This excerpt taken from the WEN 10-K filed Mar 1, 2007.
ARGs financial results are affected by the financial results of Arbys franchisees.
ARG receives revenue in the form of royalties and fees from Arbys franchisees, which are generally based on a percentage of sales at franchised restaurants. Accordingly, a substantial portion of ARGs financial results is to a large extent dependent upon the operational and financial success of Arbys franchisees, including their implementation of ARGs strategic plans. If sales trends or economic conditions worsen for Arbys franchisees, their financial results may worsen and ARGs collection rates may decline. When ARG divests company-owned restaurants, ARG is often required to remain responsible for lease payments for these restaurants to the extent that the relevant franchisees default on their leases. Additionally, if Arbys franchisees fail to renew their franchise agreements, or if ARG is required to restructure its franchise agreements in connection with such renewal, it would result in decreased revenues for ARG.