Wendy's 2010 Annual Report Download - page 28

Additionally, the restaurant industry has been subject to a number of claims that the menus and actions of
restaurant chains have led to the obesity of certain of their customers. Adverse publicity resulting from these
allegations may harm the reputation of our restaurants, even if the allegations are not directed against our restaurants
or are not valid, and even if we are not found liable or the concerns relate only to a single restaurant or a limited
number of restaurants. Moreover, complaints, litigation or adverse publicity experienced by one or more of Wendy’s
or Arby’s franchisees could also hurt our business as a whole.
Our current insurance may not provide adequate levels of coverage against claims that may be filed.
We currently maintain insurance we believe is adequate for businesses of our size and type. However, there are
types of losses we may incur that cannot be insured against or that we believe are not economically reasonable to
insure, such as losses due to natural disasters or acts of terrorism.In addition, we currently self-insure a significant
portion of expected losses under workers compensation, general liability and property insurance
programs. Unanticipated changes in the actuarial assumptions and management estimates underlying our reserves for
these losses could result in materially different amounts of expense under these programs, which could harm our
business and adversely affect our results of operations and financial condition.
Changes in legal or regulatory requirements, including franchising laws, accounting standards, payment card
industry rules, overtime rules, minimum wage rates, government-mandated health care benefits, tax legislation
and menu-board labeling requirements, may hurt our ability to open new restaurants or otherwise hurt our
existing and future operations and results.
Each Wendy’s and Arby’s restaurant is subject to licensing and regulation by health, sanitation, safety and other
agencies in the state and/or municipality in which the restaurant is located, as well as to Federal laws, rules and
regulations and requirements of non-governmental entities such as payment card industry rules. State and local
government authorities may enact laws, rules or regulations that impact restaurant operations and the cost of
conducting those operations. For example, recent efforts to require the listing of specified nutritional information on
menus and menu boards could adversely affect consumer demand for our products, could make our menu boards less
appealing and could increase our costs of doing business. There can be no assurance that we and/or our franchisees
will not experience material difficulties or failures in obtaining the necessary licenses or approvals for new restaurants,
which could delay the opening of such restaurants in the future. In addition, more stringent and varied requirements
of local governmental bodies with respect to tax, zoning, land use and environmental factors could delay or prevent
development of new restaurants in particular locations.
Federal laws, rules and regulations address many aspects of our business, such as franchising, minimum wages
and taxes. We and our franchisees are also subject to the Fair Labor Standards Act, which governs such matters as
minimum wages, overtime and other working conditions, along with the ADA, family leave mandates and a variety of
other laws enacted by the states that govern these and other employment law matters. As described more fully under
“Item 3. Legal Proceedings,” one of our subsidiaries was a defendant in a lawsuit alleging failure to comply with Title
III of the ADA at approximately 775 company-owned restaurants acquired as part of the RTM acquisition by Arby’s
in July 2005. Under a court approved settlement of that lawsuit, Arby’s estimates that it will spend approximately
$1.15 million per year of capital expenditures over a seven-year period (which commenced in 2008) to bring these
restaurants into compliance with the ADA, in addition to paying certain legal fees and expenses. We cannot predict
the amount of any other future expenditures that may be required in order to permit company-owned restaurants to
comply with any changes in existing regulations or to comply with any future regulations that may become applicable
to our businesses.
Recent Federal legislation regarding changes in government-mandated health care benefits are also anticipated
to increase our costs and the costs of our franchisees and may result in significant modifications to our employment
and hiring practices. Because of the absence of implementing regulations, we currently cannot predict the timing or
amount of those cost increases or modifications to our business practices. However, the cost increases may be material
and such modifications to our business practices may be disruptive to our operations and impact our ability to attract
and retain personnel.
Our operations are influenced by adverse weather conditions.
Weather, which is unpredictable, can impact Wendy’s and Arby’s restaurant sales. Harsh weather conditions
that keep customers from dining out result in lost opportunities for our restaurants. A heavy snowstorm in the
Northeast or Midwest or a hurricane in the Southeast can shut down an entire metropolitan area, resulting in a
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