Wendy's 2010 Annual Report Download - page 137

WENDY’S/ARBY’S GROUP, INC. AND SUBSIDIARIES
WENDY’S/ARBY’S RESTAURANTS, LLC AND SUBSIDIARIES
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(In Thousands Except Per Share Amounts)
Wendy’s. In order to facilitate the orderly transition of the 2010 purchasing function for North America
operations, Wendy’s transferred certain contracts, assets and certain Wendy’s purchasing employees to QSCC in
the first quarter of 2010. Pursuant to the terms of the Co-op Agreement, Wendy’s was required to pay $15,500
to QSCC over an 18 month period through May 2011 in order to provide funding for start-up costs, operating
expenses and cash reserves. The required payments by Wendy’s under the Co-op Agreement were expensed in the
fourth quarter of 2009 and included in “General and administrative.” Wendy’s made payments of $15,195 in
2010. In connection with the ongoing operations of QSCC during 2010, QSCC reimbursed Wendy’s $913 for
amounts Wendy’s had paid primarily for payroll-related expenses for certain Canadian QSCC purchasing
employees.
(c) ARCOP subleased approximately 4,500 square feet of the corporate headquarters office space from Arby’s in
2010, and 2,680 square feet in 2009 and 2008. The Arby’s Foundation, Inc. (the “Foundation”), a not-for-profit
charitable foundation in which Arby’s has non-controlling representation on the board of directors, subleased
approximately 3,800 square feet of the corporate headquarters office space from Arby’s in 2010, 2009 and 2008.
Effective January 4, 2010, QSCC subleased approximately 9,333 square feet of office space from
Wendy’s. Effective April 5, 2010, the SSG leased 2,300 square feet of office space from Arby’s. The Companies
received $104, $106, and $111, of sublease income from ARCOP in 2010, 2009, and 2008, respectively, $105,
$107 and $116 of sublease income from Foundation in 2010, 2009, and 2008, respectively, $113 of sublease
income from QSCC in 2010, and $24 of sublease income from SSG in 2010.
(d) In December 2009, and as amended in February and August 2010, AFA entered into a revolving loan agreement
with Arby’s. The terms of this agreement allow AFA to have revolving loans of up to $14,000 outstanding with
an expiration date of March 2012 and bearing interest at 7.5% per annum. In February 2011, the maximum
principal amount of revolving loans was reduced to $11,000. As of January 2, 2011 and January 3, 2010, the
outstanding revolving loan balance was $4,458 and $5,089, respectively. Arby’s received interest income of $463
and $4 in 2010 and 2009, respectively, which is included in “Other income (expense).”
(e) Beginning in January 2010 and through March 2010, Arby’s and most domestic Arby’s franchisees paid 1.2% of
sales as member dues to AFA. Beginning in April 2010 and for the remainder of 2010, the AFA Board approved
a dues increase based on a tiered rate structure for the payment of the advertising and marketing service fee
ranging between 1.4% and 3.6% of sales. As a result, the average Arby’s advertising and marketing service fee
percentage from April 2010 to the end of the 2010 fiscal year was approximately 2.3%. In addition, Arby’s
partially subsidized the top two rate tiers in 2010 thereby decreasing franchisees’ effective advertising and
marketing service fee percentages. This subsidy required payments by Arby’s of $2,635 to AFA in 2010.
Transactions with the Management Company
(f) Wendy’s/Arby’s and the Management Company entered into a new services agreement (the “New Services
Agreement”), which commenced on July 1, 2009 and will continue until June 30, 2011, unless sooner
terminated. Under the New Services Agreement, the Management Company assists us with strategic merger and
acquisition consultation, corporate finance and investment banking services and related legal matters. Pursuant to
the terms of this agreement, Wendy’s/Arby’s is paying the Management Company a service fee of $250 per
quarter, payable in advance commencing July 1, 2009. In addition, in the event the Management Company
provides substantial assistance to us in connection with a merger or acquisition, corporate finance and/or similar
transaction that is consummated at any time during the period commencing on the date the New Services
Agreement was executed and ending six months following the expiration of its term, Wendy’s/Arby’s will
negotiate a success fee to be paid to the Management Company which is reasonable and customary for such
transactions. In addition, Wendy’s/Arby’s incurred service fees of $1,000 in 2010, which are included in
“General and administrative.”
(g) The Companies paid approximately $2,465 and $5,368 in 2010 and 2009, respectively, in fees for corporate
finance advisory services under the New Services Agreement in connection with the negotiation and execution of
the Credit Agreement in 2010 and the issuance of the Senior Notes in 2009.
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