Wendy's International (WEN)

(2) Significant Risks and Uncertainties

Nature of Operations

       The Company operates in two business segments: restaurants and, effective with the acquisition of Deerfield on July 22, 2004, asset management.

       The restaurant segment is operated through franchised and Company-owned Arby's® quick service restaurants specializing in slow-roasted roast beef sandwiches. Arby's restaurants also offer an extensive menu of chicken, turkey and ham sandwiches, side dishes and salads. These include Arby's Market Fresh® sandwiches, salads and wraps. Some of the Arby's system-wide restaurants are multi-branded with the Company's T.J. Cinnamons® product line. The franchised restaurants are principally located throughout the United States and, to a much lesser extent, Canada. The Company's owned restaurants are located in 28 states, with the largest number in Michigan, Florida, Indiana, Georgia, Ohio and Pennsylvania. Information concerning the number of Arby's franchised and Company-owned restaurants is as follows:

       The asset management segment is comprised of an asset management company that offers a diverse range of fixed income and credit-related strategies to institutional investors from its domestic offices. It currently provides asset management services for CDOs and Funds, including the REIT, but may expand its services into other types of investments.

Use of Estimates

       The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the

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Triarc Companies, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
January 1, 2006

consolidated financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Significant Estimates

       The Company's significant estimates which are susceptible to change in the near term relate to (1) provisions for the resolution of income tax contingencies subject to future examinations of the Company's Federal and state income tax returns by the Internal Revenue Service or state taxing authorities, including remaining provisions included in “Current liabilities relating to discontinued operations,” (see Note 15), (2) provisions for the resolution of legal and environmental matters (see Note 28), (3) the valuation of investments and liability positions related to investments which are not publicly traded (see Note 14), (4) provisions for Other Than Temporary Losses (see Note 19) and (5) estimates of impairment of the carrying values of long-lived assets of the restaurant business (see Notes 1 and 18). The Company's estimates of each of these items historically have been adequate. Due to uncertainties inherent in the estimation process, it is reasonably possible that the actual resolution of any of these items could vary significantly from the estimate and, accordingly, there can be no assurance that the estimates may not materially change in the near term. In this connection, in 2004 and, to a much lesser extent, in 2005 the Company's results of operations were materially impacted by the release of income tax reserves and related interest accruals that were no longer required (see Notes 15 and 22).

Certain Risk Concentrations

       The Company believes its vulnerability to risk concentrations in its cash equivalents and investments, including leverage employed in its trading portfolios, is mitigated by (1) the Company's policies restricting the eligibility, credit quality and concentration limits for its placements in cash equivalents, (2) the diversification of its investments, (3) insurance from the Securities Investor Protection Corporation of up to $500,000 per account as well as supplemental private insurance coverage maintained by substantially all of the Company's brokerage firms, to the extent the Company's cash equivalents and investments are held in brokerage accounts, (4) hedging strategies employed in its trading portfolios that are not designated as hedging instruments and (5) diversification of credit positions by industry, credit rating and individual issuers for asset-backed and corporate debt securities in its trading portfolios. The Company has no significant major customers which accounted for 10% or more of consolidated revenues in 2003, 2004 or 2005. However, RTM accounted for 9%, 9% and 2% of consolidated revenues and 30%, 29% and 18% of royalties and franchise and related fees in 2003, 2004 and 2005, respectively. The significant decline in those percentages in 2005 resulted from the Company's acquisition of RTM on July 25, 2005. The Company also derives revenues from the REIT, which accounted for 23% of asset management and related fees in 2005, as well as revenues from another Fund, which accounted for 20% and 18% of asset management and related fees in 2004 subsequent to the Deerfield Acquisition and 2005, respectively. In addition, the Company has an institutional investor whose participation in various Funds managed by the Company generated approximately 17% and 12% of asset management and related fees in 2004 subsequent to the Deerfield Acquisition and 2005, respectively. Although revenues attributable to the REIT, the Fund and the institutional investor each represented less than 10% of consolidated revenues during each period, the loss of these revenues would have a material adverse impact on the Company's business.

       The Company's restaurant segment could also be adversely affected by changing consumer preferences resulting from concerns over nutritional or safety aspects of beef, poultry, french fries or other foods or the effects of food-borne illnesses. The Company believes that its vulnerability to risk concentrations in its restaurant segment related to significant vendors and sources of its raw materials for itself and its franchisees is not significant. However, increases in the cost of beef adversely affected profit margins of the Company-owned restaurants in 2003 and 2004, although in 2005 these costs stabilized. The Company also believes that its vulnerability to risk concentrations related to geographical concentration in its restaurant segment is mitigated

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Triarc Companies, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
January 1, 2006

since the Company and its franchisees generally operate throughout the United States and have minimal foreign exposure.

