Wendy's 2011 Annual Report Download - page 21

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 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 nongovernmental 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.
Federal legislation regarding changes in government-mandated health care benefits is 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.
Wendy’s does not exercise ultimate control over purchasing for its restaurant system, which could harm sales or
profitability and the brand.
Although Wendy’s ensures that all suppliers to the Wendy’s system meet quality control standards, Wendy’s
franchisees control the purchasing of food, proprietary paper, equipment and other operating supplies from such
suppliers through the purchasing co-op controlled by Wendy’s franchisees, QSCC. QSCC negotiates national
contracts for such food, equipment and supplies. Wendy’s is entitled to appoint two representatives (of the total of
11) on the board of directors of QSCC and participates in QSCC through its company-owned restaurants, but does
not control the decisions and activities of QSCC except to ensure that all suppliers satisfy Wendy’s quality control
standards. If QSCC does not properly estimate the product needs of the Wendy’s system, makes poor purchasing
decisions, or decides to cease its operations, system sales and operating costs could be adversely affected and our results
of operations and financial condition or the financial condition of Wendy’s franchisees could be hurt.
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, Wendy’s business outside of the
United States is subject to a number of additional factors, including international economic and political conditions,
risk of corruption and violations of the United States Foreign Corrupt Practices Act or similar laws of other countries,
differing cultures and consumer preferences, the inability to adapt to international customer preferences, inadequate
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