Wendy's 2011 Annual Report Download - page 13

additional contributions to be made for both company-owned and franchised restaurants based on a percent of
restaurant retail sales for the purpose of local and regional advertising programs. Required franchisee contributions to
the national advertising funds and for local and regional advertising programs are governed by the Wendy’s Unit
Franchise Agreement. Required contributions by company-owned restaurants for advertising and promotional
programs are at the same percent of retail sales as franchised restaurants within the Wendy’s system. As of January 1,
2012, the contribution rate for United States restaurants is generally 3.25% of retail sales for national advertising and
.75% of retail sales for local and regional advertising. Prior to January 1, 2012, the rates were generally 3% and 1%,
respectively. The contribution rate for Canadian restaurants is generally 3% of retail sales for national advertising and
1% of retail sales for local and regional advertising.
See Note 27 of the Financial Statements and Supplementary Data included in Item 8 herein, for further
information regarding advertising.
International Operations and Franchising
As of January 1, 2012, Wendy’s had 350 franchised restaurants in 26 countries and territories other than the
United States and Canada. Wendy’s intends to grow its international business aggressively, yet responsibly. Since the
beginning of 2009, new development agreements have been announced for Wendy’s locations in Singapore, the
Middle East, North Africa, the Russian Federation, the Eastern Caribbean, Argentina, and the Philippines. New
market expansion and further development within existing markets will continue to be components of Wendy’s
international strategy over the coming years. Wendy’s has granted development rights in the certain countries and
territories listed under Item 2 of this Form 10-K.
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 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.
In 2011, Wendy’s entered into a joint venture to develop restaurants in Japan. Wendy’s also continually
evaluates non-franchise opportunities for development of Wendy’s restaurants in other international markets,
including through joint ventures with third parties and opening company-owned restaurants.
General
Governmental Regulations
Various state laws and the Federal Trade Commission regulate Wendy’s franchising activities. The Federal
Trade Commission requires that franchisors make extensive disclosure to prospective franchisees before the execution
of a franchise agreement. Several states require registration and disclosure in connection with franchise offers and sales
and have “franchise relationship laws” that limit the ability of franchisors to terminate franchise agreements or to
withhold consent to the renewal or transfer of these agreements. In addition, Wendy’s and its franchisees must
comply with the federal Fair Labor Standards Act and similar state and local laws, the Americans with Disabilities Act
(the “ADA”), which requires that all public accommodations and commercial facilities meet federal requirements
related to access and use by disabled persons, and various state and local laws governing matters that include, for
example, the handling, preparation and sale of food and beverages, the provision of nutritional information on menu
boards, minimum wages, overtime and other working and safety conditions. Compliance with the ADA requirements
could require removal of access barriers and non-compliance could result in imposition of fines by the United States
government or an award of damages to private litigants. We do not believe that costs relating to compliance with the
ADA will have a material adverse effect on the Companies’ consolidated financial position or results of operations. We
cannot predict the effect on our operations, particularly on our relationship with franchisees, of any pending or future
legislation.
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