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Item 1A. Risk Factors

2025-02-21 compared with 2024-02-26 · 87 added, 103 removed, 281 unchanged (40% 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 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.

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, convenience, digital engagement and the location and condition of the restaurant facilities.

If Wendy’s restaurants fail to deliver an exceptional customer experience, 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 independent locally owned restaurants, as well as regional, national and global restaurant chains.

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.

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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, casual dining outlets and food delivery providers.

For example, additional competitive pressures for prepared food purchases have come from the deli or prepared foods sections of a number of major grocery store chains, as well as from convenience stores, casual dining outlets and food delivery providers.

Additionally, convenience stores and retail outlets at gas stations frequently offer a wide variety of sandwiches and other foods.

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

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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.

This increased product and price competition could put deflationary pressure on the selling price of products offered at Wendy’s restaurants.

This increased product and price competition could put deflationary pressure on the selling price of products offered at Wendy’s restaurants or lead to a decrease in customer counts.

All such competition may adversely affect our brand, business, results of operations and financial condition.

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 interest rates and declines in consumer confidence and spending.

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

Health epidemics or pandemics – such as the global outbreak of COVID-19 in early 2020 – have in the past and may in the future impact macroeconomic conditions.

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

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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.

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.

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 the quick-service restaurant hamburger segment contracts or does not grow as quickly as other categories within the food service industry, or if we are unable to continue to achieve consumer acceptance or adapt to changes in consumer demographics or preferences, including with respect to product mix, nutrition, health or dietary trends (including the use of weight loss medications), 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.

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 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.

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, digital engagement, our use of emerging technologies, 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.

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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.

Our inability or failure to recognize, respond to and effectively manage the impact of social or digital 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 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.

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

The dissemination of information by news media, customers, employees, social media influencers and others via social or digital 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 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.

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 .

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Food safety is a top priority for Wendy’s, and we dedicate substantial resources to food safety matters to ensure our customers enjoy safe, quality food products.

However, food safety events, including instances of food-borne illness (such as salmonella or E.

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, however, including instances of food-borne illness (such as salmonella or E.

coli) can and have occurred in the food industry, including at the Company.

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 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.

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

Our business strategy includes a focus on driving sales and share growth across all of our dayparts through our craveable core menu, impactful innovation and by delivering relevant value to our customers.

However, we may be unable to deliver global sales growth or maintain or grow 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 and technological enhancements, driving new restaurant development and ensuring the support and engagement of franchisees.

For example, Wendy’s has 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.

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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, 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.

If franchisees do not successfully operate their restaurants in a manner consistent with required standards, the royalty payments they make 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 capital planning and/or 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, 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.

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, restaurant remodeling initiatives, marketing and menu programs and digital commerce platforms and other restaurant 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.

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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.

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

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.

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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.

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 and can successfully implement development agreements and expansion plans, then our royalty and rental revenues may decrease and our future growth could be adversely affected.

The growth of our business is dependent on new restaurant openings, which could be affected by factors beyond our control.

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(i) our ability to attract new franchisees;

(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.

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

(iii) the attractiveness of our development incentive initiatives to new and existing franchisees;

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

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

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

(vii) construction and development costs;

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

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

(x) the profitability of existing and new restaurants;

and (xi) 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 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.

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 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 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.

In addition, the growth of our business could be adversely impacted by anticipated and unanticipated 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.

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 completion 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.

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If we are unable to execute our system optimization initiative or effectively manage the acquisition and disposition of restaurants, our business and financial results could be adversely affected.

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.

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, the 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 potential diversion of management’s attention.

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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 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.

We have significant real estate operations in connection with our restaurant 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, zoning, condemnation or eminent domain, insurance, demographic trends, supply chain management, supply and demand for the ownership and operation of restaurants, franchisee commitments,

payments and performance 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.

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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.

Most leases require us to pay the costs of insurance, taxes, maintenance, utilities and capital repairs and replacements, which costs are passed along to franchisees via sublease where and when such sites are operated by franchisees.

We generally cannot cancel these leases prior to the expiration of their term.

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.

If an existing or future restaurant is not profitable, and we decide to close it (or, with respect to a franchise-operated restaurant, we permit the franchisee to close the restaurant or suffer an involuntary closure of the restaurant), 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 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.

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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.

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.

Foreign Corrupt Practices Act or similar anti-corruption and anti-bribery 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, tariffs and trade barriers or foreign policy changes, 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.

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 new and existing international markets.

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

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.

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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.

If increased costs were passed to our customers, demand for our products may decrease, which in turn could adversely affect our results of operations.

For example, historically, in order to partially offset inflation and other increases in commodity and other operating costs, we have gradually increased menu prices.

There can be no assurance that future cost increases, including as a result of inflation, can be offset by increased menu prices or that our current or future menu prices will be fully absorbed by our customers without any resulting change to their demand for our products, which in turn could adversely affect our results of operations.

Shortages or interruptions in the supply or distribution of perishable food products could damage our brand and adversely affect our business and results of operations.

