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Item 1A. Risk Factors

2023-03-01 compared with 2022-03-01 · 128 added, 155 removed, 265 unchanged (52% of the section changed)

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Risks Related to Macroeconomic and Industry Conditions

The novel coronavirus (COVID-19) pandemic has disrupted and is expected to continue to disrupt our business, which has materially affected and could continue to materially affect our results of operations, financial condition and prospects for an extended period of time.

In March 2020, the World Health Organization declared the novel coronavirus (COVID-19) a global pandemic, and governmental authorities around the world implemented measures to reduce the spread of COVID-19.

These measures adversely affected customers, workforces, economies and financial markets, and, along with decreased consumer spending, led to an economic downturn in many of our markets.

Governmental restrictions and public perceptions of the risks associated with COVID-19 have caused consumers to avoid or limit travel, gatherings in public places and other social interactions, which has adversely affected, and could continue to adversely affect, our business.

In response to the COVID-19 pandemic, in March 2020, we updated our brand standard to include the closure of all dining rooms except where there were specific needs, or a drive-thru or pick-up window option was not available, subject to applicable federal, state and local requirements.

Substantially all Wendy’s restaurants continued to offer drive-thru and delivery service to our customers.

During the second quarter of 2020, we began implementing our restaurant and dining room reopening process through a phased approach in accordance with federal, state and local requirements, with customer and team member safety as our top priority.

As of January 2, 2022, substantially all restaurants were open across the Wendy’s system, and the majority of restaurants had dining rooms open.

During the height of the COVID-19 pandemic, our customer counts and systemwide sales were significantly negatively impacted, and our customer counts continue to be negatively impacted.

Even as mobility continues to increase, customers have been and may continue to be reluctant to return to in-restaurant dining, and consumer spending may continue to be adversely impacted for an extended period of time as a result of decreased consumer confidence and other macroeconomic factors.

The COVID-19 pandemic has had, and could again have, an adverse effect on new restaurant development and restaurant reimaging.

For example, in 2020, due to the uncertain and challenging economic and market conditions, we delayed construction of certain new Company-operated restaurants and reimaging of existing Company-operated restaurants and also extended the new restaurant development and Image Activation requirements of our franchisees by one year.

These or similar delays could affect our ability to drive future growth in our business.

The COVID-19 pandemic has had, and could again have, an adverse effect on our franchisees’ operations and financial condition.

Following the onset of the pandemic, we took certain actions to support our franchisees, including extending payment terms for royalties, extending or abating payment terms for advertising fund contributions and offering to defer base rent payments on properties owned by the Company and leased to franchisees.

To the extent our franchisees experience financial distress, including as a result of the COVID-19 pandemic, it could negatively affect our results of operations, cash flows and financial condition through delayed or reduced payments of royalties, advertising fund contributions or rent.

The COVID-19 pandemic has led, and could again lead, to interruptions in the delivery of food or other supplies to Wendy’s restaurants arising from delays or restrictions on shipping or manufacturing, closures of supplier or distributor facilities or financial distress or insolvency of suppliers or distributors.

These delays or interruptions could impact the availability of certain food items at Wendy’s restaurants, including beef, chicken, pork and other core menu products.

For example, we experienced disruptions to our beef supply beginning in early May 2020 as beef suppliers across North America faced production challenges.

As a result, some menu items were occasionally in short supply at some Wendy’s system restaurants.

While we and our supply chain partners effectively managed through this disruption and the beef supply subsequently returned to normal levels across the Wendy’s system, the pandemic has continued to impact our supply chain and there can be no assurances that we will not see similar disruptions in the future.

Our results of operations and those of our franchisees could be adversely affected if our key suppliers or distributors are unable to fulfill their responsibilities and we are unable to identify and transition the impacted business to alternative suppliers or distributors in a timely manner.

The COVID-19 pandemic has led, and could again lead, to labor shortages or increased labor costs.

The risk or perceived risk of contracting the virus, as well as vaccine mandates or other governmental actions or restrictions, could continue to adversely affect restaurant operations, including the ability or cost of adequately staffing restaurants.

If a significant percentage of our or our franchisees’ workforce is unable to work, whether because of illness, quarantine, travel limitations, vaccine mandates or other governmental actions or restrictions, our operations and the operations of our franchisees may be negatively impacted, which could materially affect our results of operations and financial condition.

Following the onset of the pandemic, we took several actions to help support our employees and protect the health and safety of our employees and customers, such as implementing a new emergency sick leave policy, providing temporary wage increases to restaurant employees and purchasing additional sanitation supplies and personal protective materials, which contributed to increased operating costs.

The impacts from the COVID-19 pandemic could have a material adverse effect on our liquidity and capital resources.

We currently believe we have the ability to pursue additional sources of liquidity if needed or desired to fund operating cash requirements or for other purposes.

However, there can be no assurance that additional liquidity will be readily available or available on terms acceptable to us.

If the disruptions caused by COVID-19 worsen, our ability to comply with certain debt covenants under our securitized financing facility could be adversely affected.

Additionally, negative changes to our credit ratings due to the impact or expected impact of COVID-19 could have an adverse effect on our existing indebtedness, our ability to access additional capital, our cost of borrowing and our overall liquidity position and financial condition.

In addition to the risks described above, the COVID-19 pandemic has had, and could continue to have, the effect of heightening other risks disclosed in this risk factors section, including, but not limited to, those related to brand value and perception, consumer preferences and spending, commodity costs, labor, supply chain and purchasing, performance of the breakfast daypart and international operations.

We cannot predict the ultimate duration, scope or severity of the COVID-19 pandemic or its ultimate impact on our results of operations, financial condition and prospects.

Competition from other restaurant companies, as well as grocery chains and other retail food outlets, or poor customer experience at Wendy’s restaurants, could hurt our brand.

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Several of these chains compete by offering menu items that are targeted at certain consumer groups or dietary trends.

Additionally, many of our competitors have introduced lower

cost value meal menu options and have employed marketing strategies that include frequent use of price discounting (including through the use of coupons and other offers), frequent promotions and heavy advertising expenditures.

Additionally, many of our competitors have introduced lower cost value meal menu options and have employed marketing strategies that include frequent use of price discounting (including through the use of coupons and other offers), frequent promotions and heavy advertising expenditures.

Some of our competitors have substantially greater financial, marketing, personnel and other resources than we do, which may allow them to react to changes in pricing and marketing strategies better than we can and drive higher levels of brand awareness among consumers.

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Moreover, new companies, including operators outside the quick-service restaurant industry, may enter market areas in which Wendy’s restaurants operate and target our customer base.

For example, additional competitive pressures for prepared food purchases have come from deli sections and in-store cafes of a number of major grocery store chains, as well as from convenience stores and casual dining outlets.

Such competitors may have, among other things, lower operating costs, better locations, better facilities, more effective marketing and more efficient operations.

Wendy’s also competes with grocery chains and other retail outlets that sell food to be prepared at home.

Wendy’s also competes with grocery chains and other retail outlets or concepts that sell food to be prepared at home.

Competition with these chains and other outlets could increase based on the gap between the price of food prepared at home compared to the price of food purchased at restaurants.

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Adverse economic conditions or disruptions in the national and global economies, or in regions that have a high concentration of Wendy’s restaurants, could adversely impact our business, results of operations and financial condition.

