Wendy's 2008 Annual Report Download - page 30

number of operating units were: Ohio, Florida, Texas, Michigan, Georgia and Pennsylvania. This geographic
concentration can cause economic conditions in particular areas of the country to have a disproportionate
impact on our overall results of operations. It is possible that adverse economic conditions in states or regions
that contain a high concentration of Wendy’s and Arby’s restaurants could have a material adverse impact on
our results of operations in the future.
Wendy’s and its subsidiaries, and ARG and its subsidiaries, are subject to various restrictions, and
substantially all of their non-real estate assets are pledged subject to certain restrictions, under a
Credit Agreement.
Under an amended and restated Credit Agreement entered into as of March 11, 2009 by Wendy’s and its
subsidiaries and ARG and its subsidiaries (collectively, the “Borrowers”), substantially all of the assets of the
Borrowers (other than real property) are pledged as collateral security. The amended and restated Credit
Agreement also contains financial covenants that, among other things, require the Borrowers to maintain
certain aggregate leverage and interest coverage ratios and restrict their ability to incur debt, pay dividends or
make other distributions, make certain capital expenditures, enter into certain fundamental transactions
(including sales of assets and certain mergers and consolidations) and create or permit liens. If the Borrowers
are unable to generate sufficient cash flow or otherwise obtain the funds necessary to make required payments
of interest or principal under, or are unable to comply with covenants of, the Credit Agreement, then they
would be in default under the terms of the agreement, which would preclude the payment of dividends to
Wendy’s/Arby’s Group, Inc., restrict access to their revolving lines of credit and, under certain circumstances,
permit the lenders to accelerate the maturity of the indebtedness. See Note 10 of the Financial Statements and
Supplementary Data included in Item 8 herein, for further information regarding the Credit Agreement.
We may not be able to adequately protect our intellectual property, which could harm the value of our
brands 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
brands 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 brands may be harmed, which could have a material adverse effect
on our business, including the failure of our brands 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 restaurant brands to various franchisees. While we try to ensure that the quality of our
brands 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 and/or Arby’s restaurant
system.
We have registered certain trademarks and have other trademark registrations pending in the United
States and certain foreign jurisdictions. The trademarks that we currently use have not been registered in all of
the countries outside of the United States in which we do business or may do business in the future and may
never be registered in all of these countries. We cannot assure you that all of the steps we have taken to protect
our intellectual property in the United States and foreign countries will be adequate. The laws of some foreign
countries do not protect intellectual property rights to the same extent as the laws of the United States.
In addition, we cannot assure you that third parties will not claim infringement by us in the future. Any
such claim, whether or not it has merit, could be time-consuming, result in costly litigation, cause delays in
introducing new menu items or investment products or require us to enter into royalty or licensing
agreements. As a result, any such claim could harm our business and cause a decline in our results of operations
and financial condition.
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