Wendy's 2010 Annual Report Download - page 14

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.
Effective February 2011, certain lenders are offering financing to Wendy’s United States franchisees to purchase
new equipment and smallwares and modify other equipment needed to implement Wendy’s new hamburger product
roll out. Wendy’s has agreed to subsidize a portion of the interest that would otherwise be payable by the franchisees
participating in this financing program. The financing program is expected to end in September 2011.
See “Management Discussion and Analysis—Liquidity and Capital Resources—Guarantees and Other
Contingencies” in Item 7 herein, for further information regarding guarantee obligations.
Franchised restaurants are required to be operated under uniform operating standards and specifications relating
to the selection, quality and preparation of menu items, signage, decor, equipment, uniforms, suppliers, maintenance
and cleanliness of premises and customer service. Wendy’s monitors franchisee operations and inspects restaurants
periodically to ensure that required practices and procedures are being followed.
See Note 5 and Note 23 of the Financial Statements and Supplementary Data included in Item 8 herein, and
the information under “Management’s Discussion and Analysis” in Item 7 herein, for further information regarding
reserves, commitments and contingencies involving franchisees.
Advertising and Marketing
In the United States and Canada, Wendy’s advertises nationally on network and cable television programs,
including nationally televised events. Locally in the United States and Canada, Wendy’s primarily advertises through
regional network and cable television, radio and newspapers. Wendy’s participates in two national advertising funds
established to collect and administer funds contributed for use in advertising through television, radio, newspapers,
the Internet and a variety of promotional campaigns. Separate national advertising funds are administered for
Wendy’s United States and Canadian locations. Contributions to the national advertising funds are required to be
made from both company-owned and franchised restaurants and are based on a percent of restaurant retail sales. In
addition to the contributions to the national advertising funds, Wendy’s requires additional contributions to be made
for both company-owned and franchised restaurants based on a percent of restaurant retail sales for the purpose of
local and regional advertising programs. Required franchisee contributions to the national advertising funds and for
local and regional advertising programs are governed by the Wendy’s Unit Franchise Agreement. Required
contributions by company-owned restaurants for advertising and promotional programs are at the same percent of
retail sales as franchised restaurants within the Wendy’s system. Currently the contribution rate for United States and
Canadian restaurants is generally 3% of retail sales for national advertising and 1% of retail sales for local and regional
advertising.
See Note 26 of the Financial Statements and Supplementary Data included in Item 8 herein, for further
information regarding advertising.
International Operations and Franchising
As of January 2, 2011, Wendy’s had 136 company-owned and 232 franchised restaurants in Canada and 325
franchised restaurants in 22 other countries and U.S. territories. Wendy’s is aggressively pursuing international
development opportunities. Since the second quarter of 2009, new development agreements have been announced for
Wendy’s locations in Singapore, Trinidad and Tobago and 8 other eastern Caribbean countries, Argentina, and the
Philippines and dual branded Wendy’s and Arby’s locations in the United Arab Emirates and 11 other countries in
the Middle East and North Africa, and the Russian Federation. In March 2011, Wendy’s also announced that it had
entered into a joint venture to develop Wendy’s restaurants in Japan. Wendy’s has granted development rights in the
certain countries and U. S. territories listed under Item 2 of this Form 10-K.
Wendy’s Restaurants of Canada Inc. (“WROC”), a 100% 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
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