Adverse economic conditions or disruptions in the national and global economies could result in higher unemployment rates, labor shortages, increases in inflation and declines in consumer confidence and spending.

If such disruptions occur, they may result in significant declines in consumer food-away-from-home spending and customer counts in our restaurants and those of our franchisees.

Adverse economic conditions or disruptions in the national and global economies could result in higher unemployment rates, labor shortages, increases in inflation and interest rates and declines in consumer confidence and spending.

If such disruptions occur, they may result in significant declines in consumer food-away-from-home spending and customer counts in Wendy’s restaurants.

There can be no assurance that government responses to economic disruptions will restore consumer confidence.

Ongoing disruptions in the national and global economies may adversely impact our business, results of operations and financial condition.

Additionally, adverse economic conditions in regions that contain a high concentration of Wendy’s restaurants, including markets in which our Company-operated restaurants are located, could also have a material adverse impact on our results of operations.

Additionally, adverse economic conditions in regions that contain a high concentration of Wendy’s restaurants, including markets in which Company-operated restaurants are located, could also have a material adverse impact on our results of operations.

Changes in discretionary consumer spending, and in consumer tastes and preferences, could adversely affect our business, results of operations and financial condition.

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Material declines in the amount of discretionary spending or consumer food-away-from-home spending could hurt our business, results of operations and financial condition.

Furthermore, significant increases in expenses incurred by consumers, such as living expenses or gasoline prices, could also adversely affect our business.

Our success also depends to a large extent on continued consumer acceptance of our offerings, the success of our operating, promotional, marketing and new product development initiatives and the reputation of our brand.

If we are unable to continue to achieve consumer acceptance or adapt to changes in consumer preferences, including with respect to nutrition, health or dietary trends or environmental or social concerns, Wendy’s restaurants may lose customers, and the resulting revenues from Company-operated restaurants and the royalties that we receive from franchisees may decline.

If we are unable to continue to achieve consumer acceptance or adapt to changes in consumer preferences, including

with respect to nutrition, health or dietary trends or environmental or social concerns, Wendy’s restaurants may lose customers, and the resulting revenues from Company-operated restaurants and the royalties that we receive from franchisees may decline.

The COVID-19 pandemic has disrupted and could continue to disrupt our business, which has materially affected and could continue to materially affect our results of operations, financial condition and prospects.

The COVID-19 pandemic and related protective measures have adversely affected, and could continue to adversely affect, our business.

During the height of the pandemic, our customer counts and systemwide sales were significantly negatively impacted.

Even as mobility increases, customers have been and may continue to be reluctant to return to in-restaurant dining.

Our restaurant operations have been and could continue to be disrupted by the pandemic, including restaurant and dining room closures, labor shortages or increased labor costs.

Furthermore, the pandemic has led, and could again lead, to interruptions in the delivery of food or other supplies to Wendy’s restaurants arising from delays or restrictions on shipping or manufacturing, labor shortages and increased labor costs, closures of supplier or distributor facilities or financial distress of suppliers or distributors.

These delays or interruptions have impacted, and could continue to impact, the availability of certain food items at Wendy’s restaurants, including beef, chicken, pork and other core menu products.

Our results of operations and those of our franchisees could be adversely affected if our key suppliers or distributors are unable to fulfill their responsibilities and we are unable to timely identify and transition the impacted business to alternative suppliers or distributors.

The pandemic has had, and could again have, an adverse effect on new restaurant development, as well as on our franchisees’ operations and financial condition.

To the extent the pandemic causes development delays, or leads to the financial distress of our franchisees, our results of operations, cash flows and financial condition could be impacted.

Such risks and other potential impacts from the pandemic could have a material adverse effect on our liquidity and capital resources, which may impede our ability to comply with our debt covenants or access additional capital.

In addition to the risks described above, the pandemic has had, and could continue to have, the effect of heightening other risks disclosed in this risk factors section, including, but not limited to, those related to brand value and perception, consumer preferences and spending, our ability to achieve or maintain market share, new restaurant development, commodity costs, labor, supply chain and purchasing and international operations.

We cannot predict the ultimate duration, scope or severity of the pandemic or its ultimate impact on our results of operations, financial condition and prospects.

Risks Related to Brand Perception and Value

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For example, our brand could be damaged by claims or perceptions about the quality or safety of our products or the quality or reputation of our franchisees or other business partners, regardless of whether such claims or perceptions are true.

Our brand could also be adversely impacted by other incidents described in this risk factors section, including incidents related to customer service, customer health or safety, a failure to attract and retain qualified employees, food safety or other health concerns regarding our products, the impact of social media, data privacy violations, cyber incidents, social and environmental sustainability matters or reports of our employees, franchisees or business partners taking controversial positions or acting in an unethical, illegal or socially irresponsible manner.

Any such incidents could cause a decline in consumer confidence in our brand and reduce consumer

demand for our products, which could have a material adverse impact on our business, results of operations and financial condition.

Our results of operations depend in part on the effectiveness of our marketing and advertising programs and the successful development and launch of new products.

Our results of operations are heavily influenced by brand marketing and advertising and by our ability to develop and launch new and innovative products.

Our marketing and advertising programs may not be successful, or we may fail to develop commercially successful new products, which may impact our ability to attract new customers and retain existing customers, which, in turn, could materially and adversely affect our results of operations.

Our brand could also be adversely impacted by other incidents described in this risk factors section, including incidents related to customer service, health or safety, a failure to attract and retain qualified employees, food safety or other health concerns regarding our products, the impact of social media, data privacy violations, cyber incidents, environmental, social and governance matters or reports of our employees, franchisees or business partners taking controversial positions or acting in an unethical, illegal or socially irresponsible manner.

Any such incidents could cause a decline in consumer confidence in our brand and reduce consumer demand for our products, which could have a material adverse impact on our business, results of operations and financial condition.

Our results of operations and the value and perception of our brand depend in part on the effectiveness of our marketing and advertising programs and the successful development and launch of new products.

Our results of operations and the value and perception of our brand are heavily influenced by brand marketing and advertising and by our ability to develop and launch new and innovative products.

Moreover, because franchisees contribute to advertising funds based on a percentage of sales at their franchised restaurants, advertising fund expenditures are dependent upon sales volumes across the Wendy’s system.

If systemwide sales decline, this could result in a reduced amount of funds available for our marketing and advertising programs.

In addition, to the extent we use value offerings or other promotions or discounts in our marketing and advertising programs to drive customer counts, these actions may condition our customers to resist higher menu prices or result in reduced demand for premium products.

In addition, to the extent we use value offerings or other promotions or discounts in our marketing and advertising

programs to drive customer counts, these actions may condition our customers to resist higher menu prices or result in reduced demand for premium products.

Our inability or failure to recognize, respond to and effectively manage the accelerated impact of social media could adversely impact our brand, business and results of operations.

In recent years, there has been a significant increase in the use of social media platforms, including social media and news aggregation websites and other forms of internet-based communications that allow individuals access to a broad audience.

The rising popularity of social media has increased the speed and accessibility of information dissemination and given users the ability to more effectively organize collective actions such as boycotts and other brand-damaging behaviors.

Social media platforms, including forms of internet-based communications, allow individuals access to a broad audience.

The availability of information on social media platforms is virtually immediate and has given users the ability to more effectively organize collective actions such as boycotts and other brand-damaging behaviors.

The dissemination of information via social media, whether accurate or inaccurate, could harm our business, brand, reputation, results of operation and financial condition.