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Shortages or interruptions in the supply of perishable food products caused by unanticipated demand, problems in production or distribution, labor shortages, disease or food-borne illnesses, political unrest, health epidemics or pandemics, inclement weather or other calamities or conditions could adversely affect the availability, quality and cost of ingredients, which could lower revenues, increase operating costs, damage brand reputation and otherwise harm our business and the businesses of our franchisees.

Certain of the products sold in our restaurants, such as beef and chicken, are sourced from a limited number of suppliers, which may increase our reliance on those suppliers.

Certain products sold in our restaurants, such as beef and chicken, are sourced from a limited number of suppliers, which may increase our reliance on those suppliers.

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

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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 and enhance workplace conditions) 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), health epidemics or pandemics (such as the COVID-19 pandemic) 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 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 achieve our growth strategy and other business initiatives.

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.

Much of our future success depends on the continued availability, efforts and abilities of our senior leadership team and other key personnel.

The loss of, or failure to engage in adequate succession planning for, 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, including changes to the Company’s senior leadership team in 2024, 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 and integration, artificial intelligence (“AI”), 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, 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.

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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 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.

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 continued rollout and implementation of digital menu boards, kiosks and AI integrated in our restaurants, 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 as quickly and efficiently as our competitors.

We rely on third-party delivery services to fulfill delivery orders, and errors or failures by those providers to make timely deliveries could cause customers to stop ordering from us.

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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.

In addition, the delivery business continues to rapidly evolve, including through consolidation, 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.

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

The failure of these systems and technology to operate effectively, or an interruption or degradation in

these 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.

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 implementation and use of AI technologies, which we are incorporating into certain aspects of our restaurant operations and may become more important in our operations over time, 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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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.

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

As privacy and information security laws and regulations change, we will likely incur additional costs to ensure that we remain in compliance with those laws and regulations.

If our security and information systems are compromised or if our employees or franchisees fail to comply with these laws, regulations or contract terms, and this information is obtained by unauthorized persons or used inappropriately, it could adversely affect our reputation, disrupt our operations, damage our relationship with customers, franchisees or employees and result in costly litigation, judgments, or penalties resulting from violation of applicable laws and payment card industry regulations.

Our business involves the collection and retention of sensitive 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.

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

As privacy and information security laws and regulations change, including comprehensive privacy and data protection laws adopted by states or foreign countries, we will likely incur additional costs to ensure that we remain in compliance with those laws and regulations.

If our security and information systems are compromised or if our employees or franchisees fail to comply with, or fail to successfully implement processes related to, these laws, regulations or contract terms, and this information is obtained by unauthorized persons or used inappropriately, it could adversely affect our reputation, disrupt our operations, damage our relationship with customers, franchisees or employees and result in costly litigation, judgments, or penalties resulting from violation of applicable laws and payment card industry regulations.

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.

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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, 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 include, among others, significant contractual requirements regarding the purchase of beverages, 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 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.

Nelson Peltz, our former Chairman and Chairman Emeritus, Peter May, our Senior Vice Chairman and Matthew Peltz, our Vice Chairman, beneficially own shares of our outstanding common stock that collectively constitute approximately 15% of the Company’s total voting power as of February 19, 2025.

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

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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.

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.

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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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, 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.

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, marketing or advertising 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.

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.

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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, 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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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.

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, 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.

As a result, we are subject to evolving disclosure obligations promulgated by governmental and regulatory organizations and 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 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.

In addition, the actions needed to meet our commitments, goals and targets could be difficult and resource intensive, or may require collaboration with and cooperation by our franchisees and other third parties, including suppliers in our supply chain, and 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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We currently maintain insurance that we believe to be adequate for businesses of our size and type.

However, there are types of losses we could encounter that cannot be insured against or that we believe are not economically reasonable to insure, such as losses due to natural disasters, acts of terrorism or the declaration of war.

However, we could encounter losses that cannot be insured against or that we believe are not economically reasonable to insure, such as losses due to certain natural disasters, acts of terrorism or the declaration of war.

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.

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

We also currently maintain insurance coverage to address cyber incidents.

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While we believe our recorded provision for income taxes properly reflects all applicable tax laws as currently enacted, there can be no assurance that we would be successful in challenging adjustments by the relevant tax authorities.

Any significant increases in income tax rates, changes in income tax laws or unfavorable resolution of tax matters could have a material adverse impact on our results of operations and financial condition.

Any significant increases in income tax rates, new or increased import duties or tariffs, changes in income tax laws,

trade or tax policy or unfavorable resolution of tax matters could have a material adverse impact on our results of operations and financial condition.

Our operations are subject to fluctuations in foreign currency exchange rates.

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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 (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.

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 (such as COVID-19) 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, including a health epidemic or pandemic, have in the past, and could again in the future, also heighten other risks disclosed in this risk factors section, including, but not limited to, those related to brand value and perception, consumer preferences, our ability to maintain or grow market share, new restaurant development, commodity costs, labor, supply chain and purchasing and international operations.

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