Wendy's 2011 Annual Report Download - page 17

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In addition, food safety events, whether or not involving Wendy’s, could result in negative publicity for
Wendy’s or for the industry or market segments in which we operate. This negative publicity, as well as any other
negative publicity concerning types of food products Wendy’s serves, may reduce demand for Wendy’s food and
could result in a decrease in guest traffic to our restaurants as consumers shift their preferences to other products or
food types. A decrease in guest traffic to our restaurants as a result of these health concerns or negative publicity could
result in a decline in sales at company-owned restaurants or in royalties from sales at franchised restaurants.
Consumer concerns regarding the nutritional aspects of beef, poultry, french fries or other products we sell or
concerns regarding the effects of disease outbreaks such as “mad cow disease” and avian influenza or “bird flu,”
could affect demand for our products.
Consumer concerns regarding the nutritional aspects of beef, poultry, french fries or other products we sell or
concerns regarding the effects of disease outbreaks such as “mad cow disease” and avian influenza or “bird flu,” could
result in less demand for our products and a decline in sales at company-owned restaurants and in the royalties that
we receive from franchisees.
Growth of our restaurant businesses is significantly dependent on new restaurant openings, which may be
affected by factors beyond our control.
Our restaurant businesses derive earnings from sales at company-owned restaurants, franchise royalties received
from franchised restaurants and franchise fees from franchise restaurant operators for each new unit opened. Growth
in our restaurant revenues and earnings is significantly dependent on new restaurant openings. Numerous factors
beyond our control may affect restaurant openings. These factors include but are not limited to:
• our ability to attract new franchisees;
• the availability of site locations for new restaurants;
• the ability of potential restaurant owners to obtain financing;
• the ability of restaurant owners to hire, train and retain qualified operating personnel;
• construction and development costs of new restaurants, particularly in highly-competitive markets;
• the ability of restaurant owners to secure required governmental approvals and permits in a timely manner,
or at all; and
• adverse weather conditions.
Wendy’s franchisees could take actions that could harm our business.
Wendy’s franchisees are contractually obligated to operate their restaurants in accordance with the standards set
forth in agreements with them. Wendy’s also provides training and support to franchisees. However, franchisees are
independent third parties that we do not control, and the franchisees own, operate and oversee the daily operations of
their restaurants. As a result, the ultimate success and quality of any franchise restaurant rests with the franchisee. If
franchisees do not successfully operate restaurants in a manner consistent with required standards, royalty payments to
us will be adversely affected and the brand’s image and reputation could be harmed, which in turn could hurt our
business and operating results.
Our success depends on franchisees’ participation in brand strategies.
Wendy’s franchisees are an integral part of our business. Wendy’s may be unable to successfully implement the
strategies that it believes are necessary for further growth if franchisees do not participate in that implementation. Our
business and operating results could be adversely affected if a significant number of franchisees do not participate in
brand strategies.
Our financial results are affected by the operating results of franchisees.
As of January 1, 2012, approximately 79% of the Wendy’s system were franchise restaurants. We receive
revenue in the form of royalties, which are generally based on a percentage of sales at franchised restaurants, rent and
fees from franchisees. Accordingly, a substantial portion of our financial results is to a large extent dependent upon
the operational and financial success of our franchisees. If sales trends or economic conditions worsen for franchisees,
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