Wendy's 2012 Annual Report Download - page 11

Advertising and Marketing
In the United States and Canada, Wendy’s advertises nationally through national advertising funds on network
and cable television programs, including nationally televised events. Locally in the United States and Canada,
Wendy’s primarily advertises through regional network and cable television, radio and newspapers. Wendy’s
participates in two national advertising funds established to collect and administer funds contributed for use in
advertising through television, radio, newspapers, the Internet and a variety of promotional campaigns, including the
increasing use of social media. Separate national advertising funds are administered for Wendy’s United States and
Canadian locations. Contributions to the national advertising funds are required to be made from both company-
owned and franchised restaurants and are based on a percent of restaurant retail sales. In addition to the contributions
to the national advertising funds, Wendy’s requires 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 December 30, 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 25 of the Financial Statements and Supplementary Data included in Item 8 herein, for further information
regarding advertising.
International Operations and Franchising
As of December 30, 2012, Wendy’s had 374 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, development agreements have been announced for Wendy’s locations to be opened in the
following countries and territories: Singapore, the Middle East, North Africa, the Russian Federation, the Eastern
Caribbean, Argentina, Japan, Georgia and the Republic of Azerbaijan. These development agreements include rights
for 21 countries in which no Wendy’s restaurants were open as of December 30, 2012. In addition to new market
expansion, further development within existing markets will continue to be an important component of Wendy’s
international strategy over the coming years. In 2012, Wendy’s announced new development agreements in the
existing markets of Indonesia and Philippines. Wendy’s has granted development rights in 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 an initial 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
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