Wendy's 2010 Annual Report Download - page 142

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)
The Companies’ advertising expenses in 2010, 2009 and 2008 totaled $169,704, $182,008, and $110,849,
respectively.
(27) Business Segments
The Companies manage and internally report their operations in two segments: (1) the operation and
franchising of Wendy’s restaurants and (2) the operation and franchising of Arby’s restaurants. We evaluate segment
performance and allocate resources based on each segment’s operating profit (loss).
The Wendy’s restaurants segment is operated through franchised and company-owned Wendy’s quick service
restaurants specializing in hamburger sandwiches. The franchised restaurants are principally located throughout the
United States and, to a lesser extent, in 23 foreign countries and U. S. territories with the largest number in Canada.
Company-owned restaurants are located in 30 states, with the largest number in Florida, Illinois, Pennsylvania, Ohio,
and Texas. Wendy’s restaurants offer an extensive menu featuring hamburgers, filet of chicken breast sandwiches,
chicken nuggets, chili, side dishes, freshly prepared salads, soft drinks, milk, Frosty®desserts, floats and kids’ meals.
In addition, the restaurants sell a variety of promotional products on a limited basis. The Bakery is a producer of buns
for Wendy’s restaurants, and to a lesser extent for outside parties including certain distributors to the Arby’s system.
The Arby’s restaurants segment is operated through franchised and company-owned Arby’s quick service
restaurants specializing in slow-roasted roast beef sandwiches. The franchised restaurants are principally located
throughout the United States, and to a much lesser extent, in four other countries; principally in Canada. Company-
owned restaurants are located in 27 states, with the largest number in Michigan, Ohio, Indiana, Georgia, and Florida.
Arby’s restaurants also offer an extensive menu of, chicken, turkey and ham sandwiches, side dishes, snacks, soft
drinks and milk, including its Market Fresh®sandwiches, salads, wraps and toasted subs.
We had no customers which accounted for 10% or more of consolidated revenues in 2010, 2009 or 2008. As of
January 2, 2011, the Wendy’s restaurants segment had one main in-line distributor of food, packaging and beverage
products, excluding produce and breads, that serviced approximately 67% of its company-owned and franchised
restaurants and two additional in-line distributors that, in the aggregate, serviced approximately 20% of its company-
owned and franchised restaurants. As of January 2, 2011, Arby’s restaurants segment had one main in-line distributor
of food, packaging and beverage products, excluding produce, breads and beverage products, that serviced
approximately 48% of Arby’s company-owned and franchised restaurants and four additional in-line distributors that,
in the aggregate, serviced approximately 47% of Arby’s company-owned and franchised restaurants. We believe that
our vulnerability to risk concentrations in our restaurant segments related to significant vendors and sources of its raw
materials is mitigated as we believe that there are other vendors who would be able to service our requirements.
However, if a disruption of service from any of our main in-line distributors was to occur, we could experience short-
term increases in our costs while distribution channels were adjusted.
Because our restaurant operations are generally located throughout the United States, and to a much lesser
extent, Canada and other foreign countries and U. S. territories, we believe the risk of geographic concentration is not
significant. Our restaurant segments could also be adversely affected by changing consumer preferences resulting from
concerns over nutritional or safety aspects of beef, poultry, French Fries or other products we sell or the effects of food
safety events or disease outbreaks. Our exposure to foreign exchange risk is primarily related to fluctuations in the
Canadian dollar relative to the U.S. dollar for Canadian operations in the Wendy’s restaurant segment. However, our
exposure to Canadian dollar foreign currency risk is mitigated by the fact that less than 10% of our restaurants are in
Canada.
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