Wendy's 2008 Annual Report Download - page 31

Wendy’s has re-focused its breakfast initiative on key markets and reduced the number of restaurants
offering a breakfast menu from 1,070 to approximately 600 in 2008. The breakfast daypart remains
competitive and markets may prove difficult to penetrate.
The roll out and expansion of breakfast has been accompanied by challenging competitive conditions,
varied consumer tastes and discretionary spending patterns that differ from existing dayparts. In addition,
breakfast sales could cannibalize sales during other parts of the day and may have negative implications on food
and labor costs and restaurant margins. Wendy’s has re-focused its breakfast initiative on key markets and
reduced the number of restaurants offering a breakfast menu to approximately 600. Wendy’s will need to
reinvest royalties earned and other amounts to build breakfast brand awareness through greater investments in
advertising and promotional activities. Capital investments will also be required at company-owned
restaurants. As a result of the foregoing, breakfast sales and resulting profits may take longer to reach expected
levels.
Our international operations are subject to various factors of uncertainty and there is no assurance
that international operations will be profitable.
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, 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 and construction costs,
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 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.
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