       The Company believes that it has no material risk concentrations in its asset management segment with respect to sources of investment products or geographic concentration. Since the segment performs its services from its domestic offices, it has no significant foreign exposure although there are investors and Funds and CDOs in certain foreign countries.

3. Significant Risks and Uncertainties

Nature of Operations

      The Group operates solely in the restaurant business through its Arby's® quick service restaurants specializing in slow-roasted roast beef sandwiches. Arby's restaurants also offer an extensive menu of chicken, turkey and ham sandwiches, side dishes and salads including Arby's Market Fresh® sandwiches. The Group's restaurants are located in 22 states throughout the United States. Information concerning the number of the Group's Arby's restaurants is as follows:

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RTM RESTAURANT GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS—(Continued)
(In Thousands, Except Share and Per Share Amounts)
(Unaudited)

3. Significant Risks and Uncertainties—(Continued)

Use of Estimates

      The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.

      The Group's significant estimates which are susceptible to change in the near term relate to tax matters, RTMRG valuation estimates related to stock based compensation, self-insurance reserves, impairment of goodwill and long-lived assets and gains and losses related to the disposition of restaurants. The Group evaluates those estimates and assumptions on an ongoing basis utilizing historical experience and various other factors which the Group believes are reasonable under the circumstances.

Certain Risk Concentrations

      The Group does not have a single significant customer. However, the Group's restaurant business could be adversely affected by changing consumer preferences resulting from concerns over nutritional or safety aspects of beef, poultry, french fries or other foods or the effects of food-borne illnesses. The Group believes that its vulnerability to risk concentrations related to significant vendors and sources of its raw materials is not significant, although increases in the cost of beef during 2004 due to market-wide supply and demand factors adversely affected profit margins of the Group's restaurants in 2004 and 2005. The Group also believes that its vulnerability to risk concentrations related to geographical concentration is mitigated since the Group generally operates throughout the United States and has no foreign exposure.

4. Discontinued Operations

Phoenix District

      On April 19, 2004, the Group sold all of its Arby's restaurants in the Phoenix, AZ district (the “Phoenix District”) to an unrelated third party for net proceeds of $15,950, including cash and a note receivable for $2,000 payable monthly over 10 years. The gain of $10,874 ($8,948 net of taxes) resulting from this transaction was recorded in the fourth quarter of fiscal year 2004 in discontinued operations. Goodwill of $1,167 related to the Phoenix District was retired in connection with the sale.

      As of the date of the transaction, the Phoenix District's assets and liabilities were recorded at a net carrying value of approximately $4,432.

40

RTM RESTAURANT GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS—(Continued)
(In Thousands, Except Share and Per Share Amounts)
(Unaudited)

4. Discontinued Operations—(Continued)

      The Phoenix District's revenues were $24,321, and income before income taxes was $103, during the 40 weeks ended February 29, 2004, and is included in income from discontinued operations, net of income taxes, in the accompanying combined statement of operations.

Other Restaurant Sales

      On September 13, 2004, the Group sold the operations of 4 of its restaurants in Georgia to a former stockholder for net proceeds of $3,513, including a note receivable for $832, receipt of the shareholder's stock of $108, and cash. On September 27, 2004, the Group sold the operations of 6 of its restaurants in Indiana to a former stockholder for net proceeds of $3,675, including receipt of the shareholder's stock of $1,590, and cash. Gains aggregating $4,940 ($3,162 net of tax) resulted from these transactions and are included in income from discontinued operations, and $748 was deferred as of March 6, 2005. The deferred gain will be recognized as collections are made on a note receivable from the buyer.

      As of the date of the transactions, the assets and liabilities disposed of related to these 10 restaurants were recorded at a net carrying value of approximately $865. As of May 30, 2004, the net carrying value of such assets and liabilities was $602.

      For purposes of these financial statements, the results of operations of these restaurants have been included in discontinued operations. Revenues related to the 10 restaurants sold in September 2004 were $8,067 and $8,652, and income before income taxes, exclusive of the gains on sale, was $1,172 and $5,494 during the 40 weeks ended February 29, 2004 and March 6, 2005, respectively, and is included in income from discontinued operations, net of income taxes, in the accompanying combined statements of operations.