Wendy's International (WEN)

Complaints or litigation may hurt ARG.

Occasionally, ARG’s customers file complaints or lawsuits against it alleging that ARG is responsible for an illness or injury they suffered at or after a visit to an Arby’s restaurant, or alleging that there was a problem with food quality or operations at an Arby’s restaurant. ARG is also subject to a variety of other claims arising in the ordinary course of our business, including personal injury claims, contract claims, claims from franchisees and claims alleging violations of federal and state law regarding workplace and employment matters, discrimination and similar matters. ARG could also become subject to class action lawsuits related to these matters in the future. Regardless of whether any claims against ARG are valid or whether ARG is found to be liable, claims may be expensive to defend and may divert management’s attention away from operations and hurt ARG’s performance. A judgment significantly in excess of ARG’s insurance coverage for any claims could materially adversely affect ARG’s financial condition or results of operations. Further, adverse publicity resulting from these allegations may hurt ARG and Arby’s franchisees.

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Additionally, the restaurant industry has been subject to a number of claims that the menus and actions of restaurant chains have led to the obesity of certain of their customers. Adverse publicity resulting from these allegations may harm the reputation of Arby’s restaurants, even if the allegations are not directed against Arby’s restaurants or are not valid, and even if ARG is not found liable or the concerns relate only to a single restaurant or a limited number of restaurants. Moreover, complaints, litigation or adverse publicity experienced by one or more of Arby’s franchisees could also hurt ARG’s business as a whole.