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Article by DailyStocks_admin    (02-08-12 01:48 AM)

Description

Wendys International Inc. Director, 10% Owner PETER W MAY bought 2625000 shares on 3-02-2012 at $ 4.8

BUSINESS OVERVIEW

Introduction

Wendy’s/Arby’s Group, Inc. (“Wendy’s/Arby’s”) is the parent company of its 100% owned subsidiary holding company Wendy’s/Arby’s Restaurants, LLC (“Wendy’s/Arby’s Restaurants”). Wendy’s/Arby’s Restaurants is the parent company of Wendy’s International, Inc. (“Wendy’s”) and Arby’s Restaurant Group, Inc. (“Arby’s”), which are the owners and franchisors of the Wendy’s® and Arby’s® restaurant systems, respectively. As used in this report, unless the context requires otherwise, the term “Companies” refers to Wendy’s/Arby’s and its direct and indirect subsidiaries, including Wendy’s/Arby’s Restaurants.

As of January 2, 2011, the Wendy’s restaurant system was comprised of 6,576 restaurants, of which 1,394 were owned and operated by the Companies. As of January 2, 2011, the Arby’s restaurant system was comprised of 3,649 restaurants, of which 1,144 were owned and operated by the Companies. References in this Form 10-K to restaurants that we “own” or that are “company-owned” include owned and leased restaurants . Wendy’s/Arby’s corporate predecessor was incorporated in Ohio in 1929 and was reincorporated in Delaware in June 1994. Effective September 29, 2008, in conjunction with the merger with Wendy’s, Wendy’s/Arby’s corporate name was changed from Triarc Companies, Inc. (“Triarc”) to Wendy’s/Arby’s Group, Inc. The Companies’ principal executive offices are located at 1155 Perimeter Center West, Atlanta, Georgia 30338, and their telephone number is (678) 514-4100. We make our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to such reports, as well as the Wendy’s/Arby’s annual proxy statement, available, free of charge, on our website as soon as reasonably practicable after such reports are electronically filed with, or furnished to, the Securities and Exchange Commission. Our website address is www.wendysarbys.com. Information contained on that website is not part of this Annual Report on Form 10-K.

Merger with Wendy’s

On September 29, 2008, Triarc and Wendy’s completed their previously announced merger (the “Wendy’s Merger”) in an all-stock transaction in which Wendy’s shareholders received 4.25 shares of Wendy’s/Arby’s Class A common stock for each Wendy’s common share owned.

In the Wendy’s Merger, approximately 377,000,000 shares of Wendy’s/Arby’s Class A common stock were issued to Wendy’s shareholders. The merger value of approximately $2.5 billion for financial reporting purposes is based on the 4.25 conversion factor of the Wendy’s outstanding shares as well as previously issued restricted stock awards, both at a value of $6.57 per share which represented the average closing market price of Triarc Class A common stock two days before and after the merger announcement date of April 24, 2008. Wendy’s shareholders held approximately 80%, in the aggregate, of Wendy’s/Arby’s outstanding Class A common stock immediately following the Wendy’s Merger. In addition, effective on the date of the Wendy’s Merger, Wendy’s/Arby’s Class B common stock was converted into Class A common stock. In connection with the May 28, 2009 amendment and restatement of Wendy’s/Arby’s Certificate of Incorporation, Class A common stock was redesignated as “Common Stock.”

The Wendy’s and Arby’s brands continue to operate independently, with headquarters in Dublin, Ohio and Atlanta, Georgia, respectively. A consolidated support center is based in Atlanta, Georgia and oversees all public company responsibilities, as well as other shared service functions.

Fiscal Year

The Companies use a 52/53 week fiscal year convention whereby their fiscal year ends each year on the Sunday that is closest to December 31 of that year. Each fiscal year generally is comprised of four 13-week fiscal quarters, although in the years with 53 weeks, including 2009, the fourth quarter represents a 14-week period.

Business Segments

We operate in two business segments, Wendy’s and Arby’s. See Note 27 of the Financial Statements and Supplementary Data included in Item 8 herein, for financial information attributable to our business segments and geographic areas.

The Wendy’s Restaurant System

Wendy’s is the third largest restaurant franchising system in the United States specializing in the hamburger sandwich segment of the quick service restaurant industry. According to Nation’s Restaurant News , Wendy’s is the fourth largest quick service restaurant chain in the United States.

Wendy’s is primarily engaged in the business of operating, developing and franchising a system of distinctive quick-service restaurants serving high quality food. At January 2, 2011, there were 6,576 Wendy’s restaurants in operation in North America and in 22 foreign countries (other than Canada) and United States territories. Of these restaurants, 1,394 were operated by Wendy’s and 5,182 by a total of 490 franchisees. See “Item 2. Properties” for a listing of the number of company-owned and franchised locations in the United States and in foreign countries and United States territories.

The revenues from our restaurant business are derived from three principal sources: (1) sales at company-owned restaurants; (2) sales of bakery items and kids’ meal promotional items to franchisees and others; and (3) franchise royalties received from all Wendy’s franchised restaurants.

Wendy’s is also a 50% partner in a Canadian restaurant real estate joint venture with Tim Hortons Inc. The joint venture owns Wendy’s/Tim Hortons combo units in Canada. As of January 2, 2011, there were 105 Wendy’s restaurants in operation that were owned by the joint venture. The Tim Hortons menu includes premium coffee, flavored cappuccinos, specialty teas, home-style soups, fresh sandwiches and fresh baked goods.

Operations

Each Wendy’s restaurant offers a relatively standard menu featuring hamburgers and filet of chicken breast sandwiches, 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. In addition, the restaurants sell a variety of promotional products on a limited basis. Wendy’s has tested breakfast in certain markets and plans to expand its breakfast initiative in 2011.

Free-standing Wendy’s restaurants generally include a pick-up window in addition to a dining room. The percentage of sales at company-owned Wendy’s restaurants through the pick-up window was 64.9%, 64.6%, and 63.8% in 2010, 2009, and 2008 respectively.

Wendy’s strives to maintain quality and uniformity throughout all restaurants by publishing detailed specifications for food products, preparation and service, continual in-service training of employees, restaurant operational audits and field visits from Wendy’s supervisors. In the case of franchisees, field visits are made by Wendy’s personnel who review operations, including quality, service and cleanliness and make recommendations to assist in compliance with Wendy’s specifications.

Generally, Wendy’s does not sell food or supplies, other than sandwich buns and kids’ meal toys, to its franchisees. However, prior to 2010, Wendy’s arranged for volume purchases of many food and supply products. Commencing in 2010, the purchasing function was transferred to a new purchasing co-op as described below in “Raw Materials and Purchasing.”

The New Bakery Co. of Ohio, Inc. (the “Bakery”), a 100% owned subsidiary of Wendy’s, is a producer of buns for some Wendy’s restaurants, and to a lesser extent for other outside parties, including one distributor to the Arby’s system. At January 2, 2011, the Bakery supplied 709 restaurants operated by Wendy’s and 2,551 restaurants operated by franchisees. As of that date, the Bakery also directly supplied 10 Arby’s restaurants on a test basis. The Bakery also manufactures and sells some products to customers in the grocery and other food service businesses.

Raw Materials and Purchasing

As of January 2, 2011, 5 independent processors (6 total production facilities) supplied all of Wendy’s hamburger in the United States. In addition, 5 independent processors (7 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 “Co-op Agreement”) to establish a new Wendy’s purchasing co-op, Quality Supply Chain Co-op, Inc. (“QSCC”). QSCC manages food and related product purchases and distribution services for the Wendy’s system in the United States and Canada. Through QSCC, Wendy’s and Wendy’s franchisees purchase food, proprietary paper and operating supplies 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 North America supply chain. The system’s purchasing function for 2009 and prior was performed and paid for by Wendy’s. In order to facilitate the orderly transition of the 2010 purchasing function for North America operations, Wendy’s transferred certain contracts, assets and certain Wendy’s purchasing employees to QSCC in the first quarter of 2010. Pursuant to the terms of the Co-op Agreement, Wendy’s was required to pay $15.5 million to QSCC over an 18 month period through May 2011 in order to provide funding for start-up costs, operating expenses and cash reserves. In addition to the initial funding by Wendy’s, since the third quarter of 2010 all QSCC members (including Wendy’s) began paying sourcing fees on products sourced through QSCC. Such sourcing fees will be the primary means of funding QSCC’s operations after the initial funding by Wendy’s is completed.

During the 2010 second quarter, QSCC and ARCOP, Inc. (“ARCOP”), Arby’s independent purchasing cooperative, in consultation with Wendy’s/Arby’s Restaurants, established the Strategic Sourcing Group Co-op, LLC (“SSG”). SSG was formed to manage and operate purchasing programs which combine the purchasing power of both Wendy’s and Arby’s company-owned and franchised restaurants to create buying efficiencies for certain non-perishable goods, equipment and services.

In order to facilitate the orderly transition of this purchasing function for the Companies’ North America operations, Wendy’s/Arby’s Restaurants transferred certain contracts, assets and certain Wendy’s/Arby’s Restaurants purchasing employees to SSG in the second quarter of 2010. Wendy’s/Arby’s Restaurants had committed to pay approximately $5.2 million of SSG expenses, which was expensed in 2010 and was to be paid over a 24 month period through March 2012. We made payments of $2.0 million in 2010.

