Wendy's 2010 Annual Report Download - page 31

We may not be able to adequately protect our intellectual property, which could harm the value of our brands
and hurt our business.
Our intellectual property is material to the conduct of our business. We rely on a combination of trademarks,
copyrights, service marks, trade secrets and similar intellectual property rights to protect our brands and other
intellectual property. The success of our business strategy depends, in part, on our continued ability to use our
existing trademarks and service marks in order to increase brand awareness and further develop our branded products
in both existing and new markets. If our efforts to protect our intellectual property are not adequate, or if any third
party misappropriates or infringes on our intellectual property, either in print or on the Internet, the value of our
brands may be harmed, which could have a material adverse effect on our business, including the failure of our brands
to achieve and maintain market acceptance. This could harm our image, brand or competitive position and, if we
commence litigation to enforce our rights, cause us to incur significant legal fees.
We franchise our restaurant brands to various franchisees. While we try to ensure that the quality of our brands
is maintained by all of our franchisees, we cannot assure you that these franchisees will not take actions that hurt the
value of our intellectual property or the reputation of the Wendy’s and/or Arby’s restaurant system.
We have registered certain trademarks and have other trademark registrations pending in the United States and
certain foreign jurisdictions. The trademarks that we currently use have not been registered in all of the countries
outside of the United States in which we do business or may do business in the future and may never be registered in
all of these countries. We cannot assure you that all of the steps we have taken to protect our intellectual property in
the United States and foreign countries will be adequate. The laws of some foreign countries do not protect
intellectual property rights to the same extent as the laws of the United States.
In addition, we cannot assure you that third parties will not claim infringement by us in the future. Any such
claim, whether or not it has merit, could be time-consuming, result in costly litigation, cause delays in introducing
new menu items, require costly modifications to advertising and promotional materials or require us to enter into
royalty or licensing agreements. As a result, any such claim could harm our business and cause a decline in our results
of operations and financial condition.
Wendy’s plans to expand its new breakfast initiative in 2011. The breakfast daypart remains competitive and
markets may prove difficult to penetrate.
The roll out of breakfast at Wendy’s has been accompanied by challenging competitive conditions, varied
consumer tastes and discretionary spending patterns that differ from lunch, snack, dinner and late night hours. In
addition, breakfast sales can cannibalize sales during other parts of the day and may have negative impacts on food
and labor costs, advertising, and restaurant margins. Wendy’s plans to expand its breakfast initiative in 2011. Capital
investments will be required at company-owned restaurants that are added to the breakfast initiative. In addition,
franchisees will be required to make capital investments in their restaurants that participate in the breakfast
initiative. As a result of all of these factors, breakfast sales and resulting profits may take longer than expected to reach
targeted levels or the planned rollout of breakfast may be delayed or may not occur.
Our international operations are subject to various factors of uncertainty and there is no assurance that
international operations will be profitable.
In addition to many of the risk factors described throughout this Item 1A, each brand’s business outside of the
United States is subject to a number of additional factors, including international economic and political conditions,
differing cultures and consumer preferences, the inability to adapt to international customer preferences, inadequate
brand infrastructure within foreign countries to support our international activities, inability to obtain adequate
supplies meeting our quality standards and product specifications or interruptions in obtaining such supplies,
currency regulations and fluctuations, diverse government regulations and tax systems, uncertain or differing
interpretations of rights and obligations in connection with international franchise agreements and the collection of
royalties from international franchisees, the availability and cost of land, construction costs, other legal, financial or
regulatory impediments to the development and/or operation of new restaurants, and the availability of experienced
management, appropriate franchisees, and joint venture partners. Although we believe we have developed the support
structure required for international growth, there is no assurance that such growth will occur or that international
operations will be profitable.
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