Wendy's 2009 Annual Report Download - page 50

The percentage decrease in the Arby’s restaurant margin in 2008 as compared to 2007 was due to (1) the
effect of the decrease in Arby’s same-store sales without comparable reductions in fixed and semi-variable costs,
(2) higher utilities, (3) fuel costs under new distribution contracts that became effective in the third quarter of
2007, (4) increased advertising which was anticipated to generate additional customer traffic but did not, (5)
an increase in labor costs primarily due to the effect of Federal and state minimum wage increases in 2008 and
(6) higher cost of beef and other commodities.
Cost of Services
As a result of the Deerfield Sale, we did not incur any cost of services in 2009 or 2008. For 2007, our cost
of services was from the management of CDOs and Funds by Deerfield.
General and Administrative
2009 2008
Change
(In Millions)
Wendy’s Merger.......................................................... $161.7 $79.5
Wendy’s Co-op Agreement ................................................ 15.5 —
Integration costs related to the Wendy’s Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.3 2.3
Incentive compensation.................................................... 9.7 (9.8)
Provision for doubtful accounts............................................. 6.5 0.5
Salaries and wages ........................................................ 4.0 4.5
Services agreements ....................................................... (5.3) 3.5
Aircraft expenses.......................................................... (2.1) (0.4)
Asset management segment costs........................................... — (24.8)
Corporate Restructuring ................................................... — (14.0)
Relocation costs........................................................... — (2.2)
Other.................................................................... (0.3) 4.2
$204.0 $ 43.3
The increases for 2009 and 2008 were primarily due to the Wendy’s Merger as well as increases in (1)
integration costs related to the Wendy’s Merger which increased to $16.6 million in 2009 from $2.3 million
in 2008 and (2) salaries and wages due to staffing and other expenses associated with the establishment of the
shared services center in Atlanta, Georgia. Our 2009 general and administrative expenses were also
significantly impacted by (1) required future payments expensed in the 2009 fourth quarter as a result of the
Wendy’s Co-op Agreement, (2) increases in certain incentive compensation accruals due to stronger
consolidated operating performance versus plan in 2009 as compared to weaker consolidated operating
performance versus plan in 2008 and (3) an increase in the provision for doubtful accounts primarily associated
with the collectability of Arby’s franchisee receivables. The 2009 increases in general and administrative
expenses were partially offset by (1) a decrease in fees for the New Services Agreement, as compared to fees
incurred under the Services Agreement in 2008 and (2) a decrease in costs associated with our corporate aircraft
as a result of the termination of the time share agreements and the establishment of a new aircraft lease
agreement with the Principals and the Management Company, and the sale of one of the aircraft in 2009. Our
2008 general and administrative expenses were also impacted by an increase associated with the full year effect
of fees for professional and strategic services provided to us under the Services Agreement that became effective
in June 2007 as part of the Corporate Restructuring. The 2008 increases in general and administrative expenses
were partially offset by (1) expenses incurred in 2007 by our former asset management segment, which did not
recur in 2008 as a result of the Deerfield Sale in December 2007, (2) a decrease in corporate general and
administrative expenses as a result of the completion of our Corporate Restructuring which commenced in
2007, (3) a decrease in incentive compensation accruals due to weaker consolidated operating performance
versus plan in 2008 as compared to our operating performance versus plan in 2007 and (4) a decrease in
relocation costs principally attributable to additional costs in the prior year related to estimated declines in
market value and increased carrying costs for homes we purchased for resale from relocated employees.
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