This damage may be immediate, without an opportunity to correct inaccurate information or respond to or address particular issues.

In addition, as part of our marketing efforts, we frequently use social media to communicate with consumers in order to build their awareness of, engagement with and loyalty to us.

Failure to use social media effectively or appropriately, particularly as compared to our competitors, could lead to a decline in brand value, customer visits and revenues.

In addition, as part of our marketing efforts, we frequently use social media to communicate with consumers in order to build their awareness of, engagement with and loyalty to our brand.

Our failure to use social media effectively or appropriately, particularly as compared to our competitors, could lead to a decline in brand value, customer visits and revenues.

Laws and regulations governing the use of social media continue to rapidly evolve.

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While we try to ensure that the quality of our brand is maintained by our franchisees, we cannot ensure that franchisees will not take actions that hurt the value of our intellectual property or the reputation of the Wendy’s brand or restaurant system.

Any damage or violation of our intellectual property could harm our image, brand or competitive position and cause us to incur significant legal fees and diversion of resources.

Any damage or violation of our intellectual property could harm our image, brand or competitive position and result in significant legal fees and the diversion of resources.

If we do not attempt or are unable to successfully protect, maintain or enforce our intellectual property rights, there could be a material adverse effect on our business or results of operations as a result of, among other things, consumer confusion, dilution of the Wendy’s brand or increased competition from unauthorized users of our brand.

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Not all of the trademarks that are used in the Wendy’s system have been registered in all of the countries in which we do business or may do business in the future, and some trademarks will never be registered in all of these countries.

Some countries’ laws do not protect unregistered trademarks at all, or make them more difficult to enforce, and third parties have filed, or may in the future file, for “Wendy’s” or similar marks.

Some countries’ laws make unregistered trademarks more difficult to enforce, or do not protect them at all, and third parties have filed, or may in the future file, for “Wendy’s” or similar marks.

Accordingly, we may not be able to adequately protect the Wendy’s brand everywhere in the world and use of the Wendy’s brand may result in liability for trademark infringement, trademark dilution or unfair competition.

In addition, the laws of some foreign countries do not protect

intellectual property rights to the same extent as the laws of the United States.

In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as the laws of the United States.

We cannot ensure that all of the steps we have taken to protect our intellectual property in the United States and foreign countries will be adequate.

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coli), have occurred in the food industry in the past, and could occur in the future.

For example, in August 2022, the Centers for Disease Control and Prevention (the “CDC”) began investigating a multistate outbreak of E.

coli in which many of the impacted individuals reported having eaten at a Wendy’s restaurant and most reported consuming sandwich romaine lettuce.

The Company cooperated with the CDC’s investigation and, as a precautionary measure, removed sandwich romaine lettuce from its restaurants in the relevant region.

In October 2022, the CDC announced that the outbreak was over and that the specific source of the outbreak had not been confirmed.

The Company was referenced in news stories related to the outbreak, and the Company (and others) have been named in various claims and lawsuits related to the outbreak.

Food safety events, whether or not involving Wendy’s restaurants or other restaurant companies, could adversely affect the price and availability of certain products and result in negative publicity for Wendy’s or the restaurant industry.

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Risks Related to Our Business Strategy

We may be unable to deliver accelerated global sales growth or achieve or maintain market share across our dayparts.

Our business strategy includes a focus on driving strong sales momentum across all of our dayparts through exciting menu innovation, compelling value offerings and operational excellence.

However, we may be unable to deliver accelerated global sales growth or achieve or maintain market share across our dayparts due to competitive pressures and other factors, such as consumer tastes and preferences, the effectiveness of our marketing and advertising programs, the successful development and launch of new products, commodity and labor costs, providing fast and accurate customer experiences, further accelerating our digital business, driving new restaurant development and ensuring the support and engagement of franchisees.

For example, Wendy’s recently entered the breakfast daypart in the United States and Canada with a breakfast program designed to drive incremental sales and profits through a strong economic model.

Our inability to successfully execute on our strategy for the breakfast daypart and reach targeted levels of sales and profits could have a material adverse impact on our business, results of operations and financial condition.

Our predominantly franchised business model presents a number of risks.

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As a result, the ultimate success and quality of any franchise restaurant rests with the franchisee.

If franchisees do not successfully operate their restaurants in a manner consistent with required standards, their royalty payments to us could be adversely affected and our brand’s image and reputation could be harmed, both of which in turn could hurt our business and results of operations.

If franchisees do not successfully operate their restaurants in a manner consistent with required standards, their royalty payments to us could be adversely affected and our brand’s image and reputation could be harmed, which in turn, could hurt our business and results of operations.

In addition, the failure of franchisees to adequately engage in succession planning may adversely affect their restaurant operations and development of new Wendy’s restaurants, which in turn could hurt our business and results of operations.

Wendy’s franchisees are an integral part of our business, growth and brand strategies.

We may be unable to successfully implement our growth strategies if franchisees do not participate in the implementation of those strategies.

Our business and results of operations could be adversely affected if a significant number of franchisees do not participate in brand strategies, such as new restaurant development, Image Activation, digital commerce platforms and technologies and execution of the breakfast daypart, which in turn may harm our business and financial condition.

In addition, Wendy’s current franchise model, and the way our brand strategies are executed across the system, may make it difficult for our brand to respond and adapt to the speed of change in technology, consumer preferences, the regulatory environment or other factors as quickly as may be required to maintain and grow market share and remain competitive.

Certain of our competitors that have a significantly higher

percentage of company-operated restaurants than we do may have greater influence over their respective restaurant systems and greater ability to implement operational initiatives and business strategies.

Wendy’s franchisees are an integral part of our business, growth and brand strategies, and difficulties in identifying, attracting and retaining franchisees who meet our criteria could harm our business and brand.

Our business and results of operations could be adversely affected if a significant number of franchisees do not participate in brand strategies, such as new restaurant development, Image Activation, marketing and menu programs and digital commerce platforms and technologies,

which in turn may harm our business and financial condition.

In addition, Wendy’s current franchise model, and the way our brand strategies are executed across the system, may make it difficult for our brand to respond and adapt to the speed of change in technology, consumer preferences or other factors as quickly as may be required to maintain and grow market share and remain competitive.

Certain of our competitors that have a significantly higher percentage of company-operated restaurants than we do may have greater influence over their respective restaurant systems and greater ability to implement operational initiatives and business strategies.

We receive revenues in the form of royalties and national advertising funds contributions (both of which are generally based on a percentage of sales at franchised restaurants), as well as rent and fees from franchisees.

Accordingly, a substantial portion of our financial results is to a large extent dependent upon the operational and financial success of our franchisees.

If sales trends or economic conditions worsen for franchisees, or if the overall business or financial health of franchisees deteriorates, their results of operations or financial condition may worsen and our royalty, national advertising funds, rent and other fee revenues may decline and our accounts receivable and related allowance for doubtful accounts may increase.

Additionally, when Company-operated restaurants with leased real estate are sold to franchisees, we are often required to remain responsible for lease payments for these restaurants in the event the purchasing franchisees default on their leases.

Similarly, when we lease or sublease properties to franchisees, we remain responsible for certain expenses related to the properties, such as lease payments and maintenance charges.

If franchisees fail to renew their franchise agreements or fail to perform under or extend their leases or subleases with us, or if we are unable to identify, attract and retain new franchisees who meet our criteria, then our royalty and rental revenues may decrease and our future growth could be adversely affected.

