Wendy's 2009 Annual Report Download - page 14

territories listed under Item 2 of this Form 10-K. In addition, Wendy’s has granted development rights for
dual-branded Wendy’s and Arby’s restaurants in 12 countries in the Middle East and North Africa.
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 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.
Franchisees who wish to develop Wendy’s restaurants outside the United States and Canada enter into
agreements with Wendy’s that generally provide franchise rights for a restaurant for an initial term of 10 years
or 20 years, depending on the country, and typically include a 10-year renewal provision, subject to certain
conditions. If the restaurant site is leased by the franchisee, the term will expire with expiration of the term of
the lease, if shorter. The agreements license the franchisee to use the Wendy’s trademarks and know-how in the
operation of a Wendy’s restaurant at a specified location. Generally, the franchisee is required to pay Wendy’s a
technical assistance fee, which is typically US$30,000 for each restaurant, and monthly fees, which are typically
equal to 4% of the monthly sales of each restaurant. In certain foreign markets, Wendy’s and the franchisee
may sign a development agreement under which the franchisee undertakes to develop a specified number of
new Wendy’s restaurants in a stated territory based on a negotiated schedule. In some of the agreements, the
developer pays an upfront development fee that is credited against technical assistance fees incurred in the
future. In certain circumstances, Wendy’s and the franchisee may sign a master franchise agreement under
which the franchisee has the right to sub-franchise in a stated territory, subject to certain conditions.
We also evaluate non-franchise opportunities in international markets and may elect to develop a market
through a joint venture, licensing transaction or other arrangement or we may elect to open company-owned
restaurants in a market.
Franchised Restaurants
As of January 3, 2010, Wendy’s franchisees operated 5,150 Wendy’s restaurants in 49 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 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, or enter into guarantees of 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.
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