Wendy's 2012 Annual Report Download - page 15

Download and view the complete annual report

Please find page 15 of the 2012 Wendy's annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 146

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146

Increased use of social media could create and/or amplify the effects of negative publicity and adversely affect
sales and operating results.
Events reported in the media, including social media, whether or not accurate or involving Wendy’s, could
create and/or amplify negative publicity for Wendy’s or for the industry or market segments in which we operate.
This could reduce demand for Wendy’s food and could result in a decrease in guest traffic to our restaurants as
consumers shift their preferences to our competitors or to other products or food types. A decrease in guest traffic to
our restaurants as a result of negative publicity from social media could result in a decline in sales and operating results
at company-owned restaurants or in royalties from sales at franchised restaurants.
Growth of our restaurant businesses is 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 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.
The Company’s Image Activation program may not positively affect sales at company-owned and participating
franchised restaurants or improve our results of operations.
Throughout 2013, the Company plans to reimage approximately 100 existing company-owned restaurants and
open approximately 25 new company-owned restaurants under its Image Activation program, with plans for
significantly more new and reimaged Company and franchisee restaurants in 2014 and beyond. The Company also
expects that franchisees will reimage approximately 100 and build 40 new restaurants in 2013. Wendy’s initiated a
cash incentive program for franchisees during the third quarter of 2012. In January 2013, the program was expanded
to include variable cash incentives for Tier 1, 2, and 3 remodels and to allow for a maximum of $100,000 each, for up
to three incentives per franchisee. The cash incentive program is for the reimaging of restaurants completed in 2013
and totals $10.0 million. The Company intends to use its cash on hand and operating cash flows to fund the Image
Activation program and new restaurant growth.
12