Should a sale of Arby’s occur as discussed in “The Arby’s Restaurant System” herein, under the change of control provisions in the agreement that established SSG, the activities of SSG would be wound up. In the wind up process, the assets, personnel and functions of SSG would be transferred to QSCC and ARCOP as such parties and Wendy’s/Arby’s Restaurants agree. In contemplation of a possible sale, the parties are in discussion regarding the dissolution of SSG and transferring SSG’s assets, personnel and functions to QSCC and ARCOP.

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 2011 to 2020, 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 such as McDonald’s®, Burger King®, Taco Bell®, Kentucky Fried Chicken® and Arby’s®. Wendy’s competes with other restaurant companies and food outlets, primarily through the quality, variety, convenience, price, and value perception of food products offered. The number and location of units, quality and speed of service, attractiveness of facilities, effectiveness of marketing and new product development by Wendy’s and its competitors are also important factors. The price charged for each menu item may vary from market to market (and within markets) depending on competitive pricing and the local cost structure. Wendy’s also competes within the food service industry and the quick service restaurant sector not only for customers, but also for personnel, suitable real estate sites and qualified franchisees.

Wendy’s competitive position is differentiated by a focus on quality, its use of fresh, never frozen ground beef in the United States and Canada and certain other countries, its unique and diverse menu, its promotional products, its choice of condiments and the atmosphere and decor of its restaurants.

Many of the leading restaurant chains have focused on new unit development as one strategy to increase market share through increased consumer awareness and convenience. This has led to increased competition for available development sites and higher development costs for those sites, although the recent decline in commercial real estate values has somewhat offset those costs. Competitors also employ marketing strategies such as frequent use of price discounting, frequent promotions and heavy advertising expenditures. Continued price discounting in the quick service restaurant industry and the emphasis on value menus has had and could continue to have an adverse impact on Wendy’s. In addition, the growth of fast casual chains and other in-line competitors could cause some fast food customers to “trade up” to a more traditional dining out experience while keeping the benefits of quick service dining.

Other restaurant chains have also competed by offering high quality sandwiches made with fresh ingredients and artisan breads and there are several emerging restaurant chains featuring high quality food served at in-line locations. Several chains have also sought to compete by targeting certain consumer groups, such as capitalizing on trends toward certain types of diets (e.g., low carbohydrate or low trans fat) by offering menu items that are promoted as being consistent with such diets.

Additional competitive pressures for prepared food purchases come from operators outside the restaurant industry. A number of major grocery chains offer fresh deli sandwiches and fully prepared food and meals to go as part of their deli sections. Some of these chains also have in-store cafes with service counters and tables where consumers can order and consume a full menu of items prepared especially for that portion of the operation. Additionally, convenience stores and retail outlets at gas stations frequently offer sandwiches and other foods.

Quality Assurance

Wendy’s quality assurance program is designed to verify that the food products supplied to our restaurants are processed in a safe, sanitary environment and in compliance with our food safety and quality standards. Wendy’s quality assurance personnel conduct multiple on-site sanitation and production audits throughout the year at all of our core menu product processing facilities, which include beef, poultry, pork, buns, French fries, Frosty™ dessert ingredients, and produce. Animal welfare audits are also conducted every year at all beef, poultry, and pork facilities to confirm compliance with our required animal welfare and handling policies and procedures. In addition to our facility audit program, weekly samples of beef, poultry, and other core menu products from our distribution centers are randomly sampled and analyzed by a third party laboratory to test conformance to our quality specifications. Each year, Wendy’s representatives conduct unannounced inspections of all company and franchise restaurants to test conformance to our sanitation, food safety, and operational requirements. Wendy’s has the right to terminate franchise agreements if franchisees fail to comply with quality standards.

Acquisitions and Dispositions of Wendy’s Restaurants

Wendy’s has from time to time acquired the interests of and sold Wendy’s restaurants to franchisees, and it is anticipated that the company may have opportunities for such transactions in the future. Wendy’s generally retains a right of first refusal in connection with any proposed sale of a franchisee’s interest. Wendy’s will continue to sell and acquire restaurants in the future where prudent.

Franchised Restaurants

As of January 2, 2011, Wendy’s franchisees operated 5,182 Wendy’s restaurants in 49 states, Canada and 22 other countries and United States territories.

The rights and obligations governing the majority of franchised restaurants operating in the United States are set forth in the Wendy’s Unit Franchise Agreement. This document provides the franchisee the right to construct, own and operate a Wendy’s restaurant upon a site accepted by Wendy’s and to use the Wendy’s system in connection with the operation of the restaurant at that site. The Unit Franchise Agreement provides for a 20-year term and a 10-year renewal subject to certain conditions. Wendy’s has in the past franchised under different agreements on a multi-unit basis; however, Wendy’s now generally grants new Wendy’s franchises on a unit-by-unit basis.

The Wendy’s Unit Franchise Agreement requires that the franchisee pay a royalty of 4% of sales, as defined in the agreement, from the operation of the restaurant. The agreement also typically requires that the franchisee pay Wendy’s a technical assistance fee. In the United States, the standard technical assistance fee required under a newly executed Unit Franchise Agreement is currently $25,000 for each restaurant.

The technical assistance fee is used to defray some of the costs to Wendy’s in providing technical assistance in the development of the Wendy’s restaurant, initial training of franchisees or their operator and in providing other assistance associated with the opening of the Wendy’s restaurant. In certain limited instances (like the regranting of franchise rights or the relocation of an existing restaurant),
Wendy’s may charge a reduced technical assistance fee or may waive the technical assistance fee. Wendy’s does not select or employ personnel on behalf of franchisees.

Wendy’s has announced a program to encourage the development of new restaurants in the United States. Under the program, provided certain conditions are met, the technical assistance fee for franchised restaurants opened from April 2011 through December 2013 will be reduced to $15,000, and royalties paid on sales from those restaurants will be reduced to 2% for the first 12 months and to 3% for the second 12 months. After 24 months, the monthly royalty rate reverts to the prevailing 4% rate for the remaining term of the franchise agreement.

Wendy’s currently does not offer any financing arrangements, or enter into guarantees of financing arrangements, to franchisees seeking to build new franchised units . However, Wendy’s had previously made such financing available to qualified franchisees and Wendy’s had guaranteed payment on a portion of the loans made by third-party lenders to those franchisees.

Effective February 2011, certain lenders are offering financing to Wendy’s United States franchisees to purchase new equipment and smallwares and modify other equipment needed to implement Wendy’s new hamburger product roll out. Wendy’s has agreed to subsidize a portion of the interest that would otherwise be payable by the franchisees participating in this financing program. The financing program is expected to end in September 2011.

See “Management Discussion and Analysis – Liquidity and Capital Resources – Guarantees and Other Contingencies” in Item 7 herein, for further information regarding guarantee obligations.

Franchised restaurants are required to be operated under uniform operating standards and specifications relating to the selection, quality and preparation of menu items, signage, decor, equipment, uniforms, suppliers, maintenance and cleanliness of premises and customer service. Wendy’s monitors franchisee operations and inspects restaurants periodically to ensure that required practices and procedures are being followed.

See Note 5 and Note 23 of the Financial Statements and Supplementary Data included in Item 8 herein, and the information under “Management’s Discussion and Analysis” in Item 7 herein, for further information regarding reserves, commitments and contingencies involving franchisees.

Advertising and Marketing

In the United States and Canada, Wendy’s advertises nationally 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. 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. Currently the contribution rate for United States and Canadian restaurants is generally 3% of retail sales for national advertising and 1% of retail sales for local and regional advertising.

See Note 26 of the Financial Statements and Supplementary Data included in Item 8 herein, for further information regarding advertising.

International Operations and Franchising

As of January 2, 2011, Wendy’s had 136 company-owned and 232 franchised restaurants in Canada and 325 franchised restaurants in 22 other countries and U.S. territories. Wendy’s is aggressively pursuing international development opportunities. Since the second quarter of 2009, new development agreements have been announced for Wendy’s locations in Singapore, Trinidad and Tobago and 8 other eastern Caribbean countries, Argentina, and the Philippines and dual branded Wendy’s and Arby’s locations in the United Arab Emirates and 11 other countries in the Middle East and North Africa, and the Russian Federation. In March 2011, Wendy’s also announced that it had entered into a joint venture to develop Wendy’s restaurants in Japan. Wendy’s has granted development rights in the certain countries and U. S. territories listed under Item 2 of this Form 10-K.

Wendy’s Restaurants of Canada Inc. (“WROC”), a 100% owned subsidiary of Wendy’s, holds master franchise rights for Canada. The rights and obligations governing the majority of franchised restaurants operating in Canada are set forth in a Single Unit Sub-Franchise Agreement. This document provides the franchisee the right to construct, own and operate a Wendy’s restaurant upon a site accepted by WROC and to use the Wendy’s system in connection with the operation of the restaurant at that site. The Single Unit Sub-Franchise Agreement provides for a 20-year term and a 10-year renewal subject to certain conditions. The sub-franchisee pays to WROC a monthly royalty of 4% of sales, as defined in the agreement, from the operation of the restaurant or C$1,000, whichever is greater. The agreement also typically requires that the franchisee pay WROC a technical assistance fee. The standard technical assistance fee is currently C$35,000 for each restaurant.

