Wendy's 2010 Annual Report Download - page 59
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Franchise Revenues
We expect that the sales trends for franchised restaurants at Wendy’s and Arby’s will continue to be generally
impacted by many of the same factors described above under “Sales.” Arby’s franchise revenues may also be impacted
by certain franchisees’ financial difficulties and the closure of franchised restaurants.
Cost of Sales
We expect that the factors described above which affected cost of sales for company-owned restaurants in 2010
for the Wendy’s and Arby’s brand will continue to impact cost of sales in 2011. In addition, we expect both Wendy’s
and Arby’s cost of sales to be negatively impacted due to an overall increase in commodity costs.
Depreciation and Amortization
We expect that our depreciation and amortization expenses will increase in 2011 primarily due to the effect on
depreciation of (1) capital expenditures at Wendy’s related to our continued remodeling of company-owned
restaurants and the opening of new company-owned restaurants and (2) various capital projects.
Interest Expense
We expect our interest expense for 2011 will decrease slightly compared to 2010 primarily as a result of the
effect of the redemption of the Wendy’s 6.25% senior notes and cancellation of related interest rate swaps in May
2010, partially offset by an increase in interest expense due to higher principal amounts outstanding during 2011
under the Term Loan than were outstanding during 2010 under the Term Loan issued in May 2010 and the prior
Arby’s credit agreement prior to May 2010, and by the lower effective interest rate of the Term Loan as compared to
the prior Arby’s credit agreement.
Arby’s Strategic Alternatives
In January 2011, Wendy’s/Arby’s announced that it is exploring strategic alternatives for Arby’s, including a
sale of the brand. This process is in its early phases and there is no assurance as to any particular outcome. To address
uncertainties for our employees created by this process, Wendy’s/Arby’s has implemented a retention program; the
payment of a portion of which is conditioned on the sale of Arby’s. While the process is pending, Arby’s will continue
to execute its growth initiatives.
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