Wendy's 2013 Annual Report Download - page 20

the Bakery and Confectionery Union and Industry International Pension Fund (the “Union Pension Fund”), a
multiemployer pension plan. The Bakery remitted contributions based on hours worked by covered, unionized
employees pursuant to a collective bargaining agreement that expired on March 31, 2013 and the Rehabilitation Plan
adopted by the Union Pension Fund in accordance with the provisions of the Pension Protection Act of 2006 due to
the underfunded status of the plan.
In December of 2013, the Bakery terminated its participation in the Union Pension Fund and formally notified
the plan’s trustees of its withdrawal from the plan. The Union Pension Fund administrator has acknowledged the
withdrawal, which required Wendy’s to assume an estimated withdrawal liability of $13.5 million based on the
applicable requirements of the Employee Retirement Income Security Act, as amended, and which has been included
in “Cost of sales.” The final withdrawal liability will be determined through discussions between the Bakery and the
Union Pension Fund administrator and the resolution of a charge filed with the National Labor Relations Board
related to the matter brought by the Bakery and Bakers Local No. 57, Bakery, Confectionery, Tobacco Workers &
Grain Millers International Union of America, AFL-CIO. The Bakery believes it has meritorious defenses to the
charge.
The unionized employees became eligible to participate in the 401(k) Plan as of December 5, 2013.
Complaints or litigation may hurt the Wendy’s brand.
Wendy’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 restaurant, or alleging that there was a problem with food quality or
operations at a Wendy’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. We
cannot estimate the aggregate possible range of loss due to most proceedings being in preliminary stages, with various
motions either yet to be submitted or pending, discovery yet to occur, and significant factual matters unresolved. In
addition, most cases seek an indeterminate amount of damages and many involve multiple parties. Predicting the
outcomes of settlement discussions or judicial or arbitral decisions are thus inherently difficult. 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 contributed 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
franchisees could also hurt our business as a whole.
We may not be able to adequately protect our intellectual property, which could harm the value of the Wendy’s
brand 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 brand 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
brand may be harmed, which could have a material adverse effect on our business, including the failure of our brand
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 brand to various franchisees. While we try to ensure that the quality of our brand 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 restaurant system.
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