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Numerous factors beyond our control may adversely affect new restaurant openings, which in turn could hurt our business and results of operations.

These factors include, among others, (i) our ability to attract new franchisees;

These factors include, among others:

(i) our ability to attract new franchisees;

(ii) the availability of site locations for new restaurants;

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(iv) the ability of restaurant owners to attract, train and retain qualified operating personnel;

(v) construction and development costs, particularly in highly competitive markets;

(v) construction and development costs;

(vi) the ability of restaurant owners to secure required governmental approvals and permits in a timely manner, or at all;

and (vii) adverse weather conditions.

Our inability to identify suitable locations, achieve consumer acceptance or otherwise execute our development strategy could have an adverse impact on our future growth, results of operation and financial condition.

Our growth strategy also includes an increased focus on non-traditional development, such as fuel and transportation centers, food courts and other retail locations, military bases and delivery kitchens.

The inability of us or our franchisees to execute our non-traditional development strategy, including meeting development goals, achieving anticipated sales results and upholding the value of the Wendy’s brand, could have an adverse impact on our future growth, results of operations and financial condition.

(vii) the ability of us and our franchises to execute our development strategy for non-traditional restaurants, such as fuel and transportation centers, food courts and other retail locations, military bases and delivery kitchens;

and (viii) adverse weather conditions.

Our Image Activation program may not positively affect sales or improve our results of operations, and franchisees may not participate in our Image Activation program to the extent expected by us.

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There can also be no assurance that franchisees will participate in the Image Activation program to the extent expected by the Company.

In order to support our Image Activation program and promote new restaurant development, we have provided franchisees with certain incentive programs for qualifying new and reimaged restaurants, including reductions in royalty and national advertising payments and options for the early renewal of franchise agreements.

In order to support our Image Activation program and promote new restaurant development, we have provided franchisees with certain incentive programs for qualifying new and reimaged restaurants, including waivers or reductions in royalty, national advertising and technical assistance fees and options for the early renewal of franchise agreements.

It is possible we may provide additional financial incentives to franchisees, which could result in additional expenses, a reduction of royalties or other revenues or the incurrence of other costs or liabilities.

Some franchisees may need to borrow funds in order to participate in the Image Activation program.

Some franchisees may need to borrow funds in order to reimage existing restaurants or build new restaurants under the Image Activation program.

If franchisees are unable to obtain financing at commercially reasonable rates, or at all, they may be unwilling or unable to invest in the reimaging of their existing restaurants or the development of new restaurants, and our future growth and results of operations could be adversely affected.

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We continue to optimize the Wendy’s system through our system optimization initiative, which includes facilitating the transfer of restaurants between and among franchisees, as well as evaluating strategic acquisitions of franchised restaurants and strategic dispositions of Company-operated restaurants to existing and new franchisees, to further strengthen the franchisee base, drive new restaurant development and accelerate adoption of our Image Activation program.

The success of this initiative is dependent upon many factors, such as the availability of sellers and buyers, the availability of financing, the ability to

negotiate transactions on terms deemed acceptable and the ability to successfully transition and integrate restaurant operations.

The success of this initiative

is dependent upon many factors, such as the availability of sellers and buyers, the availability of financing, the ability to negotiate transactions on terms deemed acceptable and the ability to successfully transition and integrate restaurant operations.

Acquisitions of franchised restaurants pose various risks to our operations, including (i) diversion of management’s attention to the integration of acquired restaurant operations;

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In addition, Wendy’s from time to time evaluates and may pursue other opportunities for growth, including through new and existing franchise partners, joint venture investments, expansion of our brand through other opportunities and strategic mergers, acquisitions and divestitures.

These strategic initiatives involve various risks, including general transaction and business risk, integration and synergy risk, market acceptance risk and risks associated with the diversion of management.

Strategic transactions may not ultimately create value for us or our stockholders and may harm our reputation and materially adversely affect our business, results of operations and financial condition.

Our leasing and ownership of significant amounts of real estate exposes us to possible liabilities and losses, including liabilities associated with environmental matters.

We have significant real estate operations in connection with our business and are subject to the normal risks associated with leasing and owning real estate.

Our real estate values and the costs associated with our real estate operations are impacted by a variety of factors, including changes in the investment climate for real estate, macroeconomic trends, governmental regulations, insurance, demographic trends, supply chain management, supply and demand for the ownership and operation of restaurants and environmental matters.

A significant change in real estate values, or an increase in costs as result of any of these factors, could adversely affect our results of operations and financial condition.

We have significant real estate operations in connection with our business and are subject to the normal risks associated with owning, leasing and subleasing real estate.

Our real estate values and the costs associated with our real estate operations are impacted by a variety of factors, including changes in the investment climate for real estate, macroeconomic trends, governmental regulations, infrastructure, condemnation or eminent domain, insurance, demographic trends, supply chain management, supply and demand for the ownership and operation of restaurants and environmental matters.

A significant decrease in real estate values or increase in real estate costs could adversely affect our results of operations and financial condition.

We are subject to federal, state and local environmental, health and safety laws and regulations concerning the discharge, storage, handling, release and disposal of hazardous or toxic substances.

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A number of our restaurant sites were formerly gas stations or are adjacent to current or former gas stations or were used for other commercial activities that can create environmental impacts.

We have not conducted a comprehensive environmental review of all of our properties and we may not have identified all of the potential environmental liabilities at our leased and owned properties, and any such liabilities identified in the future could cause us to incur significant costs, including costs associated with litigation, fines or clean-up responsibilities.

While we employ environmental review standards and practices in the current development of our real estate, we have not conducted a comprehensive environmental review of all of our properties and we may not have identified all of the potential environmental liabilities at our leased and owned properties, and any such liabilities identified in the future could cause us to incur significant costs, including costs associated with litigation, fines or clean-up responsibilities.

We cannot predict the amount of future expenditures that may be required in order to comply with any environmental laws or regulations or to satisfy any such claims.

We generally secure long-term real estate interests for our leased restaurants and have limited flexibility to quickly alter our real estate portfolio.

Many leases provide that the landlord may increase the rent over the term of the lease and any renewals of the term.

Many leases provide that the rent will increase over the term of the lease and any renewals of the term.

Most leases require us to pay the costs of insurance, taxes, maintenance, utilities and capital repairs and replacements.

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If an existing or future restaurant is not profitable, and we decide to close it, we may nonetheless be committed to perform our obligations under the applicable lease including, among other things, paying rent, taxes and maintenance costs for the balance of the lease term.

In addition, as each lease expires, we may fail to negotiate additional renewals or renewal options, either on commercially acceptable terms or at all, which could cause us to close restaurants in desirable locations, negatively impacting our results of operations.

The breakfast daypart is competitive across the restaurant industry and we may be unable to achieve or maintain market share or reach targeted levels of breakfast sales and profits.

Wendy’s entered the breakfast daypart across the U.S.

system in March 2020 and recently announced plans to launch breakfast in Canada in the second quarter of 2022.

The Company and franchisee leadership worked closely to align on a breakfast program designed to drive incremental sales and profits through a strong economic model.

