Wendy's 2014 Annual Report Download - page 22

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, federal ethanol
policy, 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.
Changes in laws, rules, regulations and governmental policies, including the joint employer standard, could increase
our costs and adversely affect our existing and future operations and results.
Changes in government-mandated health care benefits under the Patient Protection and Affordable Care Act
(“PPACA”) are also anticipated to increase our costs and the costs of our franchisees. Our compliance with the
PPACA may result in significant modifications to our employment and benefits policies and practices. Wendy’s
experienced a modest enrollment in its health plans with newly eligible employees. Because participation in the health
plans by newly full-time employees was modest, the cost increases did not result in modifications to our business
practices. However, future cost increases may be material and any future modifications to our business practices may
be disruptive to our operations and impact our ability to attract and retain personnel.
Changes in accounting standards, or in the interpretation of existing standards, applicable to us could also affect
our future results.
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
brand infrastructure within foreign countries to support our international activities, inability to obtain adequate
supplies meeting our quality standards and product specifications or interruptions in obtaining such supplies,
restrictions on our ability to move cash out of certain foreign countries, currency regulations and fluctuations, diverse
government regulations and tax systems, uncertain or differing interpretations of rights and obligations in connection
with international franchise agreements and the collection of royalties from international franchisees, the availability
and cost of land, construction costs, other legal, financial or regulatory impediments to the development and/or
operation of new restaurants, and the availability of experienced management, appropriate franchisees, and joint
venture partners. Although we believe we have developed the support structure required for international growth,
there is no assurance that such growth will occur or that international operations will be profitable.
To the extent we invest in international company-operated restaurants or joint ventures, we would also have the
risk of operating losses related to those restaurants, which would adversely affect our results of operations and financial
condition.
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