Wendy's 2008 Annual Report Download - page 14

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.
International Operations
Wendy’s has 138 company owned and 235 franchised restaurants in Canada and 352 franchised
restaurants in 20 other countries and U.S. territories. Wendy’s is evaluating further expansion into other
international markets. Wendy’s has granted development rights for the countries and U.S. territories listed
under Item 2 of this Form 10-K.
Franchised Restaurants
As of December 28, 2008, Wendy’s franchisees operated 5,224 Wendy’s restaurants in 50 states, Canada
and 20 other countries and U.S. 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 gross 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 currently does not offer any 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.
See “Management Discussion and Analysis—Liquidity and Capital Resources—Guarantees and Other
Contingencies” in Item 7 herein, for further information regarding guaranty obligations.
Wendy’s Restaurants of Canada, Inc. (“WROC”), a wholly 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 gross 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.
The rights and obligations governing franchisees who wish to develop outside the United States and
Canada are currently contained in the Franchise Agreement and Services Agreement (the “International
Agreements”). The International Agreements may be for an initial term of 10 years or 20 years depending on
the country and a 10-year renewal, subject to certain conditions. The term will expire with expiration of the
term of the lease for the restaurant site, if shorter. The International Agreements license the franchisee to use
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