Wendy's 2010 Annual Report Download - page 15

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 operate Wendy’s restaurants outside the United States and Canada enter into
agreements with Wendy’s that generally provide franchise rights for each 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. 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 pays Wendy’s a technical assistance fee or an
other per restaurant fee and monthly fees based on a percentage of gross monthly sales of each restaurant. In certain
foreign markets, Wendy’s may grant the franchisee exclusivity to develop a territory in exchange for the franchisee
undertaking to develop a specified number of new Wendy’s restaurants in the territory based on a negotiated
schedule. In these instances, the franchisee generally pays Wendy’s an upfront development fee, annual development
fees or a per restaurant fee. In certain circumstances, Wendy’s may grant a franchisee the right to sub-franchise in a
stated territory, subject to certain conditions.
Wendy’s also continually evaluates non-franchise opportunities for development of Wendy’s restaurants in
international markets, including through joint ventures with third parties and opening company-owned restaurants.
The Arby’s Restaurant System
Arby’s is the largest restaurant franchising system specializing in the roast beef sandwich segment of the quick
service restaurant industry. According to Nation’s Restaurant News, Arby’s is the second largest sandwich chain
restaurant in the United States. In January 2011, Wendy’s/Arby’s announced that it is exploring strategic alternatives
for the Arby’s brand, including a sale of the brand.
As the franchisor of the Arby’s restaurant system, Arby’s, through its subsidiaries, owns and licenses the right to
use the Arby’s brand name and trademarks in the operation of Arby’s restaurants. Arby’s provides Arby’s franchisees
with services designed to increase both the revenue and profitability of their Arby’s restaurants. The most important
of these services are providing strategic leadership for the brand, product development, quality control, operational
training and counseling regarding site selection.
At January 2, 2011, there were 3,649 Arby’s restaurants in operation in North America and in 3 foreign
countries (other than Canada). Of these restaurants, 1,144 were operated by Arby’s and 2,505 by a total of 460
franchisees. See “Item 2. Properties” for a listing of the number of company-owned and franchised locations in the
United States and in foreign countries.
The revenues from the Arby’s restaurant business are derived from two principal sources: sales at company-
owned restaurants and franchise royalties received from all Arby’s franchised restaurants.
Arby’s also owns the T.J. Cinnamons®concept, which consists of gourmet cinnamon rolls, gourmet coffees and
other related products. As of January 2, 2011, there were a total of 90 T.J. Cinnamons outlets, 82 of which are dual-
branded with domestic Arby’s restaurants.
Arby’s Restaurants
Arby’s opened its first restaurant in Boardman, Ohio in 1964. During 2010, Arby’s closed 17 generally
underperforming company-owned restaurants. In addition, Arby’s sold 8 company-owned restaurants to its
franchisees. During 2010, Arby’s franchisees opened 44 new Arby’s restaurants and closed 96 generally
underperforming Arby’s restaurants. In addition, during 2010, Arby’s franchisees closed 18 T.J. Cinnamons outlets
14 of which were located in Arby’s units and 4 others not dual-branded with Arby’s units.
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