This excerpt taken from the WEN 10-K filed Mar 1, 2007.
ARG does not exercise ultimate control over advertising and purchasing for the Arbys restaurant system, which could hurt sales and the Arbys brand.
Arbys franchisees control the provision of national advertising and marketing services to the Arbys franchise system through AFA Service Corporation (the AFA), a company controlled by Arbys franchisees. Subject to ARGs right to protect its trademarks, and except to the extent that ARG participates in the AFA through its company-owned restaurants, the AFA has the right to approve all significant decisions regarding the national marketing and advertising strategies and the creative content of advertising for the Arbys system. Although ARG has entered into a management agreement pursuant to which ARG, on behalf of the AFA, manages the day-to-day operations of the AFA, many areas are still subject to ultimate approval by the AFAs independent board of directors and the management agreement may be terminated by either party for any reason upon one years prior notice. See Item 1. BusinessBusiness SegmentsRestaurant Franchising and Operations (Arbys)Advertising and Marketing. In addition, local cooperatives run by operators of Arbys restaurants in a particular local area (including ARG) make their own decisions regarding local advertising expenditures, subject to spending the required minimum amounts. ARGs lack of control over advertising could hurt sales and the Arbys brand.
In addition, although ARG ensures that all suppliers to the Arbys system meet quality control standards, Arbys franchisees control the purchasing of food, proprietary paper, equipment and other operating supplies from such suppliers through ARCOP, Inc., a not-for-profit entity controlled by Arbys franchisees. ARCOP negotiates national contracts for such food, equipment and supplies. ARG is entitled to appoint one representative on the board of directors of ARCOP and participate in ARCOP through its company-owned restaurants, but otherwise does not control the decisions and activities of ARCOP except to ensure that all suppliers satisfy Arbys quality control standards. If ARCOP does not properly estimate the needs of the Arbys system with respect to one or more products, makes poor purchasing decisions, or decides to cease its operations, system sales and operating costs could be adversely affected and the financial condition of ARG or the financial condition of Arbys franchisees could be hurt.