However, we may be unable to achieve market share and reach targeted levels of breakfast sales and profits due to competitive pressures and responses from our competitors, some of whom are well-established in the breakfast daypart, or other factors, including operational complexity, food and labor costs, supply chain management, lack of consumer acceptance, discretionary spending patterns that differ from other dayparts and changes to customer mobility and daily routines, including as a result of the COVID-19 pandemic.

In addition, breakfast sales could cannibalize sales during other parts of the day and may have negative

impacts on restaurant margins.

The continued active support and engagement of our franchisees is also critical for the successful performance of the breakfast daypart.

The breakfast daypart may require significant financial resources, including the Company’s plans to fund incremental marketing and advertising campaigns.

Our inability to successfully execute on our strategy for the breakfast daypart could have a material adverse impact on our business, results of operations and financial condition.

In addition, as our leases expire, we may fail to negotiate additional renewals or renewal options, either on commercially acceptable terms or at all, which could cause us to close restaurants in desirable locations, negatively impacting our results of operations.

Our international operations are subject to various risks and uncertainties and there is no assurance that our international operations will continue to be profitable.

In addition to many of the factors described in this risk factors section, our business outside of the United States is subject to a number of additional risks and uncertainties, including international economic and political conditions, risk of corruption and violations of the U.S.

Foreign Corrupt Practices Act or similar laws of other countries, the inability to adapt to differing cultures or consumer preferences, inadequate brand infrastructure to support our international activities, inability to obtain adequate supplies meeting our quality standards and product specifications or interruptions in obtaining such supplies, challenges and risks associated with managing and monitoring suppliers, restrictions on our ability to move cash out of certain foreign countries, currency regulations and fluctuations, diverse government regulations and tax systems, uncertain or differing interpretations of rights and obligations in connection with international franchise agreements, the collection of royalties and other fees from international franchisees, the inability to protect technology, data or intellectual property rights, compliance with international privacy and information security laws and regulations, the availability and cost of land, construction costs, other legal, financial or regulatory impediments to the development or operation of restaurants, the inability to identify, attract and retain experienced management, qualified franchisees and joint venture partners and ongoing disruptions and impacts from the COVID-19 pandemic.

challenges and risks associated with managing and monitoring suppliers, restrictions on our ability to move cash out of certain foreign countries, currency regulations and fluctuations, diverse government regulations and tax systems, uncertain or differing interpretations of rights and obligations in connection with international franchise agreements, the collection of royalties and other fees from international franchisees, the inability to protect technology, data or intellectual property rights, compliance with international privacy and information security laws and regulations, the availability and cost of land, construction costs, other legal, financial or regulatory impediments to the development or operation of restaurants, the inability to identify, attract and retain experienced management, qualified franchisees and joint venture partners and ongoing disruptions and impacts from the COVID-19 pandemic.

Adverse conditions or unforeseen events in countries that contain a high concentration of Wendy’s restaurants (including Canada, our largest international market), could have a material adverse impact on our international growth strategy and results of operations.

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There can be no assurance that our international growth strategy will be successful or that our international operations will be profitable.

Wendy’s opened Company-operated and franchised restaurants in the United Kingdom in 2021 and plans to expand into other anchor markets in Europe utilizing a franchise model.

New markets may have low brand awareness as well as competitive conditions, consumer tastes, discretionary spending patterns and social and cultural differences that are more difficult to predict or satisfy than our existing markets.

For example, Wendy’s entered the United Kingdom in 2021, plans to expand into other anchor markets in Europe utilizing a franchise model and intends to accelerate restaurant development in other existing international markets.

New and emerging markets may have lower brand awareness as well as competitive conditions, consumer tastes and preferences, discretionary spending patterns and social and cultural differences that are more difficult to predict or satisfy than our existing markets.

We may need to make greater investments than we originally planned in advertising and promotional activity to build brand awareness, which could negatively impact the profitability of our operations.

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Our profitability depends in part on our ability to anticipate and react to changes in commodity costs (including beef, chicken, pork, dairy and grains), supplies, fuel, utilities, distribution and other operating costs, including labor costs.

Increases in commodity costs, particularly beef or chicken prices, could adversely affect our future results of operations.

Increases in commodity costs have adversely impacted and could continue to adversely impact our results of operations.

Our business is susceptible to increases in commodity and other operating costs as a result of various factors beyond our control, such as general economic conditions, inflation, industry demand, energy costs, food safety concerns, animal disease outbreaks, product recalls and government regulations.

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The ongoing and long-term costs of these impacts could have a material adverse effect on our business if not properly mitigated.

We could also be adversely impacted by the cost of products raised or grown in accordance with our responsible sourcing criteria, including those related to environmental sustainability and animal welfare, as availability of products that can be assured to meet those criteria are generally smaller and more concentrated, and may be more costly, than the markets for conventionally raised or grown products that are not assured to meet those criteria.

Significant increases in expenses incurred by consumers, such as living expenses or gasoline prices, could also result in decreased customer counts at our restaurants, which could adversely affect our business.

We cannot predict whether we will be able to anticipate and react to changing commodity costs by adjusting our purchasing practices and menu prices, and a failure to

do so could adversely affect our results of operations.

We could also be adversely impacted by the cost of products raised or grown in accordance with our responsible sourcing criteria, including those related to environmental sustainability and animal welfare, as the availability of products that can be assured to meet those criteria are generally smaller and more concentrated, and may be more costly, than the markets for conventionally raised or grown products that are not assured to meet those criteria.

We cannot predict whether we will be able to anticipate and react to changing commodity costs by adjusting our purchasing practices and menu prices, and a failure to do so could adversely affect our results of operations.

In addition, we may not seek to or be able to pass along price increases to our customers.

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In addition, our system relies on a limited number of in-line distributors to deliver certain food, packaging and beverage products to our restaurants.

If a disruption of service from any of our key suppliers or distributors was to occur, we could experience short-term increases in our costs while supply and distribution channels were adjusted, and we may be unable to identify or negotiate with new suppliers or distributors on terms that are commercially reasonable to us.

As discussed above, the COVID-19 pandemic has led, and could again lead, to delays or interruptions in the delivery of food or other supplies to Wendy’s restaurants, which could impact the availability and cost of certain food items at Wendy’s restaurants.

If a disruption of service from any of our key suppliers or distributors was to occur, we could experience short-term increases in our costs while

supply and distribution channels were adjusted, and we may be unable to identify or negotiate with new suppliers or distributors on terms that are commercially reasonable to us.

We do not exercise ultimate control over purchasing for our restaurant system, which could harm our business, results of operations and financial condition.

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We do not control the decisions and activities of QSCC.

If QSCC does not properly estimate the product needs of the Wendy’s system, makes poor purchasing decisions or ceases its operations, or if our relationship with QSCC is terminated for any reason, system sales, operating costs and supply chain management could be adversely affected, which could harm our franchisees and have a material adverse impact on our business, results of operations and financial condition.

If QSCC does not properly estimate the product needs of the Wendy’s system, makes poor purchasing decisions or ceases its operations, or if our relationship with QSCC is terminated for any reason, system sales, operating costs and supply chain management could be adversely affected, which could harm us and our franchisees and have a material adverse impact on our business, results of operations and financial condition.

Our business could be hurt by increased labor costs or labor shortages.

Labor is a primary component in the cost of operating our restaurants.

We devote significant resources to recruiting and training our managers and hourly employees.

Increased labor costs due to competition, increased wages or employee benefits costs (including various federal, state and local actions to increase minimum wages), unionization activity or other factors would adversely impact our cost of sales and operating expenses.

