Profile: Wendy’s/Arby’s Group, Inc. (WEN)

Wendy’s/Arby’s Group, Inc., formerly Triarc Companies, Inc., incorporated in 1929, is the parent company of Wendy’s International, Inc. (Wendy’s) and Arby’s Restaurant Group, Inc. (ARG), which are the franchisors of the Wendy’s and Arby’s restaurant systems. As of December 28, 2008, the Wendy’s restaurant system consisted of 6,630 restaurants, of which 1,406 were owned and operated by the Company. As of December 28, 2008, the Arby’s restaurant system included 3,756 restaurants, of which 1,176 were owned and operated by the Company. The Company operates in two business segments: Wendy’s and Arby’s. On September 29, 2008, the Company and Wendy’s completed the merger (the Wendy’s Merger).

The Wendy’s Restaurant System

Wendy’s is primarily engaged in the business of operating, developing and franchising a system of quick-service restaurants. As of December 28, 2008, there were 6,630 Wendy’s restaurants in operation in the United States and in 21 foreign countries and United States territories. Of these restaurants, 1,406 were operated by Wendy’s and 5,224 by a total of 469 franchisees. The revenues from its restaurant business are derived from four principal sources: sales at Company-owned restaurants; sales of bakery items and kid’s meal promotional items to franchisees; franchise royalties received from all Wendy’s franchised restaurants, and up-front franchise fees from restaurant operators for each new unit opened.

During the fiscal year ended December 28, 2008 (fiscal 2008), Wendy’s opened 15 new restaurants and closed 16 generally underperforming restaurants. In addition, Wendy’s disposed of 7 existing restaurants to its franchisees. During fiscal 2008, Wendy’s franchisees opened 82 new restaurants and closed 96 generally underperforming restaurants. Each Wendy’s restaurant offers a relatively standard menu featuring hamburgers and filet of chicken breast sandwiches and wraps, which are prepared to order with the customer’s choice of condiments. Wendy’s menu also includes chicken nuggets, chili, baked and French fried potatoes, freshly prepared salads, soft drinks, milk, Frosty desserts, floats and kids meals.

The New Bakery Co. of Ohio, Inc. (Bakery), a wholly owned subsidiary of Wendy’s, is a producer of buns for some Wendy’s restaurants, and to a lesser extent for outside parties. As of December 28, 2008, the Bakery supplied 666 restaurants operated by Wendy’s and 2,377 restaurants operated by franchisees. The Bakery also manufactures and sells some products to customers in the grocery and food service businesses. Wendy’s has 138 company owned and 235 franchised restaurants in Canada, and 352 franchised restaurants in 20 other countries and United States territories. As of December 28, 2008, Wendy’s franchisees operated 5,224 Wendy’s restaurants in 50 states, Canada and 20 other countries and United States territories.

The Arby’s Restaurant System

Arby’s is a restaurant franchising system specializing in the roast beef sandwich segment of the quick service restaurant industry. As of December 28, 2008, there were 1,176 Company-owned Arby’s restaurants and 2,580 Arby’s restaurants owned by 468 franchisees. Of the 2,580 franchisee-owned restaurants, 2,457 operated within the United States and 123 operated outside the United States, principally in Canada. ARG also owns the T.J. Cinnamons concept, which consists of gourmet cinnamon rolls, gourmet coffees and other related products. As of December 28, 2008, there were a total of 144 T.J. Cinnamons outlets, 132 of which are multi-branded with domestic Arby’s restaurants. In addition to various slow-roasted roast beef sandwiches, Arby’s offers a menu of chicken, turkey and ham sandwiches, snack items and salads. Arby’s also offers Market Fresh wrap sandwiches inside a tortilla wrap. Arby’s lineup of Toasted Sub offerings included four varieties on toasted ciabatta rolls: the French Dip & Swiss, the Philly Beef, the Classic Italian and the Turkey Bacon Club.

As the franchisor of the Arby’s restaurant system, ARG, through its subsidiaries, owns and licenses the right to use the Arby’s brand name and trademarks in the operation of Arby’s restaurants. The revenues from its restaurant business are derived from three principal sources: sales at Company-owned restaurants; franchise royalties received from all Arby’s franchised restaurants, and up-front franchise fees from restaurant operators for each new unit opened. As of December 28, 2008, ARG and Arby’s franchisees operated Arby’s restaurants in 48 states, and four foreign countries. Arby’s restaurants in the United States and Canada typically range in size from 2,500 square feet to 3,000 square feet, and almost all of the freestanding system-wide restaurants feature drive-thru windows.

During fiscal 2008, ARG opened 40 new Arby’s restaurants and closed 15 generally underperforming Arby’s restaurants. In addition, ARG acquired 42 existing Arby’s restaurants from its franchisees, including one that was previously operated by ARG under a management agreement. During fiscal 2008, Arby’s franchisees opened 87 new Arby’s restaurants and closed 44 generally underperforming Arby’s restaurants. In addition, during fiscal 2008, Arby’s franchisees closed 52 T.J. Cinnamons outlets located in Arby’s units, and franchisees closed an additional six T.J. Cinnamons outlets located outside of Arby’s units. As of December 28, 2008, ARG owned or operated 1,176 domestic Arby’s restaurants, of which 1,147 were freestanding units, 12 were in shopping malls, five were in office buildings/urban in-line locations, four were in convenience stores, five were in travel plazas and three were in strip center locations.

The Company competes with Panera Bread, Subway, Quiznos, McDonald’s, Burger King, Taco Bell, Chick-Fil-A and Kentucky Fried Chicken.