CEO BACKGROUND

Nelson Peltz


Mr. Peltz has been a director of the Company since April 1993 and has served as non-executive Chairman since June 2007. He served as Chairman and Chief Executive Officer of the Company and as a director or manager and officer of certain of the Company’s subsidiaries from April 1993 through June 2007. Additionally, Mr. Peltz has been Chief Executive Officer and a founding partner of Trian Fund Management, L.P. (“Trian Partners”), an investment management company for various funds and accounts, since November 2005. From its formation in January 1989 to April 1993, Mr. Peltz was Chairman and Chief Executive Officer of Trian Group, Limited Partnership (“Trian Group”), which provided investment banking and management services for entities controlled by Mr. Peltz and Mr. May. From 1983 to December 1988, he was Chairman and Chief Executive Officer and a director of Triangle Industries, Inc. (“Triangle”), which, through wholly-owned subsidiaries, was, at that time, a manufacturer of packaging products, copper electrical wire and cable and steel conduit and currency and coin handling products. Mr. Peltz has also served as a director of Legg Mason, Inc. since October 2009, of H. J. Heinz Company since September 2006, and of Trian Acquisition I Corp. since October 2007. Mr. Peltz also served as a director of Encore Capital Group, Inc. from January 2003 to June 2006, and as a director of Deerfield Capital Corp. from December 2004 to December 2007. Mr. Peltz is the father-in-law of Edward P. Garden. Mr. Peltz is 68 years of age.



Mr. Peltz has more than 40 years of business and investment experience, has served as the chairman and chief executive officer of public companies for over 20 years, and since 2005 he has served as Chief Executive Officer of Trian Partners. Over that entire period, he has developed extensive experience working

with management teams and boards of directors, and in acquiring, investing in and building companies and implementing operational improvements at the companies with which he has been involved. As a result, he has strong operating experience and strategic planning skills and has strong relationships with institutional investors, investment banking/capital markets advisors and others that can be drawn upon for the Company’s benefit.


Peter W. May


Mr. May has been a director of the Company since April 1993 and has served as non-executive Vice Chairman since June 2007. He served as the President and Chief Operating Officer of the Company and also as a director or manager and officer of certain of the Company’s subsidiaries from April 1993 through June 2007. Additionally, Mr. May has been President and a founding partner of Trian Partners since November 2005. From its formation in January 1989 to April 1993, Mr. May was President and Chief Operating Officer of Trian Group. He was President and Chief Operating Officer and a director of Triangle from 1983 until December 1988. Mr. May has also served as a director of Tiffany & Co. since May 2008, and as a director of Trian Acquisition I Corp. since October 2007. Mr. May also served as a director of Encore Capital Group, Inc. from February 1998 through May 2007, and as a director of Deerfield Capital Corp. from December 2007 to June 2010. Mr. May is 68 years of age.



Mr. May has more than 40 years of business and investment experience, has served as the president and chief operating officer of public companies for over 20 years, and since 2005 he has served as President of Trian Partners. Over that entire period, he has developed extensive experience working with management teams and boards of directors, and in acquiring, investing in and building companies and implementing operational improvements at the companies with which he has been involved. As a result, he has strong operating experience and strategic planning skills and has strong relationships with institutional investors, investment banking/capital markets advisors and others that can be drawn upon for the Company’s benefit.


Clive Chajet


Mr. Chajet has been a director of the Company since June 1994. He has been Chairman of Chajet Consultancy, L.L.C., a consulting firm specializing in identity and image management, since January 1997. Prior to that time, Mr. Chajet was Chairman of Lippincott & Margulies Inc., also a consulting firm specializing in identity and image management, from 1983 to January 1997. Mr. Chajet is 74 years of age.



Mr. Chajet is an internationally recognized corporate identity and branding specialist. Much of the value of Wendy’s/Arby’s is derived from the values of its brands and Mr. Chajet frequently participates in discussions and planning of branding issues.


Edward P. Garden


Mr. Garden has been a director of the Company since December 2004. He served as Vice Chairman from December 2004 through June 2007 and Executive Vice President from August 2003 until December 2004. Additionally, Mr. Garden has been Chief Investment Officer and a founding partner of Trian Partners since November 2005. From 1999 to 2003, Mr. Garden was a managing director of Credit Suisse First Boston, where he served as a senior investment banker in the Financial Sponsors Group. From 1994 to 1999, he was a managing

director at BT Alex Brown where he was a senior member of the Financial Sponsors Group and, prior to that, co-head of Equity Capital Markets. Mr. Garden has also served as a director of Trian Acquisition I Corp. since October 2007. Mr. Garden also served as a director of Chemtura Corporation from January 2007 through March 2009. Mr. Garden is the son-in-law of Nelson Peltz. Mr. Garden is 49 years of age.



Mr. Garden has served as a director and senior executive of several public companies and has over 25 years of experience investing in, operating, financing, and advising companies. During the past several years, Mr. Garden, as Chief Investment Officer of Trian Partners, has worked with management teams and boards of directors to implement operational improvements. Prior to that, Mr. Garden worked with financial sponsors, executing financings through the issuance of bank debt, corporate bonds and equity capital, and providing strategic advisory services. As a result, he has strong operating experience and a network of relationships with institutional investors and investment banking/capital markets advisors that he can utilize for the Company’s benefit.


Janet Hill


Ms. Hill has been a director of the Company since September 2008. She served as a director of Wendy’s International, Inc. (“Wendy’s”) from 1994 until its merger with a subsidiary of the Company in September 2008. Ms. Hill is a principal in her family’s office, Hill Family Advisors, where she oversees the family’s investments. From 1981 until her retirement in 2010, Ms. Hill was Vice President of Alexander & Associates, Inc., a management consulting business in Washington, D.C., which she owned and managed. She provided corporate planning, advice and analysis to directors, executives and managers in the areas of human resource planning, corporate responsibility, corporate communications and government consultation. Ms. Hill also serves as a director of Dean Foods Company and Sprint Nextel Corporation. Ms. Hill served as a director of Nextel Communications, Inc. from 1999 until its merger in 2005 with a subsidiary of Sprint Corporation. Ms. Hill is 63 years of age.



Ms. Hill has served on eight corporate boards over the past 20 years including valuable service on compensation, governance and audit committees. She has extensive experience in contemporary corporate governance. She assisted in the development of the Directors’ Education Institute at Duke University. She has served as a presenter in numerous university-sponsored programs for corporate directors including at Duke, the University of Maryland and the University of Pennsylvania. Through her corporate consulting firm, which she owned and managed for 30 years, she has advised hundreds of companies and senior executives in the areas of human resources and workforce inclusiveness.


Joseph A. Levato


Mr. Levato has been a director of the Company since June 1996. Mr. Levato served as Executive Vice President and Chief Financial Officer of the Company and certain of its subsidiaries from April 1993 to August 1996, when he retired from the Company. He was Senior Vice President and Chief Financial Officer of Trian Group from January 1992 to April 1993. From 1984 to December 1988, he served as Senior Vice President and Chief Financial Officer of Triangle. Mr. Levato is 70 years of age.



Mr. Levato has extensive experience with industrial, financial and consumer-related businesses. As part of his job responsibilities, he has acquired an intimate

knowledge of regulatory matters relevant to public company audit and compensation committees. Mr. Levato’s experience and background qualify him as financially literate and the Board of Directors has determined him to be an “audit committee financial expert” within the meaning of SEC regulations. He currently serves as Chairman of the Board’s Audit Committee.


J. Randolph Lewis


Mr. Lewis has been a director of the Company since September 2008. He served as a director of Wendy’s from 2004 until its merger with a subsidiary of the Company in September 2008. Mr. Lewis is Senior Vice President, Supply Chain and Logistics, Walgreen Co., Deerfield, Illinois. Walgreen Co. is the nation’s largest retail drugstore chain. Mr. Lewis joined Walgreen Co. in March 1992 as Divisional Vice President, Logistics and Planning. He was promoted to his current position in 1999. Prior to joining Walgreen Co. he was a partner in the consulting division of Ernst & Young. Mr. Lewis is 61 years of age.



Mr. Lewis’ experience as a senior executive with Walgreen Co., which is the nation’s largest retail drugstore chain with fiscal 2009 sales of $63 billion, as well as his previous experience serving as a director of Wendy’s, gives him substantial insights into effective strategies for providing consumer goods and services conveniently, managing large retail store networks, operating in a highly competitive marketplace, enhancing the customer experience, and reducing costs and improving productivity, all of which are important to the Company’s business.


Peter H. Rothschild


Mr. Rothschild has been a director of the Company since May 2010. Mr. Rothschild has been the Managing Member of Daroth Capital LLC, a financial services company, since its founding in 2001 and the President and CEO of its wholly-owned subsidiary, Daroth Capital Advisors LLC, a securities broker-dealer, since 2002. Prior to founding Daroth Capital, Mr. Rothschild was a Managing Director and Co-Head of the Leveraged Finance and Industrial Finance groups at Wasserstein Perella, the predecessor company to Dresdner Kleinwort Wasserstein and was with the organization from 1996 to 2001. From 1990 to 1996, Mr. Rothschild was a Senior Managing Director and Head of the Natural Resources Group at Bear, Stearns & Co. Inc. and was one of the founders of the firm’s Leveraged Finance and Financial Buyer Coverage groups. From 1984 to 1990, Mr. Rothschild was a Managing Director and Head of the Industrial Group at Drexel Burnham Lambert. Mr. Rothschild has been a member of the board of directors of Deerfield Capital Corp. (“Deerfield”) since December 2004 and the interim Chairman of Deerfield’s board of directors since April 2007. Mr. Rothschild previously served as a director of Wendy’s from March 2006 to September 2008. Mr. Rothschild is 55 years of age.



Mr. Rothschild has been employed as an investment banker since 1981. He has served on the board of directors of numerous companies including Wendy’s and Deerfield, where he serves as interim Chairman. He is knowledgeable about finance, mergers and acquisitions, capital raising, restructurings and restaurant companies.


