This "Management's Discussion and Analysis of Financial Condition and Results of Operations" of Triarc Companies, Inc. ("Triarc" or the "Company") and its subsidiaries should be read in conjunction with our accompanying condensed consolidated financial statements included elsewhere herein and "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the fiscal year ended December 30, 2007 (the "Form 10-K"). Item 7 of our Form 10-K describes the application of our critical accounting policies for which there have been no significant changes as of June 29, 2008. Certain statements we make under this Item 2 constitute "forward-looking statements" under the Private Securities Litigation Reform Act of 1995. See "Special Note Regarding Forward-Looking Statements and Projections" in "Part II - Other Information" preceding "Item 1."

Introduction and Executive Overview

We currently operate in one business segment-the restaurant business through our Company-owned and franchised Arby's restaurants. Prior to December 21, 2007, we also operated in the asset management business through our 63.6% capital interest in Deerfield & Company LLC ("Deerfield"). On December 21, 2007, we sold our capital interest in Deerfield (the "Deerfield Sale") to Deerfield Capital Corp., a real estate investment trust ("DFR" or "the REIT"). As a result of the Deerfield Sale, our 2008 financial statements include only the financial position, results of operations and cash flows from the restaurant business.

In April 2007 we announced that we would be closing our New York headquarters and combining its corporate operations with our restaurant operations in Atlanta, Georgia (the "Corporate Restructuring"). The Corporate Restructuring included the transfer of substantially all of Triarc's senior executive responsibilities to the Arby's Restaurant Group, Inc. ("ARG"), a wholly-owned subsidiary of ours, executive team in Atlanta, Georgia. This transition was completed in early 2008. Accordingly, to facilitate this transition, the Company entered into negotiated contractual settlements (the "Contractual Settlements") with our Chairman, who was also our then Chief Executive Officer, and our Vice Chairman, who was our then President and Chief Operating Officer, (collectively, the "Former Executives") evidencing the termination of their employment agreements and providing for their resignation as executive officers as of June 29, 2007 (the "Separation Date"). In addition, we sold properties and other assets at our former New York headquarters in 2007 to an affiliate of the Former Executives and we incurred charges for the transition severance arrangements of other New York headquarters' executives and employees who continued to provide services as employees through the 2008 first quarter.

In our restaurant business, we derive revenues in the form of sales by our Company-owned restaurants and franchise revenues which include (1) royalty income from franchisees, (2) franchise and related fees and (3) rental income from properties leased to franchisees. While approximately 76% of our existing Arby's royalty agreements and substantially all of our new domestic royalty agreements provide for royalties of 4% of franchise revenues, our average royalty rate was 3.6% for the six months ended June 29, 2008. In our former asset management business, revenues were generated through the date of the Deerfield Sale in the form of asset management and related fees from our management of (1) collateralized debt and collateralized loan obligation vehicles ("CDOs"), and (2) investment funds and private investment accounts ("Funds"), including the REIT.

In our discussions of "Sales" and "Franchise Revenues" below, we discuss same-store sales. Beginning in our 2008 first quarter, we are reporting same-store sales commencing after a store has been open for fifteen continuous months (the "Fifteen Month Method") consistent with the metrics used by our management for internal reporting and analysis. Historically, and including the 2007 fiscal year, the calculation of same-store sales commenced after a store was open for twelve continuous months (the "Twelve Month Method"). The sales discussion for the current quarter below provides the same-store sales percentage change using the new Fifteen Month Method, as well as our historical Twelve Month Method.

Our primary goal is to enhance the value of our Company by increasing the revenues of our restaurant business, which is expected to include (1) growing the number of Company-owned restaurants in the Arby's system through acquisitions and development, effective national and local advertising initiatives, adding new menu offerings and implementing operational initiatives targeted at improving service levels and convenience, (2) the pending merger with Wendy's International, Inc. ("Wendy's") (See "Pending Merger with Wendy's International, Inc." below) and (3) the possibility of other restaurant brand acquisitions.

