Wendy's International (WEN)

Provisions and Supplies

As of December 31, 2006, two independent meat processors supplied all of Arby’s beef for roasting in the United States. Franchise operators are required to obtain beef for roasting from these approved suppliers. ARCOP, Inc., a not-for-profit purchasing cooperative, negotiates contracts with approved suppliers on behalf of ARG and Arby’s franchisees. Suppliers to the Arby’s system must comply with United States Department of Agriculture (“USDA”) and United States Food and Drug Administration (“FDA”) regulations governing the manufacture, packaging, storage, distribution and sale of all food and packaging products.

Franchisees may obtain other products, including food, ingredients, paper goods, equipment and signs, from any source that meets ARG’s specifications and approval. Through ARCOP, ARG and Arby’s franchisees purchase food, beverage, proprietary paper and operating supplies under national contracts employing volume purchasing.

Provisions and Supplies

       As of January 1, 2006, two independent meat processors supplied all of Arby's beef for roasting in the United States. Franchise operators are required to obtain beef for roasting from approved suppliers. ARCOP, Inc., a not-for-profit purchasing cooperative, negotiates contracts with approved suppliers on behalf of ARG and Arby's franchisees. Suppliers to the Arby's system must comply with United States Department of Agriculture (“USDA”) and United States Food and Drug Administration (“FDA”) regulations governing the manufacture, packaging, storage, distribution and sale of all food and packaging products.

       On January 12, 2004, the Food Safety and Inspection Service of the USDA published rules enhancing safeguards to better protect public health and minimize exposure to Bovine Spongiform Encephalopathy (BSE) infective tissues, also known as “mad cow disease.” Examples of these safeguards include (1) all specified risk materials (SRMs) are banned from the human food supply, (2) non-ambulatory cattle are banned from the human food supply, (3) air-injection stunning of cattle is prohibited and (4) SRMs are prohibited from use in advanced meat recovery (AMR) systems. ARG goes even further by prohibiting the purchase of meat generated from AMR systems. Approved suppliers to the Arby's system must certify their compliance with these requirements.

       Canada banned the importation of beef from the United States for some time as a result of one BSE incident in the State of Washington in 2003. Since the ban, a single supplier with one processing facility in Canada has supplied Arby's Canadian franchisees with beef for roasting. Canada now permits importation of beef from the United States if the cattle are younger than 30 months of age when slaughtered; however, management expects that the current Canadian supplier will continue to fulfill all of the beef requirements of Arby's Canadian franchisees.

       Franchisees may obtain other products, including food, ingredients, paper goods, equipment and signs, from any source that meets ARG's specifications and approval. Through ARCOP, ARG and Arby's franchisees purchase food, beverage, proprietary paper and operating supplies through national contracts employing volume purchasing.