David E. Schwab II


Mr. Schwab has been a director of the Company since October 1994. Mr. Schwab has been a Senior Counsel of Cowan, Liebowitz & Latman, P.C., a law firm, since January 1998. Prior to that time, he was a partner of Schwab

Goldberg Price & Dannay, a law firm, for more than five years. Mr. Schwab also serves as Chair Emeritus of the Board of Trustees and Chair of the Executive Committee of Bard College. Mr. Schwab is 79 years of age.



In addition to Mr. Schwab’s training and experience as an attorney, he has had experience, as a director, partner and stockholder, with the management, operation and governance of both public and private companies over a period of more than 50 years.


Roland C. Smith


Mr. Smith has been a director and the Chief Executive Officer of the Company since June 2007, and he has also served as President of the Company and Chief Executive Officer of Wendy’s since September 2008. Mr. Smith served as the Chief Executive Officer of Arby’s Restaurant Group, Inc. (“Arby’s”) from April 2006 to September 2008. Mr. Smith also served as President of Arby’s from April 2006 to June 2006, and served as interim President of Arby’s from January 2010 to May 2010. Mr. Smith served as President and Chief Executive Officer of American Golf Corporation and National Golf Properties from February 2003 to November 2005. Prior thereto, Mr. Smith served as President and Chief Executive Officer of AMF Bowling Worldwide, Inc. from April 1999 to January 2003. Mr. Smith served as President and Chief Executive Officer of Arby’s predecessor, Arby’s, Inc., from February 1997 to April 1999. Mr. Smith also serves as Chairman of the Board of Directors of Carmike Cinemas, Inc. Mr. Smith is 56 years of age.



Mr. Smith has extensive experience as an executive in the quick service restaurant industry, including many years with the Company or its subsidiaries. He also has substantial experience as an executive or director of non-restaurant businesses operating at multiple locations and providing products and services that consumers purchase as discretionary items. Much of Mr. Smith’s business experience relates to operations and marketing, which are particularly important to the Company’s business. He also has considerable experience as a public company director, including experience as chairman of the board. This gives him substantial insights into the challenges and opportunities presented by all aspects of the Company’s business, and facilitates robust communication between the Company’s Board of Directors and its senior management team.


Raymond S. Troubh


Mr. Troubh has been a director of the Company since June 1994. He has been a financial consultant since prior to 1989, and is a former Governor of the American Stock Exchange and a former general partner of Lazard Freres & Co., an investment banking firm. Mr. Troubh is currently a director of Diamond Offshore Drilling, Inc., General American Investors Company and Gentiva Health Services, Inc. Mr. Troubh served as a trustee of the Petrie Stores Liquidating Trust from April 1994 to March 2006, as a director of Portland General Electric Company from April 2004 to October 2006, as a director of Sun-Times Media Group, Inc. from January 2006 to July 2007, and as a director of WHX Corporation from April 1992 to August 2005. Mr. Troubh is 84 years of age.



During the course of his career, Mr. Troubh has served as a director of over 30 public companies of varying degrees of size and complexity. He has served as chairman of the compensation and audit committees of many of those companies and he has extensive experience in public company regulatory matters in general, and corporate governance matters in particular.

MANAGEMENT DISCUSSION FROM LATEST 10K

Our Business

We currently manage and internally report our operations as two business segments: the operation and franchising of Wendy’s restaurants, including its wholesale bakery operations, and the operation and franchising of Arby’s restaurants. As of January 2, 2011, the Wendy’s restaurant system was comprised of 6,576 restaurants, of which 1,394 were owned and operated by the Companies. As of January 2, 2011, the Arby’s restaurant system was comprised of 3,649 restaurants, of which 1,144 were owned and operated by the Companies. The 2,538 Wendy’s and Arby’s company-owned restaurants are located principally in the United States and to a lesser extent in Canada (the “North America Restaurants”). In January 2011, we announced that we are exploring strategic alternatives for Arby’s, including a sale of the brand.

Wendy’s and Arby’s revenues and operating results have been impacted by a number of factors, including generally negative sales and traffic trends in the restaurant industry, high unemployment, negative general economic trends and intense price competition.

We continue to believe there are long-term growth opportunities for our brands. Wendy’s opportunities include (1) product innovation, (2) a continued emphasis on our everyday value menu, (3) expanding dayparts, (4) modernizing our facilities, (5) new unit development, and (6) expanding internationally. Our Arby’s opportunities include (1) our value strategy, which includes our everyday affordability proposition, (2) our remodeling program, (3) a new brand positioning to be introduced in 2011, and (4) product innovation.

As of January 2, 2011, there were approximately 350 Arby’s franchised restaurants with amounts payable to Arby’s for royalties, rent and/or other fees that were at least 60 days past due. The financial condition of a number of Arby’s franchisees was one of the factors that resulted in a net decrease of 44 and 31 in the number of franchised restaurants for fiscal 2010 and 2009, respectively. During those periods 96 and 74 franchised Arby’s restaurants were closed, respectively. The trend of declining sales at franchised Arby’s restaurants has resulted in decreases in royalties and other franchise revenues. In addition, Arby’s franchisee accounts receivable and related allowance for doubtful accounts have increased significantly, and may continue to grow, as a result of the continued deteriorating financial condition of some of our franchisees. Franchisees’ financial difficulties and the closure of franchised restaurants have also caused reductions in the contributions to and extent of advertising programs. Continuation of these trends would affect our revenues and may have a material adverse effect on our results of operations and financial condition.

Restaurant business revenues for 2010 include: (1) $2,946.8 million of sales from company-owned restaurants, (2) $98.5 million from the sale of bakery items and kids’ meal promotion items to our franchisees, (3) $345.0 million from royalty income from franchisees, and (4) $26.1 million of other franchise related revenue and other revenues. Most of our Wendy’s and Arby’s royalty agreements provided for royalties of 4.0% of franchise revenues for the year ended January 2, 2011.

Merger with Wendy’s International, Inc.

On September 29, 2008, Wendy’s/Arby’s completed the Wendy’s Merger in an all-stock transaction in which Wendy’s shareholders received 4.25 shares of Wendy’s/Arby’s Class A common stock for each share of Wendy’s common stock owned. Immediately prior to the Wendy’s Merger, each share of Wendy’s/Arby’s Class B common stock was converted into Class A common stock on a one for one basis (the “Conversion”). As a result of the May 28, 2009 amendment and restatement of Wendy’s/Arby’s Certificate of Incorporation, Wendy’s/Arby’s Class A common stock is now referred to as “Common Stock.”

Credit Agreement

As further described in “Liquidity and Capital Resources – Long-term Debt – Credit Agreement” below, on May 24, 2010, Wendy’s/Arby’s Restaurants, entered into a $650.0 million Credit Agreement (the “Credit Agreement”), which includes a $500.0 million senior secured term loan facility (the “Term Loan”) and a $150.0 million senior secured revolving credit facility (the “Credit Facility”).

The Companies recognized a loss on early extinguishment of debt of $26.2 million in the second quarter of 2010 primarily related to the repayment of the Wendy’s 6.25% senior notes from the proceeds of the Term Loan. This loss consisted of (1) a $15.0 million premium payment required to redeem the Wendy’s 6.25% senior notes, (2) $5.5 million for the write-off of the unaccreted discount of the Wendy’s 6.25% senior notes (recorded in connection with the Wendy’s Merger), and (3) $5.7 million for the write-off of deferred costs associated with the repayment of the prior senior secured term loan.

Senior Notes

On June 23, 2009, Wendy’s/Arby’s Restaurants issued $565.0 million principal amount of Senior Notes (the “Senior Notes”). The Senior Notes will mature on July 15, 2016 and accrue interest at 10.00% per annum, payable semi-annually on January 15 and July 15, the first payment of which was made on January 15, 2010. The Senior Notes were issued at 97.533% of the principal amount, representing a yield to maturity of 10.50% and resulting in net proceeds of $551.1 million. The $13.9 million discount is being accreted and the related charge included in “Interest expense” until the Senior Notes mature. The Senior Notes are fully and unconditionally guaranteed, jointly and severally, on an unsecured basis by certain direct and indirect domestic subsidiaries of Wendy’s/Arby’s Restaurants (collectively, the “Guarantors”).

Deerfield

(Wendy’s/Arby’s)

On December 21, 2007, Wendy’s/Arby’s sold its 63.6% capital interest in Deerfield & Company, LLC (“Deerfield”), an asset management business and a subsidiary of Wendy’s/Arby’s until its sale, to Deerfield Capital Corp (“DFR”) (the “Deerfield Sale”). The Deerfield Sale resulted in non-cash proceeds to Wendy’s/Arby’s aggregating $134.6 million, consisting of (1) 9.6 million convertible preferred shares (the “Preferred Stock”) of a subsidiary of DFR with an estimated fair value of $88.4 million at the date of the Deerfield Sale and (2) $48.0 million principal amount of series A senior secured notes of DFR due in December 2012 (the “DFR Notes”) with an estimated fair value of $46.2 million at the date of the Deerfield Sale.

On March 11, 2008, DFR stockholders approved the one-for-one conversion of all its outstanding convertible preferred stock into DFR common stock, which converted the Preferred Stock held by Wendy’s/Arby’s into a like number of shares of DFR common stock. On March 11, 2008, Wendy’s/Arby’s Board of Directors approved the distribution of the shares of DFR common stock then held by Wendy’s/Arby’s to Wendy’s/Arby’s stockholders. The distribution in the form of a dividend, which was valued at $14.5 million, was paid in 2008 to holders of record of Wendy’s/Arby’s then outstanding Class A common stock and Class B common stock.