We also derive investment income principally from the investment of our excess cash. In December 2005 we invested $75.0 million in an account (the "Equities Account") which is managed by a management company (the "Management Company") formed by the Former Executives and a director, who is also our former Vice Chairman (collectively, the "Principals"). The Equities Account is invested principally in equity securities, including derivative instruments, of a limited number of publicly-traded companies. In addition, the Equities Account invests in market put options in order to lessen the impact of significant market downturns. Investment income (loss) from this account includes realized investment gains (losses) from marketable security transactions, realized and unrealized gains (losses) on derivative instruments, interest and dividends. The Equities Account, including restricted cash equivalents, had a fair value of $90.2 million as of June 29, 2008.

Our restaurant business has recently experienced trends in the following areas:

Revenues

· Significant decreases in general consumer confidence in the economy as well as decreases in many consumers' discretionary income caused by factors such as high fuel and food costs and a continuing softening of the economy, including the real estate market;

· Continuing price competition in the quick service restaurant ("QSR") industry, as evidenced by (1) value menu concepts, which offer comparatively lower prices on some menu items, (2) combination meal concepts, which offer a complete meal at an aggregate price lower than the price of the individual food and beverage items, (3) the use of coupons and other price discounting and (4) many recent product promotions focused on the lower prices of certain menu items;

· Competitive pressures due to extended hours of operation by many QSR competitors, including breakfast and late night hours;

· Competitive pressures from operators outside the QSR industry, such as the deli sections and in-store cafes of major grocery and other retail store chains, convenience stores and casual dining outlets offering prepared and take-out food purchases;

· Increased availability to consumers of new product choices, including (1) healthy products driven by a greater consumer awareness of nutritional issues,
(2) new products that tend to include larger portion sizes and more ingredients; (3) beverage programs which offer a wider selection of premium non-carbonated beverages, including coffee and tea products and (4) sandwiches with perceived higher levels of freshness, quality and customization; and

· Competitive pressures from an increasing number of franchise opportunities seeking to attract qualified franchisees.

· Higher commodity prices which have increased our food costs;

· Higher fuel costs which have caused increases in our utility costs and the cost of goods we purchase under distribution contracts that became effective in the second quarter of 2007;

· Federal, state and local legislative activity, such as minimum wage increases and mandated health and welfare benefits which have and are expected to continue to result in increased wages and related fringe benefits, including health care and other insurance costs; and

· Legal or regulatory activity related to nutritional content or menu labeling which could result in increased costs.

· Increased competition among QSR competitors and other businesses for available development sites, higher development costs associated with those sites and higher borrowing costs in the lending markets typically used to finance new unit development and remodels.

We experience the effects of these trends directly to the extent they affect the operations of our Company-owned restaurants and indirectly to the extent they affect sales at our franchised locations and, accordingly, the royalties and franchise fees we receive from them.

Pending Merger with Wendy's International, Inc.

On April 23, 2008, we entered into a definitive merger agreement with Wendy's for an all stock transaction in which Wendy's shareholders will receive a fixed ratio of 4.25 shares of our Class A Common Stock for each share of Wendy's common stock they own and in which Wendy's would become a wholly-owned subsidiary of Triarc. Wendy's stock options and other equity awards will generally convert upon completion of the merger into stock options and equity awards with respect to our Class A Common Stock, after giving effect to the exchange ratio. Under the agreement, our stockholders will be asked to approve the conversion of each share of our Class B Common Stock, Series 1, into one share of our Class A Common Stock, resulting in a post-merger company with a single class of common stock ("Wendy's/Arby's Common Stock"). Existing shares of Triarc Class A Common Stock will remain outstanding as shares of Wendy's/Arby's Common Stock. Wendy's/Arby's Common Stock is expected to be quoted on the New York Stock Exchange under the symbol "WEN."

In the merger, approximately 377,000,000 shares of Wendy's/Arby's Common Stock will be issued to Wendy's shareholders. Based on the number of outstanding shares of Triarc Class A and Triarc Class B Common Stock, and the number of outstanding Wendy's common shares, Wendy's shareholders would hold approximately 81%, in the aggregate, of the outstanding Wendy's/Arby's Common Stock following completion of the merger.

The transaction is subject to regulatory approvals, customary closing conditions and the approval of both Wendy's shareholders and our stockholders. The transaction is expected to close in the second half of 2008. As of June 29, 2008 our deferred costs related to the merger were $13.4 million and are included in "Deferred costs and other assets." There can be no assurance that shareholder, stockholder and other approvals will be obtained or that the merger will be consummated.

