Wendy's 2012 Annual Report Download - page 8

Raw Materials and Purchasing
As of December 30, 2012, five independent processors (five total production facilities) supplied all of Wendy’s
hamburger in the United States. In addition, six independent processors (eight total production facilities) supplied all
of Wendy’s chicken in the United States.
Wendy’s and its franchisees have not experienced any material shortages of food, equipment, fixtures or other
products that are necessary to maintain restaurant operations. Wendy’s anticipates no such shortages of products and
believes that alternate suppliers are available. Suppliers to the Wendy’s system must comply with United States
Department of Agriculture (“USDA”) and United States Food and Drug Administration (“FDA”) regulations
governing the manufacture, packaging, storage, distribution and sale of all food and packaging products.
During the 2009 fourth quarter, Wendy’s entered into a purchasing co-op relationship agreement (the
“Wendy’s Co-op”) with its franchisees to establish Quality Supply Chain Co-op, Inc. (“QSCC”). QSCC manages, for
the Wendy’s system in the United States and Canada, contracts for the purchase and distribution of food, proprietary
paper, operating supplies and equipment under national contracts with pricing based upon total system volume.
QSCC’s supply chain management facilitates the continuity of supply and provides consolidated purchasing
efficiencies while monitoring and seeking to minimize possible obsolete inventory throughout the Wendy’s supply
chain in the United States and Canada. Prior to 2010, the system’s purchasing function was performed and paid for
by Wendy’s. In order to facilitate the orderly transition of the 2010 purchasing function for operations in the
United States and Canada, Wendy’s transferred certain contracts, assets and certain Wendy’s purchasing employees to
QSCC in 2010. Pursuant to the terms of the Wendy’s Co-op, Wendy’s expensed $15.5 million in 2009 for payments
to QSCC required over an 18 month period through May 2011 in order to provide funding for start-up costs,
operating expenses and cash reserves. Since the third quarter of 2010, all QSCC members (including Wendy’s) pay
sourcing fees to third party vendors on products which are sourced through QSCC. Such sourcing fees are remitted
by these vendors to QSCC and are the primary means of funding QSCCs operations. Should QSCCs sourcing fees
exceed its expected needs, QSCCs board of directors may return some or all of the excess to its members in the form
of a patronage dividend.
Trademarks and Service Marks
Wendy’s or its subsidiaries have registered certain trademarks and service marks in the United States Patent and
Trademark Office and in international jurisdictions, some of which include Wendy’s®, Old Fashioned Hamburgers®
and Quality Is Our Recipe®. Wendy’s believes that these and other related marks are of material importance to its
business. Domestic trademarks and service marks expire at various times from 2013 to 2022, while international
trademarks and service marks have various durations of 10 to 15 years. Wendy’s generally intends to renew
trademarks and service marks that are scheduled to expire.
Wendy’s entered into an Assignment of Rights Agreement with the company’s founder, R. David Thomas, and
his wife dated as of November 5, 2000 (the “Assignment”). Wendy’s had used Mr. Thomas, who was Senior
Chairman of the Board until his death on January 8, 2002, as a spokesperson and focal point for its products and
services for many years. With the efforts and attributes of Mr. Thomas, Wendy’s has, through its extensive investment
in the advertising and promotional use of Mr. Thomas’ name, likeness, image, voice, caricature, endorsement rights
and photographs (the “Thomas Persona”), made the Thomas Persona well known in the United States and
throughout North America and a valuable asset for both Wendy’s and Mr. Thomas’ estate. Under the terms of the
Assignment, Wendy’s acquired the entire right, title, interest and ownership in and to the Thomas Persona, including
the sole and exclusive right to commercially use the Thomas Persona.
Seasonality
Wendy’s restaurant operations are moderately seasonal. Wendy’s average restaurant sales are normally higher
during the summer months than during the winter months. Because the business is moderately seasonal, results for any
quarter are not necessarily indicative of the results that may be achieved for any other quarter or for the full fiscal year.
Competition
Each Wendy’s restaurant is in competition with other food service operations within the same geographical
area. The quick-service restaurant segment is highly competitive and includes well-established competitors. Wendy’s
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