We devote significant resources to recruiting and training our restaurant personnel, including managers and hourly employees.

Increased labor costs due to competition, inflationary pressures, increased wages or employee benefits costs (including various federal, state and local actions to increase minimum wages), unionization activity or other factors have adversely impacted and could continue to adversely impact our cost of sales and operating expenses.

In addition, Wendy’s success depends on our ability to attract, motivate and retain qualified employees, including restaurant managers and staff as well as employees and key personnel at our restaurant support center, and our inability to do so could adversely affect our business and results of operations.

Our business, results of operations and brand perception could also be adversely impacted by unionization efforts or other campaigns by labor organizations affecting our employees or the employees of our franchisees or by our responses to any such efforts or campaigns.

As discussed above, the COVID-19 pandemic has led, and could again lead, to increased labor costs and labor shortages, which could materially affect our results of operations and financial condition.

Our success depends in part upon the continued succession and retention of certain key personnel and the effectiveness of our leadership structure.

Our success depends in part upon the continued succession and retention of certain key personnel and the effectiveness of our leadership and organizational structure.

We believe that over time our success has been dependent to a significant extent upon the efforts and abilities of our senior leadership team and other key personnel.

Our failure to retain members of our senior leadership team or other key personnel could adversely affect our ability to build on the efforts we have undertaken to increase the efficiency and performance of our business.

In addition, changes to our leadership and organizational structure can be inherently difficult to manage, and if we are unable to implement any such changes effectively, our business, results of operations and financial results could be adversely affected.

Our failure to retain members of our senior leadership team or other key personnel could adversely affect our ability to achieve our growth strategy and other business initiatives.

In addition, changes to our leadership and organizational structure can be inherently difficult to manage, and if we are unable to implement such changes effectively, our business, results of operations and financial results could be adversely affected.

Risks Related to Technology and Cybersecurity

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Advances in technologies, including advances in digital food ordering and delivery technologies, and changes in consumer behavior driven by such advances could have a negative effect on our business.

Technology and consumer offerings continue to develop and evolve, and we expect that new and enhanced technologies and consumer offerings will be available in the future, including those with a focus on restaurant modernization, restaurant technology, digital engagement, online ordering and delivery.

Our inability to predict consumer acceptance of new technology or our failure to adequately invest in new technology or adapt to technological developments, industry trends and evolving legal and regulatory requirements could result in a loss of customers and related market share.

In addition, our competitors, some of whom have greater resources than we do, may be able to benefit from changes in technologies or consumer acceptance of such changes, which could harm our competitive position and brand.

Our inability to predict consumer acceptance of new technology or our failure to adequately invest in and implement new technology or adapt to technological developments, industry trends and evolving legal and regulatory requirements could result in a loss of customers and related market share.

In addition, our competitors, some of whom have greater resources than we do, may be better able to benefit from changes in technologies or consumer acceptance of such changes, which could harm our competitive position and brand.

An increasing amount of our sales and revenues is derived from digital orders, which includes online ordering and delivery.

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If we are unable to continue to grow our digital business, it may be difficult for us to achieve our planned sales growth.

If our digital commerce platforms, including the Wendy’s mobile app and online ordering system, do not meet customers’ expectations in terms of security, privacy, speed, attractiveness or ease of use, customers may be less inclined to return to those platforms, which could negatively impact our business, results of operations and financial condition.

which could negatively impact our business, results of operations and financial condition.

Our business could also be negatively impacted if we are unable to successfully implement or execute other consumer-facing digital initiatives, such as mobile order pick-up and carryout.

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If the third-party delivery services that we utilize cease or curtail their operations, increase their fees or give greater priority or promotions on their platforms to our competitors, our delivery business and our sales may be negatively impacted.

If we are unable to successfully respond to the challenges arising from our increased reliance on our digital business, this could have a material adverse impact on our brand, business, results of operations and financial condition.

We are heavily dependent on computer systems and information technology and any material failure, misuse, interruption or breach of our systems or technology could adversely affect our business, results of operations and financial condition.

We are heavily dependent on our computer systems and information technology, including those controlled by third-party providers, to conduct our business, including point-of-sale processing in our restaurants, management of our supply chain, collection of cash, payment of obligations and various other processes and procedures.

Our ability to efficiently manage our business depends significantly on the reliability and capacity of our systems and technology.

The failure of our systems and technology to operate effectively, an interruption in our systems or technology or a breach in security of our systems or technology could be harmful and cause delays in customer service, result in the loss of data, reduce efficiency or cause delays in operations.

In addition, the delivery business has been consolidating and may continue to consolidate, which may give third-party delivery companies more leverage in negotiating the terms and pricing of contracts, which could in turn negatively impact our profits from this channel.

We are heavily dependent on computer systems and information technology and any material failure, interruption or degradation of our systems or technology or issues with our key technology providers could adversely affect our business, results of operations and financial condition.

We are heavily dependent on our computer systems and information technology, including those controlled by third-party providers, to conduct our business, including point-of-sale processing in our restaurants, technologies that support our digital and delivery solutions, management of our supply chain, collection of cash, payment of obligations and various other processes and procedures.

Our ability to efficiently manage our business depends significantly on the reliability and performance of our systems and technology.

The failure of our systems and technology to operate effectively, or an interruption or degradation in our systems or technology could be harmful and cause delays in customer service, result in the loss of digital sales or data, reduce efficiency or cause delays in operations.

Significant capital investments might be required to remediate any such problems or to maintain or upgrade our systems and technology or transition to replacement systems or technology.

Additionally, the success of certain of our strategic initiatives, including the expansion and acceleration of our consumer-facing digital capabilities to connect with customers and drive growth, is highly dependent on our systems and technology.

Any security breach involving our or our franchisees’ systems or technology could result in a loss of consumer confidence and potential costs associated with fraud.

Also, despite our considerable efforts and resources to secure our systems and technology, security breaches, such as unauthorized access and computer viruses, may occur, resulting in system disruptions, shutdowns or unauthorized disclosure of confidential information, which in turn could adversely affect our business, results of operations and financial condition.

We are dependent to a significant extent on our ongoing relationship with key technology providers, including their personnel, resources, technological expertise, systems and technology and their ability to help execute our digital, restaurant technology and enterprise technology initiatives and support our technology innovation and growth.

The inability of us or our providers to successfully execute our technology growth initiatives while maintaining our brand value and perception could have an adverse impact on our business, results of operations and financial condition.

The occurrence of cyber incidents, or a deficiency in cybersecurity, could negatively impact our brand, business, results of operations and financial condition.

A number of retailers and other companies have experienced serious cyber incidents and breaches of their information technology systems, such as unauthorized access, phishing attacks, account takeovers, denial of service, computer viruses, introduction of malware or ransomware and other disruptive problems caused by malicious actors.

Cybersecurity incidents or breaches have, from time to time, occurred and may in the future occur involving our systems, the systems of our franchisees or the systems of third-party service providers.

Such cybersecurity incidents and breaches may include, without limitation, unauthorized access, phishing attacks, account takeovers, denial of service, computer viruses, introduction of malware or ransomware and other disruptive problems caused by malicious actors.

As our reliance on technology has increased, so have the risks posed to our systems, both internal and those managed by third parties.

