Wendy's 2011 Annual Report Download - page 45

first half of 2011 as compared to the first half of 2010. Incremental sales of $34.8 million for 2011 from company-
owned stores opened or acquired during fiscal 2010 and 2011 were partially offset by a reduction in sales of $13.5
million from locations sold or closed during or subsequent to the year ended January 2, 2011.
The decrease in sales in 2010 was primarily driven by one less week of sales when compared to 2009. Sales for
the 53rd week in 2009 were $35.3 million. In addition, sales in 2010 were negatively impacted by the decline in
company-owned same-store sales of 1.7%. Company-owned same-store sales for 2010 decreased primarily due to a
1.9% decline in the number of customer transactions in 2010 as compared to 2009 and generally negative economic
trends and competitive pressures. In addition, company-owned same-store sales decreased $5.9 million due to an
increase in value added sales tax in certain Canadian provinces in the third quarter of 2010. The negative factors
impacting sales were partially offset by (1) a $22.4 million positive impact from foreign currency translation for the
year ended January 2, 2011 as compared to the prior year and (2) an approximate 1% blended price increase taken
primarily in late 2009. Locations sold or closed during or subsequent to the year ended January 3, 2010 resulted in a
reduction in sales of $16.7 million for 2010, which was partially offset by incremental sales of $11.0 million in the
year ended January 2, 2011 from new stores opened during fiscal 2009 and 2010.
Franchise Revenues
Change
2011 2010
$8.5 $(6.6)
The increase in franchise revenues for 2011 was primarily due to an increase in franchise restaurant same-store
sales of 2.0%. We believe franchised restaurant same-store sales for 2011 were impacted by the same factors described
above for company-owned restaurants.
The decrease in franchise revenues for 2010 was primarily due to the decline in franchised restaurant same-store
sales of 0.3%. Franchise revenues for the 53rd week in 2009 were approximately $4.8 million. Franchised restaurant
same-store sales for 2010 were impacted by the same factors described above for company-owned restaurants,
although we believe price increases taken by certain franchised restaurants, which were not taken by company-owned
restaurants, mitigated some of the decline in same-store sales. Franchised restaurant revenues in 2010 were impacted
by the closing of 71 restaurants in Japan at the expiration of the franchise agreement on December 31, 2009.
Cost of Sales
Change
2011 2010
Food and paper ................................... 0.9% points —% points
Restaurant labor .................................. 0.1% points (0.4)% points
Occupancy, advertising and other operating costs ......... (0.2)% points 0.5 % points
0.8% points 0.1% points
As a percent of sales, the increase in food and paper costs in 2011 was primarily due to a 1.4% point increase in
commodity costs partially offset by the 0.8% point effect of strategic price increases taken on certain menu items. The
decrease in occupancy, advertising, and other operating expenses as a percent of sales in 2011 was primarily due to a
0.4% point decrease in insurance costs partially offset by a 0.2% point increase in advertising expenses associated with
the expansion of Wendy’s breakfast daypart in additional markets during the first half of 2011.
Wendy’s company-owned restaurant cost of sales remained relatively flat as a percent of sales in 2010 as
compared to 2009. As a percent of sales, the increase in occupancy, advertising, and other operating expenses was due
to increases in utilities, credit and debit card fees, and insurance expenses, combined with an increase in advertising
expenses associated with the launch of the brand’s breakfast daypart in certain test markets. As a percent of sales, the
decrease in Wendy’s restaurant labor costs in 2010 was primarily due to a 0.5% point decrease in incentive
compensation expense and a 0.3% point decrease in salaries and wages which was the result of the approximate 1%
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