Wendy's Co 10-Q

Item 4. Controls and Procedures. Evaluation of Disclosure Controls and Procedures The management of the Company, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of June 28, 2020. Based on such evaluations, the Chief Executive Officer and Chief Financial Officer concluded that, as of June 28, 2020, the disclosure controls and procedures of the Company were effective at a reasonable assurance level in (1) recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act and (2) ensuring that information required to be disclosed by the Company in such reports is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Changes in Internal Control Over Financial Reporting There were no changes in the internal control over financial reporting of the Company during the second quarter of 2020 that materially affected, or are reasonably likely to materially affect, its internal control over financial reporting. As previously announced, the Company has realigned and reinvested resources in its IT organization and partnered with a third-party global IT consultant. The Company completed the transition of certain IT services to the consultant in the second quarter of 2020, and, currently, the control environment has not changed, as the consultant is adhering to the Company’s control procedures. The Company will continue to periodically evaluate the impact of this initiative on its internal control over financial reporting, including evaluating potential changes to the control environment as the consultant provides services to the Company in accordance with contractual requirements. 45 Inherent Limitations on Effectiveness of Controls There are inherent limitations in the effectiveness of any control system, including the potential for human error and the possible circumvention or overriding of controls and procedures. Additionally, judgments in decision-making can be faulty and breakdowns can occur because of a simple error or mistake. An effective control system can provide only reasonable, not absolute, assurance that the control objectives of the system are adequately met. Accordingly, the management of the Company, including its Chief Executive Officer and Chief Financial Officer, does not expect that the control system can prevent or detect all error or fraud. Finally, projections of any evaluation or assessment of effectiveness of a control system to future periods are subject to the risks that, over time, controls may become inadequate because of changes in an entity’s operating environment or deterioration in the degree of compliance with policies or procedures. 46 PART II. OTHER INFORMATION Special Note Regarding Forward-Looking Statements and Projections This Quarterly Report on Form 10-Q and oral statements made from time to time by representatives of the Company may contain or incorporate by reference certain statements that are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Reform Act”). Generally, forward-looking statements include the words “may,” “believes,” “plans,” “expects,” “anticipates,” “intends,” “estimate,” “goal,” “upcoming,” “outlook,” “guidance” or the negation thereof, or similar expressions. In addition, all statements that address future operating, financial or business performance, strategies or initiatives, future efficiencies or savings, anticipated costs or charges, future capitalization, anticipated impacts of recent or pending investments or transactions and statements expressing general views about future results or brand health are forward-looking statements within the meaning of the Reform Act. Forward-looking statements are based on our expectations at the time such statements are made, speak only as of the dates they are made and are susceptible to a number of risks, uncertainties and other factors. For all of our forward-looking statements, we claim the protection of the safe harbor for forward-looking statements contained in the Reform Act. Our actual results, performance and achievements may differ materially from any future results, performance or achievements expressed in or implied by our forward-looking statements. Many important factors could affect our future results and cause those results to differ materially from those expressed in or implied by our forward-looking statements. Such factors include, but are not limited to, the following: • the disruption to our business from the novel coronavirus (COVID-19) pandemic and the impact of the pandemic on our results of operations, financial condition and prospects; • the impact of competition, including from outside the quick-service restaurant industry; • changes in consumer tastes and preferences, unemployment and discretionary consumer spending; • prevailing conditions and disruptions in the national and global economies, including areas with a high concentration of Wendy’s restaurants; • food safety events, including instances of food-borne illness, involving Wendy’s, its supply chain or other food service companies; • the success of our operating, promotional, marketing or new product development initiatives, including risks associated with our entry into the breakfast daypart across the U.S. system; • our ability to achieve our growth strategy through net new restaurant development, including the availability of suitable locations and terms, and the success of our Image Activation program, including the ability of reimaged restaurants to positively affect sales; • changes in commodity and other operating costs, including supply, distribution and labor costs; • our ability to attract and retain qualified restaurant personnel; • shortages or interruptions in the supply or distribution of food or other products and other risks associated with our independent supply chain purchasing co-op; • consumer concerns regarding the nutritional aspects of our products; • the effects of disease outbreaks, epidemics or pandemics; • the effects of negative publicity that can occur from socially relevant issues or from increased use of social media; • risks associated with our international operations, including our ability to achieve our international growth strategy; • risks associated with our digital commerce strategy, platforms and technologies, including our ability to adapt to changes in industry trends and consumer preferences; 47 • our dependence on computer systems and information technology, including risks associated with the failure, interruption or breach of our systems or technology or other cyber incidents or deficiencies; • risks associated with the realignment and reinvestment of resources in our IT organization to accelerate growth; • our ability to effectively manage the acquisition and disposition of restaurants or successfully implement other strategic initiatives; • conditions beyond our control, such as adverse weather conditions, natural disasters, hostilities, social unrest or other catastrophic events; • the availability and cost of insurance; • our ability to protect our intellectual property; • the continued succession and retention of key personnel and the effectiveness of our leadership structure; • compliance with legal or regulatory requirements, the impact of legal or regulatory proceedings and risks associated with an increased focus on environmental, social and governance issues; • risks associated with leasing and owning significant amounts of real estate, including a decline in the value of our real estate assets or liability for environmental matters; • the effects of charges for impairment of goodwill or other long-lived assets; • risks associated with our securitized financing facility and other debt agreements, including our overall debt levels and our ability to generate sufficient cash flow to meet increased debt service obligations, compliance with operational and financial covenants and restrictions on our ability to raise additional capital; • the availability, terms and deployment of capital, including the amount and timing of equity and debt repurchases; • other risks and uncertainties affecting us and our subsidiaries referred to in this Quarterly Report on Form 10-Q (see especially Part II, “Item 1A. Risk Factors”), our Annual Report on Form 10-K filed with the SEC on February 26, 2020 (see especially “Item 1A. Risk Factors” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations”) and in our other current and periodic filings with the Securities and Exchange Commission. In addition to the factors described above, there are risks associated with our predominantly franchised business model that could impact our results, performance and achievements. Such risks include our ability to identify, attract and retain experienced and qualified franchisees and effectively manage the transfer of restaurants between and among franchisees, the business and financial health of franchisees, the ability of franchisees to meet their royalty, advertising, development, reimaging and other commitments, participation by franchisees in brand strategies and the fact that franchisees are independent third parties that own, operate and are responsible for overseeing the operations of their restaurants. Our predominantly franchised business model may also impact the ability of the Wendy’s system to effectively respond and adapt to market changes. Many of these risks have been or in the future may be heightened due to the business disruption and impact from the COVID-19 pandemic. All future written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to above. New risks and uncertainties arise from time to time, and it is impossible for us to predict these events or how they may affect us. We assume no obligation to update any forward-looking statements after the date of this Quarterly Report on Form 10-Q as a result of new information, future events or developments, except as required by federal securities laws, although we may do so from time to time. We do not endorse any projections regarding future performance that may be made by third parties. 48