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A cyber incident could also require us to notify customers, employees or other groups, result in adverse publicity or a loss in consumer confidence, sales and profits, increase fees payable to third parties or cause us to incur penalties or remediation and other costs that could adversely affect our business, results of operations and financial condition.

While we have implemented various processes, procedures and controls to help mitigate the risk of a cyber incident and maintain insurance coverage to address certain cyber incidents, these measures do not guarantee that a cyber incident could not occur or that our business, reputation and financial condition will not be adversely affected by such an incident.

As previously reported, in 2015 and 2016, certain of our franchisees experienced cybersecurity incidents.

As a result of those incidents, the Company was named as a defendant in separate class actions brought by consumers and financial institutions, and certain of our directors and executive officers were named as defendants in a stockholder derivative action.

These and any other claims or investigations related to cybersecurity incidents may adversely affect how we and our franchisees operate the business, divert the attention of management, have a negative effect on our reputation, and adversely affect our results of operations or financial condition.

We have devoted considerable resources to secure our systems and technology against security breaches and have implemented various processes, procedures and controls to help mitigate the risk of a cyber incident.

However, the techniques and sophistication used to conduct cyber-attacks change frequently and the measures we have taken do not guarantee that a cyber incident or security breach could not occur or that our business, reputation and financial condition will not be adversely affected.

Risks Related to Our Indebtedness

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The Senior Notes are secured by a security interest in substantially all of the assets of the Master Issuer and certain other limited-purpose, bankruptcy-remote, wholly-owned indirect subsidiaries of the Company that act as guarantors (collectively, the “Securitization Entities”), except for certain real estate assets and subject to certain limitations as set forth in the indenture governing the Senior Notes (the “Indenture”) and the related guarantee and collateral agreement.

The assets of the Securitization Entities include most of the domestic and certain of the foreign revenue-generating assets of the Company and its subsidiaries, which principally consist of franchise-related agreements, certain Company-operated restaurants, intellectual property and license agreements for the use of intellectual property.

The Senior Notes are subject to a series of covenants and restrictions customary for transactions of this type, including that the Master Issuer maintains specified reserve accounts to be used to make required payments in respect of the Senior Notes, provisions relating to optional and mandatory prepayments and the related payment of specified amounts, including specified make-whole payments under certain circumstances, certain indemnification payments in the event, among other things, the assets pledged as collateral for the Senior Notes are in stated ways defective or ineffective and covenants relating to recordkeeping, access to information and similar matters.

The Senior Notes are subject to customary rapid amortization events provided for in the Indenture, including events tied to failure to maintain stated debt service coverage ratios, the sum of global gross sales for specified restaurants being below certain levels on certain measurement dates, certain manager termination events, an event of default and the failure to repay or refinance on the applicable scheduled maturity date.

The Senior Notes are also subject to certain customary events of default, including events relating to non-payment of required interest, principal, or

other amounts due on or with respect to the Senior Notes, failure to comply with covenants within certain time frames, certain bankruptcy events, breaches of specified representations and warranties, failure of security interests to be effective and certain judgments.

The assets of the Securitization Entities include most of the domestic and certain of the foreign revenue-generating assets of the Company and its subsidiaries, which principally consist of franchise-related agreements, real estate assets, intellectual property and license agreements for the use of intellectual property.

The Senior Notes are subject to a series of covenants and restrictions customary for transactions of this type, including that the Master Issuer maintains specified reserve accounts to be used to make required payments in respect of the Senior Notes, provisions relating to optional and mandatory prepayments and the related payment of specified amounts, including specified make-whole payments under certain circumstances, certain indemnification payments in the event, among other things, that the assets pledged as collateral for the Senior Notes are in stated ways defective or ineffective and covenants relating to recordkeeping, access to information and similar matters.

The Senior Notes are also subject to customary rapid amortization events provided for in the Indenture, including events tied to failure to maintain stated debt service coverage ratios, the sum of global gross sales for specified restaurants being below certain levels on certain measurement dates, certain manager termination events, the occurrence of an event of default and the failure to repay or refinance on the applicable scheduled maturity date.

The Senior Notes are also subject to certain customary events of default, including events relating to non-payment of required interest, principal or other amounts due on or with respect to the Senior Notes, failure to comply with covenants within certain time frames, certain bankruptcy events, breaches of specified representations and warranties, the trustee under the Indenture ceasing to have valid and perfected security interests in certain collateral and certain judgments.

In the event that a rapid amortization event occurs under the Indenture (including, without limitation, upon an event of default under the Indenture or the failure to repay the securitized debt at the end of the applicable term), the funds available to the Company would be reduced or eliminated, which would in turn reduce our ability to operate or grow our business.

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and (vi) placing the Company at a competitive disadvantage compared to its competitors that are less leveraged.

Further, the Company’s outstanding variable funding notes may accrue interest based on the London interbank offered rate (“LIBOR”), which is expected to be discontinued in 2023.

If LIBOR is discontinued, we may need to renegotiate certain loan documents and we cannot predict what alternative index would be negotiated with our lenders or the resulting impact on our interest expense.

The ability of the Company to make payments on, repay or refinance its debt, and any additional debt, and to fund planned capital expenditures, dividends and other cash needs will depend largely upon its future operating performance and ability to generate significant cash flows.

Further, the Company’s outstanding variable funding notes may accrue interest based on the London interbank offered rate (“LIBOR”).

In connection with the

discontinuance of LIBOR, we expect to renegotiate certain loan documents and cannot predict what alternative index will be negotiated with our lenders or the resulting impact on our interest expense.

The ability of the Company to make payments on, repay or refinance its debt, and to fund planned capital expenditures, dividends and other cash needs will depend largely upon its future operating performance and ability to generate significant cash flows.

In addition, the ability of the Company to borrow funds in the future to make payments on its debt will depend on the satisfaction of the covenants in the securitized financing facility and other debt agreements, and other agreements it may enter into in the future.

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In addition to the Company’s outstanding indebtedness, the Company is subject to risks related to certain commitments, guarantees and other liabilities.

For example, certain of the Company’s subsidiaries have significant contractual requirements for the purchase of soft drinks.

If consumer preferences change and customers purchase fewer soft drinks than expected or estimated, such contractual commitments may adversely affect the financial condition of the Company.

The Company has also provided loan guarantees to various lenders on behalf of franchisees entering into debt arrangements for new restaurant development and equipment financing.

In addition, certain of the Company’s subsidiaries also guarantee or are contingently liable for certain leases of their respective franchisees for which they have been indemnified.

These commitments, guarantees and other liabilities include, among others, significant contractual requirements regarding the purchase of soft drinks and guarantees and contingent liabilities related to certain franchisee leases for which the Company has been indemnified.

These commitments, guarantees and other liabilities could have an adverse effect on the Company’s liquidity and the ability of its subsidiaries to meet payment obligations.

The Company may incur additional indebtedness, guarantees, commitments or other liabilities in the future.

If new debt, guarantees, commitments or other liabilities are added to the Company’s current consolidated debt levels, the related risks that the Company now faces could be amplified.

The Company may incur additional indebtedness, guarantees, commitments or other liabilities in the future that could amplify the risks that the Company currently faces.

Risks Related to Our Common Stock

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Our certificate of incorporation authorizes the issuance of shares of “blank check” preferred stock, which will have such designations, rights and preferences as may be determined from time to time by our Board of Directors.

Accordingly, our Board of Directors is empowered, without stockholder approval, to issue preferred stock with dividend, liquidation, conversion, voting or other rights that could adversely affect the voting power and other rights of the holders of our common stock.