In March 2008, in response to unanticipated credit and liquidity events in the first quarter of 2008, DFR announced that it was repositioning its investment portfolio to focus on agency-only residential mortgage-backed securities and away from its principal investing segment to its asset management segment with its fee-based revenue streams. In addition, it stated that during the first quarter of 2008 , its portfolio was adversely impacted by deterioration of the global credit markets and, as a result, it sold $2.8 billion of its agency and $1.3 billion of its AAA-rated non-agency mortgage backed securities and reduced the net notional amount of interest rate swaps used to hedge a portion of its mortgage-backed securities by $4.2 billion, all at a net after-tax loss of $294.3 million to DFR.

Based on these events described above and their negative effect on the market price of DFR common stock, Wendy’s/Arby’s concluded that the fair value and, therefore, the carrying value of its investment in the DFR common shares was impaired. As a result, as of March 11, 2008 Wendy’s/Arby’s recorded an other than temporary loss, which is included in “Other than temporary losses on investments,” for the year ended December 28, 2008 of $68.1 million. As a result of the subsequent distribution of the DFR common stock, the income tax loss that resulted from the decline in value of $68.1 million was not deductible for income tax purposes and no income tax benefit was recorded related to this loss.

During the fourth quarter of 2008 , Wendy’s/Arby’s recognized an allowance for collectability of $21.2 million to reduce the then carrying amount of the DFR Notes to $25.0 million. On June 9, 2010, pursuant to a March 2010 agreement between Wendy’s/Arby’s and DFR, Wendy’s/Arby’s received cash proceeds of $31.3 million, including interest, in consideration for the repayment and cancellation of the DFR Notes. The proceeds represented 64.1% of the $48.0 million aggregate principal amount of the DFR Notes. Wendy’s/Arby’s recognized income of $4.9 million during the year ended January 2, 2011 as the repayment proceeds exceeded the carrying value of the DFR Notes. This gain is included in “Investment income (expense), net.”

Related Party Transactions

Supply Chain Relationship Agreement

During the 2009 fourth quarter, Wendy’s entered into a purchasing co-op relationship agreement (the “Co-op Agreement”) to establish a new Wendy’s purchasing co-op, Quality Supply Chain Co-op, Inc. (“QSCC”). QSCC manages food and related product purchases and distribution services for the Wendy’s system in the United States and Canada. Through QSCC, Wendy’s and Wendy’s franchisees purchase food, proprietary paper and operating supplies 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 North America supply chain. The system’s purchasing function for 2009 and prior was performed and paid for by Wendy’s. In order to facilitate the orderly transition of the 2010 purchasing function for North America operations, Wendy’s transferred certain contracts, assets and certain Wendy’s purchasing employees to QSCC in the first quarter of 2010. Pursuant to the terms of the Co-op Agreement, Wendy’s was required to pay $15.5 million to QSCC over an 18 month period through May 2011 in order to provide funding for start-up costs, operating expenses and cash reserves. The required payments by Wendy’s under the Co-op Agreement were expensed in the fourth quarter of 2009 and included in “General and administrative.” Wendy’s made payments of $15.2 million in 2010. In addition to the initial funding by Wendy’s, since the third quarter of 2010 , all QSCC members (including Wendy’s) began paying sourcing fees on products sourced through QSCC. Such sourcing fees will be the primary means of funding QSCC’s operations after the initial funding by Wendy’s is completed. In connection with the ongoing operations of QSCC during 2010, QSCC reimbursed Wendy’s $0.9 million for amounts Wendy’s had paid primarily for payroll-related expenses for certain Canadian QSCC purchasing employees. Effective January 4, 2010, the QSCC leased 9,333 square feet of office space from Wendy’s for a two year period for an average annual rental of $0.1 million with five one-year renewal options.

ARCOP, Inc. (“ARCOP”), a not-for-profit purchasing cooperative, negotiates contracts with approved suppliers on behalf of Arby’s and Arby’s franchisees and operates under a previously established agreement similar to the Wendy’s Co-op Agreement.

Revolving credit facilities

In December 2009, and as amended in February and August 2010, AFA Service Corporation ( “AFA”) entered into a revolving loan agreement with Arby’s. The terms of this agreement allow AFA to have revolving loans of up to $14.0 million outstanding with an expiration date of March 2012 and bearing interest at 7.5% per annum. In February 2011, the maximum principal amount of revolving loans was reduced to $11.0 million. As of January 2, 2011, the outstanding revolving loan balance was $4.5 million.

Strategic Sourcing Group Agreement

On April 5, 2010, QSCC and ARCOP, in consultation with Wendy’s/Arby’s Restaurants, established Strategic Sourcing Group Co-op, LLC (“SSG”). SSG was formed to manage and operate purchasing programs which combine the purchasing power of both Wendy’s and Arby’s company-owned and franchised restaurants to create buying efficiencies for certain non-perishable goods, equipment and services.


In order to facilitate the orderly transition of this purchasing function for the Companies’ North America operations, Wendy’s/Arby’s Restaurants transferred certain contracts, assets and certain Wendy’s/Arby’s Restaurants purchasing employees to SSG in the second quarter of 2010. Wendy’s/Arby’s Restaurants had committed to pay approximately $5.2 million of SSG expenses, which were expensed in 2010 and included in “General and administrative,” and was to be paid over a 24 month period through March 2012. We made payments of $2.0 million in 2010. Effective April 5, 2010, the SSG leased 2,300 square feet of office space from Arby’s until December 31, 2016, unless terminated earlier, for an annual base rental of $51 thousand.

Should a sale of Arby’s occur as discussed in “Introduction and Executive Overview – Our Business” herein, under the change of control provisions in the agreement that established SSG, the activities of SSG would be wound up. In the wind up process, the assets, personnel and functions of SSG would be transferred to QSCC and ARCOP as such parties and Wendy’s/Arby’s Restaurants agree. In contemplation of a possible sale, the parties are in discussion regarding the dissolution of SSG and transferring SSG’s assets, personnel and functions to QSCC and ARCOP.

(Wendy’s/Arby’s)

Equities Account

In 2005, Wendy’s/Arby’s invested $75.0 million in brokerage accounts (the “Equities Account”), which were managed by a management company (the “Management Company”) formed by the Chairman and then Chief Executive Officer and the Vice Chairman and then President and Chief Operating Officer of Wendy’s/Arby’s (the “Former Executives”) and a director, who is Wendy’s/Arby’s former Vice Chairman (collectively with the Former Executives, the “Principals”). The Equities Account was invested principally in equity securities, cash equivalents and equity derivatives of a limited number of publicly-traded companies. In addition, the Equities Account sold securities short and invested in market put options in order to lessen the impact of significant market downturns.

On June 10, 2009, Wendy’s/Arby’s and the Management Company entered into a withdrawal agreement (the “Withdrawal Agreement”) which provided that Wendy’s/Arby’s would be permitted to withdraw all amounts in the Equities Account on an accelerated basis (the “Early Withdrawal”) effective no later than June 26, 2009. Prior to the Withdrawal Agreement and as a result of an investment management agreement with the Management Company, which was terminated on June 26, 2009, Wendy’s/Arby’s had not been permitted to withdraw any amounts from the Equities Account until December 31, 2010, although $47.0 million was released from the Equities Account in 2008 subject to an obligation to return that amount to the Equities Account by a specified date. In consideration for obtaining such Early Withdrawal right, Wendy’s/Arby’s agreed to pay the Management Company $5.5 million (the “Withdrawal Fee”), was not required to return the $47.0 million referred to above and was no longer obligated to pay investment management and incentive fees to the Management Company. The Equities Account investments were liquidated in June 2009 for $37.4 million (the “Equities Sale”), of which $31.9 million was received by Wendy’s/Arby’s, net of the Withdrawal Fee, and for which Wendy’s/Arby’s realized a gain of $2.3 million in 2009, which are both included in “Investment income (expense), net.”

Sublease of New York Office Space

In July 2008 and July 2007, Wendy’s/Arby’s entered into agreements under which the Management Company is subleasing office space on two of the floors of Wendy’s/Arby’s former New York headquarters. During the second quarter of 2010, Wendy’s/Arby’s and the Management Company entered into an amendment to the sublease, effective April 1, 2010, pursuant to which the Management Company’s early termination right was cancelled in exchange for a reduction in rent. Under the terms of the amended sublease, the sublease is not cancelable prior to the expiration of the prime lease and the Management Company pays rent to Wendy’s/Arby’s in an amount that covers substantially all of Wendy’s/Arby’s rent obligations under the prime lease for the subleased space.

Services Agreement s

Wendy’s/Arby’s and the Management Company entered into a new services agreement (the “New Services Agreement”), which commenced on July 1, 2009 and will continue until June 30, 2011, unless sooner terminated. Under the New Services Agreement, the Management Company assists Wendy’s/Arby’s with strategic merger and acquisition consultation, corporate finance and investment banking services and related legal matters. Pursuant to the terms of this agreement, Wendy’s/Arby’s is paying the Management Company a service fee of $0.25 million per quarter, payable in advance commencing July 1, 2009. In addition, in the event the Management Company provides substantial assistance to Wendy’s/Arby’s in connection with a merger or acquisition, corporate finance and/or similar transaction that is consummated at any time during the period commencing on the date the New Services Agreement was executed and ending six months following the expiration of its term, Wendy’s/Arby’s will negotiate a success fee to be paid to the Management Company which is reasonable and customary for such transactions.

