Depreciation and amortization		182.2			(8.1	)		190.3			102.0			88.3
Goodwill impairment		-			-			-			(460.1	)		460.1
Impairment of long-lived assets		69.4			(12.7	)		82.1			62.9			19.2
Facilities relocation and restructuring		-			(11.0	)		11.0			7.1			3.9
Other operating expense, net		5.0			0.7			4.3			3.6			0.7
		3,284.0			(184.8	)		3,468.8			1,232.4			2,236.4
Operating profit (loss)		132.4			20.4			112.0			525.6			(413.6	)
Interest expense		(137.2	)		(10.5	)		(126.7	)		(59.7	)		(67.0	)
Loss on early extinguishment of debt		(26.2	)		(26.2	)		-			-			-
Investment income (expense), net		5.2			8.2			(3.0	)		(12.4	)		9.4
Other than temporary losses on investments		-			3.9			(3.9	)		108.8			(112.7	)
Other income, net		3.8			2.3			1.5			(1.2	)		2.7
Loss from continuing operations before income taxes		(22.0	)		(1.9	)		(20.1	)		561.1			(581.2	)
Benefit from income taxes		17.7			(5.9	)		23.6			(75.7	)		99.3
(Loss) income from continuing operations		(4.3	)		(7.8	)		3.5			485.4			(481.9	)
Income from discontinued operations, net of income taxes		-			(1.6	)		1.6			(0.6	)		2.2
Net (loss) income	$	(4.3	)	$	(9.4	)	$	5.1		$	484.8		$	(479.7	)

(Wendy’s/Arby’s Restaurants)

	2010						2009						2008
	Amount			Change			Amount			Change			Amount
Revenues:
Sales	$	3,045.3		$	(153.0	)	$	3,198.3		$	1,536.0		$	1,662.3
Franchise revenues		371.1			(11.4	)		382.5			222.0			160.5
		3,416.4			(164.4	)		3,580.8			1,758.0			1,822.8
Costs and expenses:
Cost of sales		2,610.8			(117.6	)		2,728.4			1,312.9			1,415.5
General and administrative		408.4			(34.3	)		442.7			229.5			213.2
Depreciation and amortization		180.3			(8.2	)		188.5			103.5			85.0
Goodwill impairment		-			-			-			(460.1	)		460.1
Impairment of long-lived assets		69.4			(10.6	)		80.0			70.4			9.6
Facilities relocation and restructuring		-			(8.0	)		8.0			4.8			3.2
Other operating expense, net		5.2			2.0			3.2			2.5			0.7
		3,274.1			(176.7	)		3,450.8			1,263.5			2,187.3
Operating profit (loss)		142.3			12.3			130.0			494.5			(364.5	)
Interest expense		(136.2	)		(10.8	)		(125.4	)		(58.5	)		(66.9	)
Loss on early extinguishment of debt		(26.2	)		(26.2	)		-			-			-
Other income (expense), net		2.7			5.7			(3.0	)		(6.2	)		3.2
(Loss) income before income taxes		(17.4	)		(19.0	)		1.6			429.8			(428.2	)
Benefit from income taxes		14.8			6.8			8.0			(55.1	)		63.1
Net (loss) income	$	(2.6	)	$	(12.2	)	$	9.6		$	374.7		$	(365.1	)

	2010				2009				2008
Sales:
Wendy’s (a)	$	1,980.6			$	2,035.2			$	504.7
Arby’s		966.2				1,064.1				1,131.4
Bakery and kids’ meal promotion items sold to franchisees		98.5				99.0				26.2
Total sales	$	3,045.3			$	3,198.3			$	1,662.3


Cost of sales:			% of Sales				% of Sales				% of Sales
Wendy’s (a)
Food and paper	$	638.8		32.2%	$	654.1		32.2%	$	175.6		34.8%
Restaurant labor		590.0		29.8%		615.2		30.2%		152.7		30.2%
Occupancy, advertising, and other operating costs		458.6		23.2%		462.2		22.7%		117.4		23.3%
Total Wendy’s cost of sales		1,687.4		85.2%		1,731.5		85.1%		445.7		88.3%

Arby’s
Food and paper		265.1		27.4%		290.6		27.3%		322.8		28.5%
Restaurant labor		317.7		32.9%		332.8		31.3%		339.6		30.0%
Occupancy, advertising, and other operating costs		271.0		28.1%		293.0		27.5%		287.3		25.4%
Total Arby’s cost of sales		853.8		88.4%		916.4		86.1%		949.7		83.9%

Bakery and kids’ meal promotion items sold to franchisees		69.6		n/m		80.5		n/m		20.1		n/m
Total cost of sales	$	2,610.8		85.7%	$	2,728.4		85.3%	$	1,415.5		85.2%

		2010		2009		2008
Margin $:
Wendy’s (a)	$	293.2	$	303.7	$	59.0
Arby’s		112.4