Wendy's 2010 Annual Report Download - page 17

Trademarks and Service Marks
Arby’s, through its subsidiaries, owns several trademarks that it considers to be material to its restaurant
business, including Arby’s®, Arby’s Market Fresh®, Market Fresh®, Horsey Sauce®, Arby’s Sauce®, and
Sidekickers®. Arby’s believes that these and other related marks are of material importance to its business. Domestic
trademarks and service marks expire at various times from 2011 to 2020, while international trademarks and service
marks have various durations of 10 to 15 years. Arby’s generally intends to renew trademarks and service marks that
are scheduled to expire.
Seasonality
Arby’s restaurant operations are not significantly impacted by seasonality. However, Arby’s restaurant revenues
are somewhat lower in the first quarter.
Competition
Arby’s faces direct and indirect competition from numerous well-established competitors, including national
and regional non-burger sandwich chains, such as Panera Bread®, Subway®and Quiznos®, as well as hamburger
chains, such as McDonald’s®, Burger King®and Wendy’s®, and other quick service restaurant chains, such as Taco
Bell®, Chick-Fil-A®and Kentucky Fried Chicken®. In addition, Arby’s competes with locally owned restaurants,
drive-ins, diners and other similar establishments. Key competitive factors in the quick service restaurant industry are
price, quality of products, convenience, quality and speed of service, advertising, brand awareness, restaurant location,
and attractiveness of facilities. Arby’s also competes within the food service industry and the quick service restaurant
sector not only for customers, but also for personnel, suitable real estate sites and qualified franchisees.
Many of the leading restaurant chains have focused on new unit development as one strategy to increase market
share through increased consumer awareness and convenience. This has led to increased competition for available
development sites and higher development costs for those sites, although the recent decline in commercial real estate
values has somewhat offset those costs. Competitors also employ marketing strategies such as frequent use of price
discounting, frequent promotions, and heavy advertising expenditures. Continued price discounting in the quick
service restaurant industry and the emphasis on value menus has had and could continue to have an adverse impact on
Arby’s. In addition, the growth of fast casual chains and other in-line competitors could cause some fast food
customers to “trade up” to a more traditional dining out experience while keeping the benefits of quick service dining.
Other restaurant chains have also competed by offering high quality sandwiches made with fresh ingredients
and artisan breads, and there are several emerging restaurant chains featuring high quality food served at in-line
locations. Several chains have also sought to compete by targeting certain consumer groups, such as capitalizing on
trends toward certain types of diets (e.g., low carbohydrate or low trans fat) by offering menu items that are promoted
as being consistent with such diets.
Additional competitive pressures for prepared food purchases come from operators outside the restaurant
industry. A number of major grocery chains offer fresh deli sandwiches and fully prepared food and meals to go as
part of their deli sections. Some of these chains also have in-store cafes with service counters and tables where
consumers can order and consume a full menu of items prepared especially for that portion of the
operation. Additionally, convenience stores and retail outlets at gas stations frequently offer sandwiches and other
foods.
Quality Assurance
Arby’s has developed a quality assurance program designed to maintain standards and the uniformity of menu
offerings at all Arby’s restaurants. Arby’s assigns a quality assurance employee to each of the independent facilities that
process beef for domestic Arby’s restaurants. The quality assurance employee inspects the beef for quality, uniformity
and to assure compliance with quality and safety requirements of the USDA and the FDA. In addition, Arby’s
periodically evaluates randomly selected samples of beef and other products from its supply chain. Each year, Arby’s
representatives conduct announced and unannounced inspections of operations of a number of franchisees to ensure
that required policies, practices and procedures are being followed. Arby’s field representatives also provide a variety of
on-site consulting services to franchisees. Arby’s has the right to terminate franchise agreements if franchisees fail to
comply with quality standards.
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