The Deerfield Sale

The Deerfield Sale resulted in non-cash proceeds aggregating $134.6 million consisting of 9,629,368 shares of convertible preferred stock of the REIT with a then estimated fair value of $88.4 million and $48.0 million principal amount of Series A Senior Secured Notes of a subsidiary of the REIT due in December 2012 (the "REIT Notes") with a then estimated fair value of $46.2 million. We also retained ownership of 205,642 common shares in the REIT as part of a pro rata distribution to the members of Deerfield prior to the Deerfield Sale. The Deerfield Sale resulted in a pretax gain of approximately $40.2 million which was recorded in the fourth quarter of 2007.

The REIT Notes bear interest at the three-month London InterBank Offered Rate ("LIBOR") (2.69% at June 29, 2008) plus 5% through December 31, 2009, increasing 0.5% each quarter from January 1, 2010 through June 30, 2011 and 0.25% each quarter from July 1, 2011 through their maturity. The REIT Notes are secured by certain equity interests of the REIT and certain of its subsidiaries. The $1.8 million original imputed discount on the REIT Notes is being accreted to "Other income (expense), net" using the interest rate method. The REIT Notes, net of unamortized discount, are reflected as "Notes receivable from related party".

Other than Temporary Losses and Equity in Losses of the REIT

On March 18, 2008, in response to unanticipated credit and liquidity events in 2008, the REIT announced that it was repositioning its investment portfolio to focus on agency-only residential mortgage-backed securities and away from its principal investing segment to its asset management segment with its fee-based revenue streams. In addition, it stated that during the first quarter of 2008, its portfolio was adversely impacted by further deterioration of the global credit markets and, as a result, it sold $2.8 billion of its agency and $1.3 billion of it AAA-rated non-agency mortgage-backed securities and significantly reduced the net notional amount of interest rate swaps used to hedge a portion of its mortgage-backed securities by $4.2 billion, all at a net after-tax loss of $294.3 million to the REIT.

Based on the events discussed above and their negative effect on the market price of the REIT common stock, we concluded that the fair value and, therefore, the carrying value of our investment in the 9,629,368 common shares, which were received upon the conversion of the convertible preferred stock as of March 11, 2008 (as discussed below), as well as the 205,642 common shares which were distributed to us in connection with the Deerfield Sale, were impaired. As a result, as of March 11, 2008, we recorded an other than temporary loss which is included in "Investment income (loss), net," for the six months ended June 29, 2008 of $67.6 million (without tax benefit as discussed below) which includes $11.1 million of pre-tax unrealized holding losses previously recorded as of December 30, 2007 and included in "Accumulated other comprehensive income
(loss)", a component of stockholder's equity. These common shares were considered available-for-sale securities due to the limited period they were to be held as of March 11, 2008 (the "Determination Date") before the dividend distribution of the shares to our stockholders on April 4, 2008 (as discussed below).

Additionally, from December 31, 2007 through the Determination Date, we recorded approximately $0.8 million of equity in net losses of the REIT which are included in "Other income (expense), net" for the six months ended June 29, 2008 related to our investment in the 205,642 common shares of the REIT discussed above which were accounted for on the equity method through the Determination Date.

The dislocation in the mortgage sector and current weakness in the broader financial market has adversely impacted, and may continue to adversely impact, the REIT's cash flows. Nonetheless, we received both quarterly interest payments on the REIT Notes which were due through June 30, 2008 on a timely basis. As of June 29, 2008, based on information available to us, we believe the principal amount of the REIT Notes is fully collectible. See further discussion below in "Liquidity and Capital Resources-The Deerfield Sale."

Conversion of Convertible Preferred Stock and Dividend of REIT Common Stock

On March 11, 2008, DFR stockholders approved the one-for-one conversion of all its outstanding convertible preferred stock into DFR common stock which converted the 9,629,368 preferred shares we held into a like number of shares of common stock. On March 11, 2008, our Board of Directors approved the distribution of our 9,835,010 shares of DFR common stock, which also included the 205,642 common shares of the REIT discussed above, to our stockholders. The dividend which was valued at $14.5 million was paid on April 4, 2008 to holders of record of our class A common stock (the "Class A Common Stock") and our class B common stock (the "Class B Common Stock") on March 29, 2008 (the "Record Date"). We also recorded an additional impairment charge from March 11, 2008 through the Record Date of $0.5 million. As a result of the dividend, the income tax loss that resulted from the decline in value of our investment of $68.1 million is not deductible for income tax purposes and no income tax benefit was recorded related to this loss.