Under a prior services agreement which commenced on June 30, 2007 and expired on June 30, 2009, (the “Services Agreement”) the Management Company provided a broader range of professional and strategic services to Wendy’s/Arby’s in connection with its 2007 restructuring and the related transition of executive management responsibilities.

MANAGEMENT DISCUSSION FOR LATEST QUARTER

Executive Overview

Sale of Arby’s

During January 2011, The Wendy’s Company decided to explore strategic alternatives for the Arby’s brand, which culminated in the sale of Arby’s, in order to focus on the development of the Wendy’s brand. On July 4, 2011, Wendy’s Restaurants completed the sale of 100% of the common stock of Arby’s to ARG IH Corporation (“Buyer”), a wholly owned subsidiary of ARG Holding Corporation (“Buyer Parent”), for $130 million in cash (subject to customary purchase price adjustments) and 18.5% of the common stock of Buyer Parent (through which Wendy’s Restaurants will indirectly retain an 18.5% interest in Arby’s and the preliminary fair value of which is estimated to be $19.0 million). Buyer and Buyer Parent were formed for purposes of this transaction. The Buyer also assumed approximately $190 million of Arby’s debt, consisting primarily of capital lease and sale-leaseback obligations. The sale occurred pursuant to the terms of a Purchase and Sale Agreement by and among Wendy’s Restaurants, Buyer Parent and Buyer dated as of June 13, 2011. In accordance with the Purchase and Sale Agreement, The Wendy’s Company expects to make an election under §338(h)(10) of the Internal Revenue Code, which will have the effect of treating the transaction as a sale of assets and is expected to result in an approximate $240.0 million ordinary loss for income tax purposes. If this election were not to be made, the sale of Arby’s common stock would result in a capital loss for income tax purposes.
The Companies have recorded an estimated pre-tax loss on disposal of Arby’s of $6.0 million in the second quarter of 2011 based upon the preliminary valuation of our indirect retained interest and our current estimates of the transaction closing costs ( $11.3 million ) and post closing purchase price adjustments primarily related to working capital ( $15.0 million ). Such valuation and estimates are subject to change. The Companies have recognized a $2.2 million tax benefit on the estimated pre-tax loss on disposal of Arby’s in the second quarter of 2011. In the third quarter of 2011, due to a permanent difference between the book and tax basis of Arby’s assets related to goodwill, the Companies will record a tax expense of approximately $5.5 million in connection with completing the Arby’s sale.

Wendy’s Restaurants also entered into a Stockholders Agreement with Buyer Parent and ARG Investment Corporation, an entity affiliated with Buyer Parent, which sets forth certain agreements among the parties thereto concerning, among other things, the governance of Buyer Parent and transfer rights, information rights and registration rights with respect to the equity securities of Buyer Parent. In addition, Wendy’s Restaurants entered into a Transition Services Agreement with Buyer, pursuant to which it will provide and be reimbursed for continuing corporate and shared services to Buyer for a limited period of time; such services are currently anticipated to be completed by the end of 2011.
Our Continuing Business

As of July 3, 2011 , the Wendy’s restaurant system was comprised of 6,571 restaurants, of which 1,400 were owned and operated by the Companies. The company-owned restaurants are located principally in the United States and to a lesser extent in Canada (the “North America Restaurants”).

Wendy’s operating results have been impacted by a number of factors, including high unemployment, negative general economic trends and intense price competition, as well as increased commodity costs in the 2011 first half. These increased costs negatively affected cost of sales and restaurant margins. Wendy’s expects that significant increases in commodity costs as compared to 2010 will continue for the remainder of 2011. Wendy’s expects to offset a portion of these increases with strategic price increases.

Wendy’s long-term growth opportunities include (1) continuing to improve its core menu, (2) capturing incremental sales through daypart expansion, (3) upgrading our existing store base, (4) developing new restaurants within the United States, and (5) building the brand worldwide.

Wendy’s revenues for the first six months of 2011 include: (1) $1,016.1 million of sales from company-owned restaurants, (2) $37.4 million from the sale of bakery items and kids’ meal promotion items to our franchisees, (3) $139.2 million of royalty income from franchisees, and (4) $12.2 million of other franchise-related revenue and other revenues. During the first quarter of 2011, Wendy’s purchasing cooperative, Quality Supply Chain Co-op, Inc. (“QSCC”) began managing the operations for kids’ meal promotion items sold to franchisees. Sales of kids’ meal promotion items recorded during the first half of 2011 were from inventory on hand prior to QSCC’s management of the process. Therefore, in future quarters we do not expect to receive any revenue from sales of kids’ meal promotion items sold to franchisees. However, we do not expect the decrease in these revenues to have a material adverse effect on our results of operations or financial condition. Most of our Wendy’s royalty agreements provided for royalties of 4.0% of franchise revenues for the six months ended July 3, 2011 .

Related Party Transactions

The Companies have entered into the following transactions with related parties since those reported in our Form 10-K:

SSG

As agreed by its board of directors in March 2011, effective April 2011 the activities of Strategic Sourcing Group Co-op, LLC (“SSG”) were transferred to QSCC, and Arby’s independent purchasing cooperative (“ARCOP”), which, following the sale of Arby’s, is no longer a related party. Wendy’s Restaurants had committed to pay approximately $5.2 million of SSG expenses, of which $4.9 million was expensed in the first quarter of 2010, and was to be paid over a 24 month period through March 2012. During the first quarter of 2011, the remaining accrued commitment of $2.3 million was reversed and credited to “General and administrative.”

QSCC Sublease

Wendy’s and QSCC entered into a sublease amendment, effective January 1, 2011, which increased the office space subleased to QSCC to 14,333 square feet for a one year period for a revised annual base rental of approximately $0.2 million with five one-year renewal options.

(The Wendy’s Company)

Aircraft Agreement

On June 29, 2011, The Wendy’s Company and TASCO, LLC, an affiliate of the management company (the “Management Company”) which was formed by our Chairman, who was our former Chief Executive Officer, and our Vice Chairman, who was our former President and Chief Operating Officer, and a director, who was our former Vice Chairman, entered into an agreement to extend an aircraft lease agreement for an additional one year period (expiring on June 30, 2012) for an increased monthly rent of $13 thousand. Under the extended lease agreement, TASCO, LLC continues to be responsible for operating costs related to the aircraft’s usage.

We intend to dispose of the Company-owned aircraft leased under the lease agreement discussed above as soon as practicable. As of July 3, 2011, the aircraft has a carrying value that approximates its fair value, is classified as held-for-sale, and is included in “Prepaid expenses and other current assets.”

CONF CALL

John D. Barker

Thanks. Good morning, everybody. This morning, we issued our third quarter 2011 earnings release, and we also filed our Form 10-Q. The agenda for today's call and the webcast will include comments from our President and CEO, Emil Brolick. Our Chief Financial Officer, Steve Hare, will then review our third quarter financial results, as well as our 2011 outlook. And then afterwards, we'll open up the line for questions.

As a reminder, due to the sale of Arby's, the restaurant group, on July 4, 2011, Arby's results of operations are reflected at discontinued operations. Today's conference call and our webcast is accompanied by a PowerPoint presentation that can be found on our Investor Relations page on our corporate website, which is www.aboutwendys.com. For those of you who are listening by phone today, make sure you select the appropriate webcast player option from our website and that will make sure that you can sync up with the slides and the audio.

Before we begin, I'd like to just take a minute to read you the Safe Harbor statement that is attached to today's release. Certain information that we may discuss today regarding future performance such as financial goals, plans, development is forward-looking. Various factors could affect the company's results and cause those results to differ materially from those expressed in our forward-looking statements. Some of those factors are referenced in the Safe Harbor statement that is attached to the news release. Also some of the comments today will reference non-GAAP financial measures such as earnings before interest, taxes, depreciation and amortization. Investors should refer to our reconciliations of non-GAAP financial measures to the most directly comparable GAAP financial measure.

As you know by now, Emil Brolick took over as our CEO of The Wendy's Company on September 12. And because this is his first quarterly earnings call with us, I'd like to provide just a little bit of background about Emil. He joined Wendy's from Yum! Brands where he had held several leadership positions including President and Chief Concept Officer of Taco Bell, President of U.S. Brand Building, Chief Operating Officer and President of A&W All-American Foods and Long John Silver's. Prior to his time at Yum!, he worked at Wendy's for 12 years, lastly, serving as our Senior Vice President of New Product Marketing, Research and Strategic Planning. During his time at Wendy's, Emil worked closely with Wendy's founder, Dave Thomas. And we are very excited to have him back.

Let me turn the call over to Emil.

Emil J. Brolick

Thank you, John. Good morning, and thank you for joining The Wendy's third quarter earnings call. It's quite an honor to have the opportunity to lead The Wendy's brand to -- and to build upon the good work of Roland Smith, David Karam and Steve Hare. Moving forward, the goal is simple: return The Wendy's brand to the luster and performance of the 90s and 2000s, the period of time when the brand enjoyed 16 years of consecutive same-store sales growth. The turnaround of The Wendy's brand has already begun, but to sustain brand sales and profit growth will take a cohesive effort of company and franchise operators united in reigniting the brand vision of our founder, Dave Thomas, and by being true to the very high people and operating standards of brand legends, Jim Near and Gordon Teter, all of whom I had the privilege of knowing and working with.

My first 2 months in position could not have been better. Franchisees and employees had been very welcoming as has been Nelson Peltz, Peter May and the entire Wendy's Board of Directors.