Accordingly, our

Board of Directors is empowered, without stockholder approval, to issue preferred stock with dividend, liquidation, conversion, voting or other rights that could adversely affect the voting power and other rights of the holders of our common stock.

The preferred stock could be used to discourage, delay or prevent a change in control of the Company that is determined by the Board of Directors to be undesirable.

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Complaints or litigation could hurt our brand, business, results of operations and financial condition.

Wendy’s customers may file complaints or lawsuits against us or our franchisees alleging that we are responsible for an illness or injury they suffered at or after a visit to a Wendy’s restaurant, or alleging that there was a problem with food quality or operations at a Wendy’s restaurant.

We may also be subject to a variety of other claims arising in the ordinary course of our business, including personal injury claims, contract claims, claims from franchisees, intellectual property claims, data privacy claims and claims alleging violations of law regarding workplace and employment matters, discrimination and similar matters, including class action lawsuits.

Regardless of whether any claims against us are valid or whether we are found to be liable, claims may be expensive to defend and may divert management’s attention away from operations, hurt our performance and have a negative impact on our brand.

While we believe we have adequate accruals for all of our legal and environmental

matters, we cannot estimate the aggregate possible range of loss for our existing litigation and claims due to most proceedings being in preliminary stages, with various motions either yet to be submitted or pending, discovery yet to occur, and significant factual matters unresolved.

While we believe we have adequate accruals for all of our legal and environmental matters, we cannot estimate the aggregate possible range of loss for our existing litigation and claims due to various reasons, including, but not limited to, many proceedings being in preliminary stages, with various motions either yet to be submitted or pending, discovery yet to occur, and significant factual matters unresolved.

In addition, most cases seek an indeterminate amount of damages and many involve multiple parties.

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Changes in laws, regulations, rules and governmental policies, including the interpretation thereof, could increase our costs, require modifications to our business practices, result in increased litigation, investigations, enforcement actions, fines or liabilities and adversely affect our business, results of operations and financial condition.

For example, a California law enacted in 2019 adopted a worker classification test to be used when determining employee or independent contractor status.

Although we do not believe this law applies to our franchisees or their employees, changes in the legal framework of employment or franchise liability could negatively impact our business, particularly if such changes result in any law, rule, regulation, governmental policy or interpretation or judicial decision determining that Wendy’s is an employer of its franchisees or a joint employer with our franchisees or otherwise imposing liability for employment-related claims or impacting our employment relationships based on theories of joint employer liability or other theories of vicarious liability.

If we are unable to effectively manage the risks associated with our complex regulatory environment, it could have a material adverse effect on our business and financial condition.

Changes in the legal framework of employment or franchise liability could negatively impact our business, particularly if such

changes result in any law, rule, regulation, governmental policy or interpretation or judicial decision determining that Wendy’s is an employer of its franchisees or a joint employer with our franchisees or otherwise imposing liability for employment-related claims or impacting our employment relationships based on theories of joint employer liability or other theories of vicarious liability.

In addition, various state and local laws may require wage increases and impose working hour and working condition standards that could result in increased costs, limit our or our franchisees’ ability to respond to market conditions and negatively impact our ability to identify, attract and retain qualified franchisees to operate or open restaurants in the impacted markets.

If we are unable to effectively manage the risks associated with this complex legislative and regulatory environment, it could have a material adverse effect on our business and financial condition.

We are also subject to legal and compliance risks related to privacy and data collection, protection and management of certain data and information associated with our technology-related services and platforms made available to customers, employees, franchisees, business partners or other third parties.

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These laws and regulations have been subject to frequent change, and there may be jurisdictions that propose or enact new data privacy requirements in the future.

Failure to meet applicable data privacy requirements could result in substantial penalties and adversely impact our business and financial condition.

Failure to meet applicable data privacy requirements could result in legal proceedings and substantial penalties and adversely impact our business and financial condition.

Additionally, evolving laws and regulations could require us and our franchisees to change or limit the way we collect or use information in operating our business, which may result in additional costs, limit our marketing or growth strategies and adversely affect our business and results of operations.

There has been increasing public focus by investors, environmental activists, the media and governmental and nongovernmental organizations on social and environmental sustainability matters, including packaging and waste, animal health and welfare, human rights, climate change, greenhouse gases and land, energy and water use.

As a result, we have

experienced increased pressure and expectations to provide expanded disclosure and make commitments, establish goals or set targets with respect to various environmental and social issues and to take the actions necessary to meet those commitments, goals and targets.

If we are not effective in addressing social and environmental sustainability matters, consumer trust in our brand may suffer.

There has been increasing public focus by investors, environmental activists, the media and governmental and nongovernmental organizations on environmental, social and governance matters, including packaging and waste, animal health and welfare, human rights, diversity, climate change, greenhouse gases and land, energy and water use.

As a result, we have experienced increased pressure and expectations to provide expanded disclosure and establish commitments, goals or targets with respect to various environmental, social and governance issues and to take the actions necessary to meet those commitments, goals and targets.

Furthermore, the standards by which certain environmental, social and governance issues are measured are evolving and subject to frequent change.

If we are not effective, or perceived to be effective, in achieving our commitments, goals or targets or otherwise addressing various environmental, social and governance matters, consumer trust in our brand may suffer.

In addition, the actions needed to achieve our commitments, goals and targets could result in market, operational, execution and other costs, which could have a material adverse effect on our results of operation and financial condition.

Our results of operation and financial condition could be adversely impacted if we are unable to effectively manage the risks or costs to us, our franchisees and our supply chain associated with social and environmental sustainability matters.

Our current insurance may not provide adequate levels of coverage against claims that have been or may be filed.

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These estimates are highly subjective and can be significantly impacted by many factors such as business and economic conditions, operating costs, inflation, competition, consumer and demographic trends and restructuring activities.

If our estimates or underlying assumptions change in the future, or if the operating performance or cash flows of our business decline, we may be required to record impairment charges, which could have a significant adverse effect on our reported results for the affected periods.

If our estimates or underlying assumptions change in the future, or if the operating performance or cash flows of our business decline, we may be

required to record impairment charges, which could have a significant adverse effect on our reported results for the affected periods.

Tax matters, including changes in tax rates or laws, imposition of new taxes, disagreements with taxing authorities and unanticipated tax liabilities, could impact our results of operations and financial condition.

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Our results can be adversely affected by unforeseen events, such as adverse weather conditions, natural disasters, hostilities, social unrest, health epidemics or pandemics or other catastrophic events.

Unforeseen events, such as adverse weather conditions, natural disasters, hostilities (including acts of war, terrorist activities and public or workplace violence), social unrest, health epidemics or pandemics or other catastrophic events can adversely affect consumer spending, consumer confidence, restaurant sales and operations, supply chains and our ability to perform corporate or support functions at our restaurant support center, any of which could affect our business, results of operations and financial condition.

Unforeseen events, such as adverse weather conditions (including related to climate change), natural disasters, hostilities (including acts of war, terrorist activities and public or workplace violence), social unrest, health epidemics or pandemics or other catastrophic events can adversely affect consumer spending, consumer confidence, restaurant sales and operations, supply chains and our ability to perform corporate or support functions at our restaurant support center, any of which could affect our business, results of operations and financial condition.

Unresolved Staff Comments.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors