What changed in this filing

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Item 1A. Risk Factors

2024-02-26 compared with 2023-03-01 · 83 added, 92 removed, 301 unchanged (37% of the section changed)

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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.

The market segments in which Wendy’s restaurants compete are highly competitive with respect to, among other things, price, food quality and presentation, service, location, convenience and the nature and condition of the restaurant facility.

The market segments in which Wendy’s restaurants compete are highly competitive with respect to, among other things, price and value perception, food quality and presentation, product innovation, service, location, convenience, digital engagement and the nature and condition of the restaurant facility.

If customers have a poor experience at a Wendy’s restaurant, whether at a Company-operated or franchised restaurant, we may experience a decrease in customer counts.

Further, Wendy’s restaurants compete with a variety of locally owned restaurants, as well as competitive regional, national and global restaurant chains.

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.

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.

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, marketing and operational strategies better than we can and drive higher levels of brand awareness among consumers.

This product and price competition could result in reduced revenues and loss of market share.

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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.

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The success of the Wendy’s system depends to a significant extent on discretionary consumer spending, which is influenced by general economic conditions and the availability of discretionary income.

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.

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.

Material declines in the amount of discretionary spending or consumer food-away-from-home spending, or significant increases in expenses incurred by consumers, such as living expenses or gasoline prices, could hurt our business, results of operations and financial condition.

Our success also depends to a large extent on continued consumer acceptance of, and demand for, our offerings, the success of our operating, growth, 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 demographics or preferences, including with respect to nutrition, health or dietary trends, environmental or social concerns or the use of digital channels, Wendy’s

restaurants may lose customers, and the resulting revenues from Company-operated restaurants and the royalties that we receive from franchisees may decline.

COVID-19 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.

COVID-19 adversely affected, and could continue to adversely affect, our business.

Our customer counts and systemwide sales were significantly negatively impacted by COVID-19 and customers may continue to be reluctant to return to in-restaurant dining.

Our restaurant operations have been and could continue to be disrupted by COVID-19, including restaurant and dining room closures, labor shortages or increased labor costs.

Furthermore, COVID-19 has led, and could again lead, to interruptions in the delivery of food or other supplies to Wendy’s restaurants closures of supplier or distributor facilities or financial distress of suppliers or distributors.

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.

COVID-19 has had, and could again have, an adverse effect on new restaurant development, as well as on our franchisees’ operations and financial condition.

In addition to the risks described above, COVID-19 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 COVID-19 or its ultimate impact on our results of operations, financial condition and prospects.

Risks Related to Brand Perception and Value

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Brand value is based in part on consumer perceptions on a variety of subjective qualities.

Business incidents, whether isolated or recurring, and whether originating from us, our franchisees or our business partners, can significantly reduce brand value and consumer trust, particularly if the incidents receive considerable publicity or result in litigation.

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.

Erosion of trust in our brand can be caused by isolated or recurring incidents originating from us, our franchisees or our business partners, or from external events.

Such incidents can significantly reduce brand value and consumer trust, particularly if the incidents receive considerable publicity or result in litigation.

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 employees, 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, 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.

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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 and the value and perception of our brand.

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.

Moreover, because franchisees contribute to advertising funds based on a percentage of sales at their franchised restaurants, our 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.

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 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 impact of social media could adversely impact our brand, business and results of operations.

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.

The dissemination of information by customers, employees, social media influencers and others 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.

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A failure by us, our employees, our franchisees or third parties acting on our behalf to abide by applicable laws and regulations in the use of social media could adversely impact our reputation, brand, results of operations and financial condition or subject us to litigation, fines or other penalties.

Social media risks could also arise from employees not following defined policies for the use of social media during business operations, or actions taken by employees during personal activities outside of their employment, but which could still reflect negatively on the Wendy’s brand.

Social media risks could also arise from our employees, franchisees or business partners not following defined policies for the use of social media during business operations, or actions taken by employees during personal activities outside of their employment, but which could still reflect negatively on the Wendy’s brand.

We may be unable to adequately protect our intellectual property, which could harm the value of our brand and hurt our business .

Our intellectual property is material to the conduct of our business.

We rely on a combination of trademarks, copyrights, service marks, trade secrets and similar intellectual property rights to protect our brand and other intellectual property.

We rely on a combination of trademarks, service marks, copyrights, domain names, trade secrets and similar intellectual property rights to protect our brand and other intellectual property.

The success of our business strategy depends, in part, on our continued ability to use our trademarks and service marks to increase brand awareness and further develop our branded products in existing and new markets.

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We have registered certain trademarks and have other trademark registrations pending in the United States and certain foreign jurisdictions.

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.

Not all of the trademarks or domain names 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 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.

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Any report linking our restaurants or suppliers to food-borne illnesses, food tampering, contamination or mislabeling or other food-safety issues could damage the value of our brand immediately and severely hurt sales of our products and possibly lead to product liability claims, litigation (including class actions) or other damages.

The Wendy’s system may also be adversely impacted by consumer concerns regarding the nutritional aspects of the products we sell, the ingredients in our products or the cooking processes used in our restaurants.

The Wendy’s system may also be adversely impacted by consumer or regulatory concerns regarding the nutritional aspects of the products we sell, the ingredients in our products or the cooking processes or packaging used in our restaurants.

These or similar concerns could result in less demand for our products and a decline in sales at Company-operated restaurants and in royalties from sales at franchised restaurants.

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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.

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

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.

The breakfast daypart has required and may continue to 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 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.

As of January 1, 2023, approximately 95% of restaurants in the Wendy’s system were operated by franchisees.

As of December 31, 2023, approximately 95% of restaurants in the Wendy’s system were operated by franchisees.

Wendy’s franchisees are contractually obligated to operate their restaurants in accordance with the standards set forth in our franchise and other agreements with them.

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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.

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 changes 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.

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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, which could result in, among other things, increased restaurant closures, decreased restaurant openings, required financial support or franchisee bankruptcies or restructuring activities, all of which could reduce our royalty, national advertising funds, rent and other fee revenues.

Furthermore, an insolvency or bankruptcy proceeding involving a franchisee could prevent or delay us from collecting payments or exercising any of our other rights under the franchise or other related agreement with such franchisee.

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.

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(i) our ability to attract new franchisees;

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

(iii) the ability of restaurant owners to obtain financing;

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

(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;

(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.

(ii) the level of participation in, and success of, our build to suit development fund;

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

(iv) the ability of restaurant owners to obtain financing;

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

(vi) construction and development costs;

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

(viii) 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 (ix) 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 operations and financial condition.

In addition, the growth of our business could be adversely impacted by higher-than-expected restaurant closures, including closures related to underperformance, market conditions, macroeconomic or demographic trends, expiration or loss of leases, franchisee health or other factors beyond our control.

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.

We continue to implement our Image Activation program, which includes reimaging existing Wendy’s restaurants and building new Wendy’s restaurants with innovative exterior and interior restaurant designs.

We continue to execute our Image Activation program, which includes reimaging existing Wendy’s restaurants and building new Wendy’s restaurants with innovative exterior and interior restaurant designs.

Our Image Activation program may not positively affect sales at Wendy’s restaurants or improve our results of operations.

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We may be unable to manage effectively the acquisition and disposition of restaurants, or successfully implement other strategic initiatives, which could adversely affect our business, results of operations and financial results.

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;

(ii) increased operating expenses and the inability to achieve expected cost savings and operating efficiencies;

(iii) exposure to liabilities arising out of prior operations of acquired restaurants;

and (iv) the assumption of long-term, non-cancelable leases.

and (iii) the assumption of long-term, non-cancelable leases.

Our system optimization initiative also places demands on our operational and financial management resources and may require us to expand these resources.

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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.

These environmental laws provide for significant fines, penalties and liabilities, sometimes without regard to whether the owner, operator or occupant of the property knew of, or was responsible for, the release or presence of the hazardous or toxic substances.

Third parties may also make claims against owners, operators or occupants of properties for personal injuries and property damage associated with releases of or exposure to such substances.

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.

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.

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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.

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.

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 disruptions and impacts from COVID-19.

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.

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.

In addition, we may be unable to obtain desirable locations for new restaurants at reasonable prices, or at all, and restaurants may have higher construction, occupancy, food and labor costs than we currently anticipate.

In addition, we and our franchisees may be unable to obtain desirable locations for new restaurants at reasonable prices, or at all, and restaurants may have higher construction, occupancy, food and labor costs than we currently anticipate.

Any of these risks and uncertainties, and other factors we cannot anticipate, could have a material adverse impact on our business, results of operations and financial condition.

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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.

If a disruption of service from any of our key suppliers or distributors was to occur, including as a result of a failure to meet our quality or safety standards, 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 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.

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 and enhance workplace conditions) 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.

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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.

In addition, changes to our leadership and organizational structure, including our recent Chief Executive Officer succession, 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

There are risks and uncertainties associated with our increasing dependence on digital commerce platforms and technologies and alternative methods of delivery.

There are risks and uncertainties associated with our digital commerce strategies, platforms and technologies.

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 and integration, online ordering and delivery.

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 and integration, artificial intelligence (“AI”), online ordering and delivery.

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.

We have implemented technology and targeted advertising and promotions to support the growth of our digital business.

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

We have implemented and will continue to implement technology investments and targeted advertising and promotions to support the growth of our digital business.

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.

If our digital commerce platforms and strategies, including our planned investments to support digital growth through enhancements to the Wendy’s mobile app, loyalty program and personalized marketing capabilities and the rollout and implementation of digital menu boards, 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.

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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The third-party restaurant delivery business is intensely competitive, with a number of companies competing for capital, market share, online traffic and delivery drivers.

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

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.

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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 initiatives.

The implementation and use of AI technologies present various risks and uncertainties, and the deficiencies or other failures of AI systems could subject us to competitive harm, regulatory action, legal liability and brand or reputational harm.

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.

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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.

The rapid evolution and increased adoption of AI technologies may intensify our cybersecurity risks.

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

Our business involves the collection and retention of customer data, including, in some instances, credit and debit card numbers and other personally identifiable information, in various information systems that we and our franchisees maintain and in those maintained by third parties with whom we and our franchisees contract to provide credit card processing, digital ordering and related services.

We also maintain important internal data, such as personally identifiable information about our employees and franchisees and information relating to our operations.

We also maintain important internal data, such as personally identifiable information about our employees and franchisees and information

relating to our operations.

Our use of personally identifiable information is regulated by international, federal and state laws, as well as by certain third-party agreements.

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We have a significant amount of debt outstanding, and such indebtedness could adversely affect our business, results of operations and financial condition.

As of January 1, 2023, the Company had approximately $2.9 billion of outstanding debt on its balance sheet.

As of December 31, 2023, the Company had approximately $2.8 billion of outstanding debt on its balance sheet.

Additionally, a subsidiary of the Company has issued variable funding notes, which allows for the borrowing of up to $300.0 million from time to time on a revolving basis.

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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”).

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.

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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.

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 include, among others, significant contractual requirements regarding the purchase of soft drinks, contractual requirements regarding certain marketing and media rights 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.

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A substantial amount of our common stock is concentrated in the hands of certain stockholders.

Nelson Peltz, our Chairman, Peter May, our Senior Vice Chairman, Matthew Peltz, our Vice Chairman, and Edward Garden, a former director of the Company, beneficially own shares of our outstanding common stock that collectively constitute approximately 20% of the Company’s total voting power as of February 21, 2023.

Nelson Peltz, our Chairman, Peter May, our Senior Vice Chairman and Matthew Peltz, our Vice Chairman, beneficially own shares of our outstanding common stock that collectively constitute approximately 16% of the Company’s total voting power as of February 16, 2024.

These individuals may, from time to time, acquire beneficial ownership of additional shares of common stock.

On December 1, 2011, the Company entered into an agreement (the “Trian Agreement”) with Messrs.

Peltz, May and Garden, and several of their affiliates (the “Covered Persons”).

Pursuant to the Trian Agreement, our Board of Directors, including a majority of the independent directors, approved, for purposes of Section 203 of the Delaware General Corporation Law, the Covered Persons becoming the owners (as defined in Section 203(c)(9)) of or acquiring an aggregate of up to (and including), but not more than, 32.5% (subject to certain adjustments set forth in the Trian Agreement) of the outstanding shares of the Company’s common stock, such that no such persons would be subject to the restrictions set forth in Section 203 solely as a result of such ownership.

Peltz and May and several of their affiliates (the “Covered Persons”).

but not more than, 32.5% (subject to certain adjustments set forth in the Trian Agreement) of the outstanding shares of the Company’s common stock, such that no such persons would be subject to the restrictions set forth in Section 203 solely as a result of such ownership.

This concentration of ownership gives these individuals significant influence over the outcome of actions requiring stockholder approval, including the election of directors and the approval of mergers, consolidations and the sale of all or substantially all of the Company’s assets.

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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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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 safety, 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.

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, stockholder 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.

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Existing and changing legal and regulatory requirements, as well as an increasing focus on environmental, social and governance issues, could adversely affect our brand, business, results of operations and financial condition.

Our complex legal and regulatory environment exposes us to compliance, litigation and similar risks that could affect our operations and results in material ways.

Each Wendy’s restaurant is subject to licensing and regulation by health, sanitation, safety and other agencies in the state or municipality in which the restaurant is located, as well as to federal laws, rules and regulations and requirements of non-governmental entities such as payment card industry rules.

Governmental authorities may enact laws, rules or regulations that impact restaurant operations and the cost of conducting those operations.

Governmental authorities may enact laws, rules or regulations that impact restaurant operations and the cost of conducting those operations, including, among other matters, product packaging, marketing, the nutritional content and safety of our food and other products, labeling and other disclosure practices.

In addition, there can be no assurance that we and our franchisees will not experience material difficulties or failures in obtaining the necessary licenses or approvals for opening new restaurants.

More stringent and varied requirements of local regulators with respect to tax, zoning, land use and environmental factors could also delay or prevent development of new restaurants in particular locations.

More stringent and varied

requirements of local regulators with respect to tax, zoning, land use and environmental factors could also delay or prevent development of new restaurants in particular locations.

We are subject to various laws and regulations that govern the offer and sale of a franchise, including rules by the U.S.

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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.

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.

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.

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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 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.

There has been increasing public focus by investors, 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.

If we are not effective, or perceived to be effective, in meeting our commitments, goals or targets or otherwise addressing various environmental, social and governance matters, this could result in negative publicity, decreased consumer trust in our brand or litigation.

In addition, the actions needed to meet 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 environmental, social and governance matte rs.

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In addition, we currently self-insure a significant portion of expected losses under workers’ compensation, general liability, products liability, auto liability and property insurance programs.

Unanticipated changes in the actuarial assumptions and management estimates underlying our reserves for these losses could result in materially different amounts of expense, which could harm our business and adversely affect our results of operations and financial condition.

affect our results of operations and financial condition.

We also currently maintain insurance coverage to address cyber incidents.

Applicable insurance policies contain customary limitations, conditions and exclusions, and there can be no assurance that our cyber insurance policies will cover substantially all of the costs and expenses related to any previous or future cyber incidents.

Applicable insurance policies contain customary limitations, conditions and exclusions, and there can be no assurance that our cyber or other insurance policies will cover substantially all of the costs and expenses related to any previous or future incidents.

In addition, our future insurance premiums may increase, and we may be unable to obtain similar levels of insurance on reasonable terms, or at all, due to challenging conditions in the insurance industry.

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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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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