Presentation of Financial Information

We report on a fiscal year consisting of 52 or 53 weeks ending on the Sunday closest to December 31. Our second quarter of fiscal 2007 commenced on April 2, 2007 and ended on July 1, 2007 (the "three months ended July 1, 2007" or the "2007 second quarter"). Our second quarter of fiscal 2008 commenced on March 31, 2008 and ended on June 29, 2008 (the "three months ended June 29, 2008" or the "2008 second quarter"). Our first half of fiscal 2007 commenced on January 1, 2007 and ended on July 1 2007 (the "six months ended July 1, 2007" or the "2007 first half"). Our first half of fiscal 2008 commenced on December 31, 2007 and ended on June 29, 2008 (the "six months ended June 29, 2008" or the "2008 first half"). Each quarter contained 13 weeks and each half contained 26 weeks. Our 2007 second quarter and first half included the calendar basis reported results of Deerfield. The difference in reporting basis is not material to our condensed consolidated financials statements. With the exception of Deerfield, all references to years, halves and quarters relate to fiscal periods rather than calendar periods.

Results of Operations

Three Months Ended June 29, 2008 Compared with Three Months Ended July 1, 2007

Presented below is a table that summarizes our results of operations and
compares the amount and percent of the change between the 2007 second quarter
and the 2008 second quarter. Certain percentage changes between these quarters
are considered not measurable or not meaningful ("n/m").

                                                    Three Months Ended
                                               July 1,              June 29,                     Change
                                                 2007                 2008               Amount          Percent
                                                     (In Millions Except Restaurant Count and Percents)
Revenues:
Sales                                      $          278.6       $       291.3       $        12.7         4.6%
Franchise revenues                                     21.4                21.7                 0.3         1.4%
Asset management and related fees                      16.8                   -               (16.8 )     (100.0)%
                                                      316.8               313.0                (3.8 )      (1.2)%
Costs and expenses:
Cost of sales                                         204.9               220.5                15.6         7.6%
Cost of services                                        6.3                   -                (6.3 )     (100.0)%
Advertising                                            20.7                24.5                 3.8        18.4%
General and administrative                             56.0                42.1               (13.9 )     (24.8)%
Depreciation and amortization                          18.4                17.7                (0.7 )      (3.8)%
Facilities relocation and corporate
restructuring                                          79.0                   -               (79.0 )     (100.0)%
                                                      385.3               304.8               (80.5 )     (20.9)%
Operating (loss) profit                               (68.5 )               8.2                76.7         n/m
Interest expense                                      (15.3 )             (13.9 )               1.4         9.2%
Investment income (loss), net                          17.6                (9.2 )             (26.8 )       n/m
Other income, net                                       3.2                 1.2                (2.0 )     (62.5)%
Loss from continuing operations before
benefit from income taxes and minority
interests                                             (63.0 )             (13.7 )              49.3        78.3%
Benefit from income taxes                              36.0                 6.8               (29.2 )     (81.1)%
Minority interests in income of
consolidated subsidiaries                              (1.0 )                 -                 1.0        100.0%
Net loss                                   $          (28.0 )     $        (6.9 )     $        21.1        75.4%

Certain items as a percentage of sales:
Cost of sales                                     73.5%                 75.7%
Gross margin (as defined in "Cost of
Sales")                                           26.5%                 24.3%
Advertising                                        7.4%                 8.4%
Same-store sales (Fifteen Month Method):
Company-owned restaurants                         (1.7)%               (3.7)%
Franchised restaurants                             1.2%                (3.0)%
Systemwide                                         0.3%                (3.3)%

Restaurant count:                           Company-Owned          Franchised          Systemwide
Restaurant count at July 1, 2007                      1,081               2,540               3,621
Opened since July 1, 2007                                53                  99                 152
Closed since July 1, 2007                               (14 )               (40 )               (54 )
Net purchased from (sold by) franchisees
since July 1, 2007                                       49                 (49 )                 -
Restaurant count at June 29, 2008                     1,169               2,550               3,719