In mid-October, we held our National Franchise Convention in Las Vegas with an all-time record attendance in both domestic and international franchisees, as well as record supplier participation. The mood was very upbeat. The Wendy's family is excited and committed to the operating effort and capital that it will take to continue the momentum that is building in The Wendy's brand. This excitement is, in large part, due to the significant success achieved by the launch of the Dave's Hot 'n Juicy hamburger line, featuring our signature fresh, never-frozen North American beef, 2 slices of cheese, crisp leaf lettuce, red ripe tomatoes, red onions and crinkle-cut pickles, all on a warm butter-toasted bun. Sounds great. And customers' response has been excellent. And importantly, sales have exceeded our expectations.

For example, we would have to go back to early April/May of 2004 to find a 5-week period of sales growth higher than the most recent 5 weeks in sales. We are pleased with this performance, but we know that the key for investors is consistent sales and profit growth over a sustained period of time. Since the beginning of the Asiago Ranch Chicken Club national marketing message on October 31, our sales momentum has held nicely, giving us a great start to the fourth quarter. We are confident that with the strong results of Dave's Hot 'n Juicy and the continued sales strength with Asiago Ranch Chicken Club, we will be able to move to third quarter year-to-date same-store sales growth of 1.1% to the middle of our annual target of 1% to 3% same-store sales growth by year end.

Following Asiago Ranch, our December marketing message will feature the launch of an exciting new taste profile to the Wendy's hamburger line up with a product that we simply call the W. The W is a mid-tier priced product that will feature 2, 2.25 ounces of fresh beef, never-frozen North American beef and a surprise taste profile. The W is positioned between our line of Dave's Hot 'n Juicy Cheeseburgers and our entry-level hamburger offering.

We believe that the W will be a compelling way to finish the year and put Wendy's in a position to enter 2012 with significant momentum. So let's spend a little time talking about what will make -- what we will make sure that this is the beginning of a sustained period of success for the Wendy's brand.

Many people have asked, what has changed since 2000, which is when I left Wendy's? Those obvious change to all of us is the evolution that we've seen in the competitive and consumer environment. Quick-serve restaurants, I call them the new QSRs, have surged to success in the past 10 years. Why? I believe that they have demonstrated to consumers that they offer a superior overall experience to that of many old-line traditional QSRs. Specifically, they offer high-quality food, as well as food transparency or food with integrity, as some would call it. They offer a better restaurant environment and they have restaurant teams that represent the brands extremely well.

The bottom line is that they offer a better total experience and many would say, a better overall value. The success of the new QSRs is unmistakable as they have accounted for 80% of QSR growth since 2005 and 100% of growth if you eliminate breakfast. So, yes, the competitive set has changed significantly. We understand this, and we are confident that we can successfully build our brand, build sales and build profits in this new environment.

The other thing that has changed since 2000 is that Wendy's went through a difficult period and lost clarity of vision for the brand. One might say that The Wendy's brand went through an identity crisis. In the past 18 months, important progress had been made to help stabilize the situation. Clarity of vision is obviously essential, and we have now identified a position in the marketplace that is unique to Wendy's, is defensible and is profitable. That position is called A Cut Above. Not coincidentally, this is the same position that Wendy's held in the marketplace in 1969 when Dave Thomas conceived The Wendy's brand.

A Cut Above says, "We are going to be ourselves, not somebody else. We control our future, our competitors do not". Our focus will be on beating ourselves, being the very best Wendy's that we can be and building our brand, sales and profits to levels not previously seen.

Our philosophy is simple: focus on the things that we control. And if you want to predict the future, you must invent the future. So, yes, you will see us return to the roots of meaningful product and service innovation. So how do we bring the vision, A Cut Above, to life in a vibrant and exciting way?

Our brand vision will be brought to life with well-conceived strategies for all the Ps: price, product, promotion, place, performance and people. While these are the same tools that our competitors have, we will use these tools in a proprietary way in what we internally call, "a Wendy's kind of way".

When the competition zigged, Dave Thomas zagged. When they zagged, he zigged. Dave beat to a different drummer. We will beat to a different drummer, too.

Let me briefly touch on the key Ps. First, price. Consumers in the U.S. are under a significant financial pressure. Household incomes have been flat in real terms since 1996, and a recent U.S. government projection indicated that household incomes were not expected to exceed current levels until the year 2021. In essence, that is a 24-year period of flat real household incomes. So, yes, price value is important to consumers.

Our belief is that there are only 2 ways to deliver value to consumers. The first way is it to provide consumers a similar product to the competition and charge them less money for it, not an approach that we would choose to take.

The second way to provide true value to customers is to provide them a clearly superior product and charge a competitive price. At Wendy's, we call this "5-star quality at a 3-star price". This is The Wendy's way. It is a consumer win and a consistent win with our overall economic model.

Next, the product P. We intend to leverage the unique capability of the kitchens in our restaurants to create enhancements to our core hamburgers, core chicken sandwiches and core salads and drive innovation beyond the core.

The Wendy's operating system is unique, and we intend to leverage this uniqueness to provide made-to-order products for our customers consistent with the quality of products offered by the new QSRs but at a price below them, re-enforcing our brand position of A Cut Above.

The quality of our new Dave's Hot 'n Juicy Cheeseburger line is an example of this strategy as will be the launch of the W in December. The very successful launch of the Berry Almond Chicken Salad and the Asiago Ranch Chicken Club are also examples of successful core innovation.

We, however, know that this is not enough. This is a dynamic, consumer and competitive environment, and we are testing or will be testing products that will re-establish The Wendy's brand as a leader in meaningful product innovation, re-establish Wendy's as A Cut Above.

Also in the product arena, we remain excited about the opportunity for the morning meal, breakfast. Over the past 5 years, breakfast has accounted for 92% of all traffic growth in the QSR segment and represents 21% of all traffic, not that much smaller than the 27% that dinner represents. We believe there is an opportunity for a fresher, higher-quality QSR breakfast that utilizes more natural ingredient and fresh preparation in our restaurants.

Pictured here are our artisan egg sandwich, our grilled paninis and an indulgent warm oatmeal bar that scored exceptionally well with consumers.

All of these products are great examples of "5-star quality products at a 3-star price".

Consumers have given The Wendy's breakfast at minimum, a rating of 9 on a scale of 10 for variety, taste, freshness, quality, convenience, price and yes, value as well.

We know that coffee is also a very important component to a breakfast offering. And we are evaluating a proprietary branding approach that we call, Redheaded Roasters. While work remains to commercialize breakfast, we are very optimistic.

We are committed to taking our franchise partners with us, and we intend to demonstrate financial, consumer and operating viability as the foundation of a national launch. As you know, we are operating hundreds of restaurants with breakfast. But please note that going forward, we have made a conscious decision not to provide any specific store count updates regarding our breakfast test for competitive reasons.

We will be aggressive, but responsible, in the evaluation of breakfast, and we see it as a complement to our strong offering of core hamburger, chicken, sandwiches and salad products at the other dayparts.

The promotion P, has been working very hard for us of late as we have leveraged customers' memories of the 1984 blockbuster advertising sensation, Where's the Beef? We are always striving to communicate our brand messages in the most compelling way possible and capture a unique look, tone and feel in our advertising.

In a related manner, I have initiated the search for an exceptional CMO to fill the existing vacancy and hope to complete that search in the first quarter of 2012.

During the second quarter call, we discussed the exciting work that is being done to reinvent our restaurant environments. We've heard from our customers that our restaurant designs and interiors are not as relevant to them as they once were, but we intend to change that.

We have 4 very exciting prototype restaurants under evaluation. Pictured here are our ultra modern restaurant in Columbus, Ohio. And please take a moment to look at the before and after pictures of the restaurants, and I think you will see a very dramatic difference. The second prototype is what we call our traditional design in Virginia Beach. And again, I encourage you to look at the before and after. The third is our urban prototype in Phoenix, Arizona. And then lastly, our contemporary restaurant prototype in Pittsburgh, Pennsylvania.

We have now opened up 9 prototype restaurants, and they are experiencing significant sales growth above the pre-renovation levels. We are working to reduce the investment costs of these prototypes, working to determine which prototypes to focus on and, of course, we are anxious to learn how well sales sustain themselves over months period of time. I will be visiting the Pittsburgh and Virginia Beach markets tomorrow to see the new prototypes. I'm confident these restaurants will be as stunning as the Columbus and Phoenix restaurants, which I previously visited.

We believe that all of these prototypes are consistent with our brand position of A Cut Above and most importantly, our consumers are telling us this.

Let me briefly address the performance and people P together as they are so closely related. We, at Wendy's, believe that our people are the most valuable asset we have. They are our greatest source of differentiation. Through the efforts of our company and franchise operators, we've made significant operating progress and more upside remains.

As recently as 2008, 25% of system restaurants were rated F by our internal metrics. We now have fewer than 10 restaurants rated F. And this reminds me of a quote from Dave Thomas, who often chided us that the goal was not to be the biggest, but to be the best. "Win the hearts and minds of consumers, and you will win their pocket books." Dave would say.

We are committed to providing a customer experience consistent with that of the new QSRs and even better. The essential component to operating excellence is our commitment to hiring 5-star athletes because we want to produce 5-star results. And we know that these 5-star athletes contribute significantly to the environment created in our restaurants.

Now let's turn to the international for a moment. The growth potential for Wendy's outside of North America, where 95% of the world population lives, is equally exciting. Beginning from an embryonic phase of just 336 restaurants, we have development agreements that will grow the global Wendy's system outside the United States to 1,000 restaurants. What has been particularly energizing is the quality of the partners that we have been able to attract.

