Wendy's 2008 Annual Report Download - page 29

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 customary 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 governmental regulation 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. 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. 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 in July 2005. Under a court approved settlement of that lawsuit, ARG estimates that it will
spend approximately $1.15 million per year of capital expenditures over a seven-year period commencing 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.
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 December 28, 2008, we and our franchisees operated Wendy’s or Arby’s restaurants in 50 states and
21 foreign countries. As of December 28, 2008 as detailed in “Item 2. Properties”, the six leading states by
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