Sales

Our sales, which were generated entirely from our Company-owned restaurants, increased $12.7 million, or 4.6%, to $291.3 million for the three months ended June 29, 2008 from $278.6 million for the three months ended July 1, 2007, primarily due to a $22.7 million increase in sales from the 88 net Company-owned restaurants we added since July 1, 2007. Of the 49 net restaurants we acquired from franchisees, 41 are in the California market (the "California Restaurants") and were purchased from a franchisee on January 14, 2008 (the "California Restaurant Acquisition"). The California Restaurants generated approximately $9.0 million of sales for us during the 2008 second quarter. The increase in sales due to the number of Company-owned restaurants added since July 1, 2007 was partially offset by a $10.0 million decrease in sales due to a 3.7% decrease in same-store sales during the 2008 second quarter (a 3.9% decrease under the Twelve Month Method). Same store sales of our Company-owned restaurants decreased principally due to lower sales volume from a decline in customer traffic as a result of (1) decreases in many consumers' discretionary income due to factors such as high fuel and food prices and the continuing softening of the economy, (2) increasing competitive price discounting and (3) less effective marketing programs in the 2008 second quarter compared with the 2007 second quarter at driving sales growth. These negative factors were partially offset by the effect of selective price increases that were implemented subsequent to the 2007 second quarter.

Franchise Revenues

Our franchise revenues, which were generated entirely from the franchised restaurants, increased $0.3 million, or 1.4%, to $21.7 million for the three months ended June 29, 2008 from $21.4 million for the three months ended July 1, 2007. Excluding $0.6 million of rental income from properties leased to franchisees that is included in franchise revenues for the three months ended June 29, 2008, franchise revenues decreased $0.3 million reflecting a $0.6 million decrease due to a 3.0% decrease in same-store sales of the franchised restaurants in the 2008 second quarter (a 3.0% decrease under the Twelve Month Method), partially offset by higher royalties of $0.5 million from the net franchised restaurants opened since July 1, 2007 as detailed in the table above (excluding approximately $0.3 million as a result of the California Restaurant Acquisition). In addition, franchise and related fees decreased $0.2 million compared to the prior year. The decrease in same-store sales of the franchised restaurants in the 2008 second quarter was due primarily to the same factors discussed above under "Sales."

Asset Management and Related Fees

As a result of the Deerfield Sale on December 21, 2007, we no longer have any revenue from asset management and related fees.

Cost of Sales

Our cost of sales resulted entirely from the Company-owned restaurants. Cost of sales increased and resulted in a decrease in gross margin to 24.3%, for the three months ended June 29, 2008 from a gross margin of 26.5%, for the three months ended July 1, 2007. We define gross margin as the difference between sales and cost of sales divided by sales. Gross margin was negatively impacted by increased (1) labor costs due to the Federal and state minimum wage increases subsequent to the second quarter of 2007, (2) utilities costs as a result of higher fuel costs and increased energy usage due to new equipment related to our major third quarter 2007 new product offering and (3) costs under new distribution contracts that became effective late in the second quarter of 2007 which also include continuing increases from higher fuel costs. In addition to these increased costs, gross margin was negatively impacted by the de-leveraging effect of our same-store sales decreases on our fixed and semi-variable costs. These negative factors were partially offset by decreases in the food cost component of gross margin due to differences in the menu mixes of our 2008 second quarter and 2007 second quarter marketing programs. These food cost decreases, however, were partially offset by increases in the cost of beef and other menu items, a portion of which relates to the expiration of favorable commodity contracts. Further, the 2008 second quarter gross margin was positively impacted by the selective price increases that were implemented subsequent to the 2007 second quarter.

Cost of Services

As a result of the Deerfield Sale, we no longer incur any cost of services. For the three months ended July 1, 2007, our cost of services resulted entirely from the management of CDOs and Funds by Deerfield.

Advertising

Our advertising consists of local and national media, direct mail and outdoor advertising as well as point of sale materials and local restaurant marketing. These expenses increased to 8.4% of sales for the three months ended June 29, 2008 from 7.4% of sales for the three months ended July 1, 2007 primarily due to (1) the timing of some of our print media which occurred in the second quarter of 2008 but in the first or third quarter of 2007, (2) additional advertising costs related to markets in which we have added new restaurants, . . .