Our Russian franchisee, Alex Kovaler is a great example of this. He has opened 4 very successful restaurants and has very exciting plans for growth in the Russian market.

Ernie Higa, our Japan JV partner, brings a wealth of experience as a former Domino's operator. Ernie's first restaurant opens in late December. We are doing it the right way and building a solid foundation for international growth and profits that will be meaningful in the future.

So in summary, we have a brand vision that everyone is excited about, A Cut Above. We believe that it is the natural position for The Wendy's brand. We are working through all the P's to bring our brand vision to life in a cohesive way, where everything our customers experience in the Wendy's brand says, A Cut Above. We will be aggressive, but responsible, in pursuing the breakfast opportunity. We will take our franchisees along with us in this process and ensure operating, financial and consumer green lights, which initial testing gives us confidence that we can achieve.

We are blessed with domestic and international franchisees with a passion for The Wendy's brand and with the financial and operating strengths to succeed. We are committed to building people capability because we know that when you place people first, customer sales and profits always follow.

Lastly, The Wendy's brand turnaround has already begun. And for this, we are pleased, but not satisfied. You will see us continue to feed the momentum in everything that we do.

I will turn it over to Steve in a moment, but let me highlight the third quarter, which I believe was very solid. First of all, we achieved positive transaction growth for the quarter of 1.1%. And, in fact, in 2011, we believe that we will report positive transaction growth for the first time since 2003, quite an achievement.

North American company-operated same-store sales growth was 1.8%, and we're proud of the fact that we achieved a 30 basis point margin expansion even with significant food cost pressures across the industry. And we achieved 6.5% adjusted EBITDA growth.

Earlier, I mentioned the strong sales performance of our Dave's Hot 'n Juicy Cheeseburger launch and the continued sales strength in the first weeks of Asiago Ranch Chicken Club. As of this call, we will not be releasing any monthly comp same-store sales going forward. Our commitment is to consistent and sustainable sales growth, and we believe that quarterly and annual performance metrics are the true measure of our sales and profit trends.

I'm looking forward to talking with you more in the future. We are planning an Investor's Day in late January in New York City, where we will touch on keys strategies and important initiatives, we'll provide guidance on 2012 and discuss long-term trends.

Now I will turn it over to Steve Hare, our Chief Financial Officer.

Stephen E. Hare

Thanks, Emil, and good morning. As Emil highlighted, North America company-owned same-store sales increased by 1.8%. This sales increase was driven by a 1.1% increase in transactions and a 0.7% increase in the average per customer check amount. Our franchisees' same-store sales increased 0.7% during the quarter.

As you can see on this slide in July, we promoted our Wild Berry Frosty Parfait and Wild Berry Frosty shake, which featured fresh strawberries and blueberries. In August, we added 2 new items to our My 99¢ Everyday Value Menu, the Monterey Ranch Crispy Chicken Sandwich and the Cheesy Cheddar Burger. In September, we promoted local options such as the Spicy Chicken Sandwich. And in some markets, introduced Dave's Hot 'n Juicy Cheeseburger line.

Wendy's company restaurant margin was 13.7% for the third quarter, which reflects a 30 basis point increase from a year ago despite higher commodity costs of 140 basis points. For comparison purposes, 2010 restaurant margin includes incremental advertising expenses as reported and consistent with 2011.

We were able to offset higher commodity costs with strategic pricing and mix shifts that produced a net positive change of approximately 120 basis points. In addition, restaurant margin was favorably impacted 80 basis points due to a year-over-year reduction in breakfast advertising expense.

Now I'd like to go into more detail on our third quarter results. Total revenues for the third quarter of 2011 increased by $10.7 million or 1.8% versus the prior year. Revenue increases were primarily a result of same-store sales increases. In addition, the increase in revenues reflects a $3.5 million benefit from Canadian currency exchange rates.

Adjusted EBITDA for the third quarter of 2011 was $87 million and represents an increase of 6.5% compared to prior year. Adjusted EBITDA in the current year excludes transaction-related cost resulting from the sale of Arby's. To present comparable results, prior year adjusted EBITDA excludes Arby's indirect corporate overhead and integration costs.

Now I would like to talk about income from continuing operations and special items affecting this quarter's results. Income from continuing operations totaled $2.5 million or $0.01 per share. These results included Arby's after-tax transaction-related costs of $15 million or $0.04 per share. In the 2011 third quarter, there was no adjustment required for Arby's indirect corporate overhead in G&A. Third quarter 2010 loss from continuing operations was $0.8 million or $0.00 per share including after-tax special items of $17.9 million or $0.04 per share. Now let's discuss corporate G&A and Arby's transition.

During the third quarter, we completed the transition of G&A services to Arby's for all departments other than IT. We incurred costs and were reimbursed for these transition services of $5.9 million. Both the cost and the reimbursement are included and net in the reported G&A. We currently anticipate that the Arby's G&A expenses and the related reimbursement will end during the fourth quarter. Consistent with historical patterns, we expect our fourth quarter adjusted G&A to be higher than the third quarter. We now anticipate adjusted G&A for 2011 to be in a range of $275 million to $280 million, reflecting the elimination of a substantial portion of the support center G&A related to Arby's.

Now let's discuss cash flow. Cash flow from operations was $182.1 million for the first 9 months of 2011. Capital expenditures were $91.9 million and were related primarily to restaurant remodels, maintenance CapEx and new restaurants. This amount includes approximately $9 million for Arby's during the first half. We still anticipate that our capital expenditures for the full year will be approximately $145 million.

One of our strengths continues to be our ability to generate positive free cash flow, which we define as cash flow from operations less capital expenditures. We generated $91.2 million of positive free cash flow in the first 9 months of 2011.

Net proceeds from the Arby's sale added $103 million of cash. We spent $152.7 million on stock repurchases, and we returned $24.6 million of capital to our stockholders in cash dividends during the first 9 months. In addition, we repaid $36.6 million of our long-term debt. Our net cash used was $23.7 million and at quarter end, we had a total cash balance of approximately $489 million. Now let's look at our debt capitalization.

The third quarter 2011 balance sheet includes the cash received from the sale of Arby's and excludes Arby's debt. By comparison, the year-end balance sheet included Arby's debt. At the end of the third quarter, our total debt was $1.4 billion and net debt was $0.9 billion. Based on our trailing 12-month adjusted EBITDA, which excludes Arby's, our current net debt multiple is 2.7x.

Next I would like to give an update on our stock repurchase program and dividends. We continued our stock repurchases during the third quarter. Year-to-date through October 2, we have purchased 30 million shares for $152 million at an average price of $5.09 per share. Of our $250 million authorization for 2011, we had $97 million remaining as of October 2. Since our repurchase program began in 2009, we have repurchased 82 million shares through October 2 for approximately $398 million at an average price of $4.84 per share. Our next quarterly cash dividend of $0.02 per share will be paid on December 15 to stockholders of record as of December 1. Next, I would like to discuss our outlook for 2011.

We are reaffirming our 2011 adjusted EBITDA guidance to be in the $330 million to $340 million range. This outlook only includes continuing operations and excludes items such as Arby's indirect corporate overhead, transaction-related cost and the reversal of Strategic Sourcing Group purchasing cooperative expenses following the dissolution of that co-op.

Our 2011 outlook includes the following assumptions: same-store sales growth of 1% to 3% at Wendy's North America company-operated restaurants, which we now expect to be in the middle of that range; Wendy's company-operated restaurant margin is now anticipated to be approximately 100 basis points lower than prior year primarily due to higher commodity costs; Wendy's capital expenditures are expected to be approximately $145 million for the year; and we estimate Wendy's 2011 unit development to represent a total of 34 new restaurants as follows.

For North America company-owned restaurants, we expect 20 openings and 16 closures for a net of 4 new company restaurants. For North America franchise restaurants, we expect 45 openings and 42 closures for a net of 3 new franchise restaurants. And for international, we expect 35 openings and 8 closures for a net of 27 new international restaurants.

And that concludes our third quarter financial review. I'll now turn it back over to John Barker. John?

John D. Barker

Thanks, Steve. Before we open up the lines for Q&A, I just want to share a little more information regarding our Investor Day that we are planning to host in late January 2012 as Emil mentioned a minute ago. At that time, when we have that meeting, we will issue a news release, plan to issue one with our preliminary 2011 results, as well as our outlook for 2012. Also at that meeting, we will plan to talk about our strategic plans for the future in terms of growth, as well as updates in our core business, some of the remodeling the units that Emil mentioned, breakfast and international. We will provide more details specifically about the location and date, time in the coming weeks.

I'd also like to address the transition that is currently underway in our Investor Relations group. As some of you may already know, our current VP of Investor Relations, Kay Sharpton, has decided to remain in Atlanta to pursue a position closer to her home as we move our headquarters back to Dublin, Ohio. David Popler, who previously served as our Director of Investor Relations from 2004 to 2007 has returned to us after spending the past 4 years leading Investor Relations at Bob Evans. Kay will continue to be your primary contact for follow-up calls related to this earnings release for the remainder of the week. And then beginning next Monday, on November 14, I would ask you to contact David. He'll take over as our daily point of contact. Dave's number is (614) 764-3311. Please join me in thanking Kay for her excellent work over the past 3 years and welcoming Dave back to Wendy's.

With that, operator, we are now ready to begin our Q&A. We have a large number of participants in the call today. [Operator Instructions] Operator, please open up the lines for questions.

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