Wendy's 2008 Annual Report Download - page 44

Our primary goal is to enhance the value of our Company by:
•improving the quality and affordability of our core menu items;
•increasing traffic in the restaurants and revitalizing the Wendy’s and Arby’s brands with new
marketing programs, menu development and an improved customer experience;
•improving company-owned restaurant margins;
•achieving significant progress on synergies and efficiencies resulting from the Wendy’s Merger;
•reducing capital spending to maximize cash flow;
•expanding the breakfast daypart at many of our restaurants over the next several years; and
•the possibility of acquiring other restaurant brands.
Our restaurant businesses have recently experienced trends in the following areas:
Revenues
•Significant decreases in general consumer confidence in the economy as well as decreases in many
consumers’ discretionary income caused by factors such as continuing deterioration in the financial
markets and in economic conditions, including high unemployment levels and significant
displacement in the real estate market, significant fluctuations in fuel costs, and high food costs;
•Increasing price competition in the quick service restaurant (“QSR”) industry, as evidenced by (1)
value menu concepts, which offer comparatively lower prices on some menu items, (2) the use of
coupons and other price discounting, (3) many recent product promotions focused on lower prices
of certain menu items and (4) combination meal concepts, which offer a complete meal at an
aggregate price lower than the price of individual food and beverage items;
•Competitive pressures due to extended hours of operation by many QSR competitors, including
breakfast and late night hours;
•Competitive pressures from operators outside the QSR industry, such as the deli sections and in-
store cafes of major grocery and other retail store chains, convenience stores and casual dining
outlets offering prepared and take-out food purchases;
•Increased availability to consumers of product choices, including (1) healthy products driven by a
greater consumer awareness of nutritional issues, (2) products that tend to offer a variety of portion
sizes and more ingredients; (3) beverage programs which offer a wider selection of premium non-
carbonated beverages, including coffee and tea products and (4) sandwiches with perceived higher
levels of freshness, quality and customization; and
•Competitive pressures from an increasing number of franchise opportunities seeking to attract
qualified franchisees.
Cost of Sales
•Higher commodity prices which have increased our food costs during 2008, but have recently
moderated;
•The recent volatility in fuel prices which, when at much higher than current levels, contributed to
an increase in utility costs and distribution costs;
•Federal, state and local legislative activity, such as minimum wage increases and mandated health
and welfare benefits which have and are expected to continue to increase wages and related fringe
benefits, including health care and other insurance costs; and
•Legal or regulatory activity related to nutritional content or menu labeling which result in
increased operating costs.
Other
•Continued competition for development sites among QSR competitors and other businesses and
higher development costs associated with those sites; and
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