Wendy's International (WEN)

The Arby’s Restaurant System

Through Arby’s Restaurant Group, Inc. (ARG) and its subsidiaries, we participate in the quick service restaurant segment of the restaurant industry as the franchisor of the Arby’s restaurant system and, as of December 31, 2006, the owner and operator of 1,061 Arby’s restaurants. We acquired our company-owned Arby’s restaurants principally through the acquisitions of Sybra, Inc. in December 2002 and the RTM Restaurant Group in July 2005. We acquire additional company-owned restaurants from time to time through acquisitions as well as the

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development and construction of new restaurants. There are approximately 3,600 Arby’s restaurants in the United States and Canada and Arby’s is the largest restaurant franchising system specializing in the roast beef sandwich segment of the quick service restaurant industry. According to Nation’s Restaurant News, Arby’s is the 12th largest quick service restaurant chain in the United States. As of December 31, 2006, there were 1,061 company-owned Arby’s restaurants and 2,524 Arby’s restaurants owned by 473 franchisees. Of the 2,524 franchisee owned restaurants, 2,397 operated within the United States and 127 operated outside the United States.

ARG also owns the T.J. Cinnamons® concept, which consists of gourmet cinnamon rolls, gourmet coffees and other related products, and the Pasta Connection® concept, which includes pasta dishes with a variety of different sauces. As of December 31, 2006, there were a total of 256 T.J. Cinnamons outlets, 233 of which are multi-branded with domestic Arby’s restaurants, and nine Pasta Connection outlets, all of which are multi- branded with domestic Arby’s restaurants. ARG is not currently offering to sell any additional Pasta Connection franchises. As of December 31, 2006, ARG also owned and operated one Arby’s Market Fresh® unit. Developed as a test design, the Arby’s Market Fresh unit features an expansion of Arby’s successful Market Fresh® line of premium sandwiches and salads within an in-line shopping center.

In addition to various slow-roasted roast beef sandwiches, Arby’s offers an extensive menu of chicken, turkey and ham sandwiches, side dishes and salads. In 2001, Arby’s introduced its Market Fresh line of premium sandwiches on a nationwide basis. Since its introduction, the Arby’s Market Fresh line has grown to include fresh salads made with premium ingredients such as fresh apples, dried cranberries, corn salsa and black beans. Arby’s also offers Market Fresh wrap sandwiches with the same ingredients as its Market Fresh sandwiches inside a tortilla wrap.

During the first quarter of 2006, Arby’s replaced its entire line of chicken products with Arby’s Chicken Naturals®, a line of menu offerings made with 100 percent all natural chicken breast that is not altered or injected with added water, salt or phosphates. In the fourth quarter of 2006, Arby’s began serving french fries with zero grams of trans fat. To accomplish this, Arby’s worked with its french fry suppliers to eliminate the use of hydrogenated oil during the par-frying process at the supplier level, allowing Arby’s to become the first national quick service restaurant chain to announce the elimination of trans fat oils in french fries from supplier to restaurant. That transition is expected to be fully implemented in all domestic Arby’s locations by the end of the second quarter of 2007.

During 2006, ARG opened 35 new Arby’s restaurants and two Arby’s Market Fresh test restaurants and closed ten generally underperforming Arby’s restaurants, two underperforming Arby’s Market Fresh test restaurants and two T.J. Cinnamons outlets located in Arby’s units. In addition, ARG acquired 13 existing Arby’s restaurants from its franchisees and sold 16 of its company-owned restaurants to new or existing franchisees. During 2006, Arby’s franchisees opened 94 new Arby’s restaurants and closed 40 generally underperforming Arby’s restaurants. In addition, during 2006, Arby’s franchisees opened six and closed 13 T.J. Cinnamons outlets located in Arby’s units, and franchisees closed an additional 15 T.J. Cinnamons outlets located outside of Arby’s units. As of December 31, 2006, franchisees have committed to open 295 Arby’s restaurants over the next six years. You should read the information contained in “Item 1A. Risk Factors–Our restaurant business is significantly dependent on new restaurant openings, which may be affected by factors beyond our control.”