This "Management's Discussion and Analysis of Financial Condition and Results of Operations" of Wendy's/Arby's Group, Inc ("Wendy's/Arby's" or "Wendy's/Arby's Group" and, together with its subsidiaries, the "Company" or "we") should be read in conjunction with our accompanying unaudited 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 28, 2008 (the "Form 10-K"). There have been no significant changes as of September 27, 2009 to the application of our critical accounting policies, contractual obligations (except as described below) or guarantees and commitments as described in Item 7 of our Form 10-K. 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." You should consider our forward-looking statements in light of our unaudited condensed consolidated financial statements, related notes, and other financial information appearing elsewhere in this report, our Form 10-K and our other filings with the Securities and Exchange Commission.

Introduction and Executive Overview

Our Business

Wendy's/Arby's is the indirect parent company of Wendy's International, Inc. ("Wendy's") and Arby's Restaurant Group, Inc. ("ARG"), which are the owners and franchisors of the Wendy'sŪ and Arby'sŪ restaurant systems, respectively. We currently manage and internally report our operations as two business segments:
the operation and franchising of Wendy's restaurants, including its wholesale bakery operations, and the operation and franchising of Arby's restaurants. As of September 27, 2009, the Wendy's restaurant system was comprised of 6,608 restaurants, of which 1,395 were owned and operated by the Company. As of September 27, 2009, the Arby's restaurant system was comprised of 3,739 restaurants, of which 1,165 were owned and operated by the Company. All 2,560 Wendy's and Arby's Company-owned restaurants are located principally in the United States and to a lesser extent in Canada (the "North America Restaurants").

Restaurant business revenues for the 2009 first nine months include: (1) $2,314.2 million of revenues from Company-owned restaurants, (2) $81.3 million from the sale of bakery items and kid's meal promotion items to our franchisees and others, (3) $263.1 million from royalty income from franchisees and (4) $21.3 million of other franchise related revenue. Our revenues increased significantly in the 2009 first nine months due to the merger with Wendy's (the "Wendy's Merger"). The Wendy's royalty rate was 4.0% for the nine months ended September 27, 2009. While approximately 80% of our existing Arby's royalty agreements and substantially all of our new domestic royalty agreements provide for royalties of 4.0% of franchise revenues, our average Arby's royalty rate was 3.6% for the nine months ended September 27, 2009.

Our restaurant businesses have recently experienced trends in the following areas:

Revenues

· Industry-wide declines in same-store sales of all segments of the restaurant industry, including quick service restaurants ("QSR");

· Continued lack of general consumer confidence in the economy and the effect of decreases in many consumers' discretionary income caused by factors such as
(1) volatility in the financial markets and recessionary economic conditions, including high unemployment levels, (2) a significant decline in the real estate market, although that market has shown some improvement in recent months, (3) fluctuations in fuel costs, with some stabilization in recent months and (4) moderate food cost inflation through the first half of 2009 followed by decreases in most commodity costs;

· Continued and increasingly aggressive price competition in the QSR industry, as evidenced by (1) value menu concepts, which offer comparatively lower prices on some menu items, (2) the use of coupons and other price discounting,
(3) product promotions focused on lower prices of certain menu items, including signature items, and (4) combination meal concepts, which offer a complete meal at an aggregate price lower than the price of individual food and beverage 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 take-out food;

· Increased availability to consumers of product choices, including (1) healthy products driven by a greater consumer awareness of nutritional issues, (2) products that tend to offer a variety of portion sizes and different types of 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.

Cost of Sales

· Decreasing commodity prices which have reduced our food costs in the second half of 2009;

· Relatively stabilized fuel costs, in recent months, which have contributed to decreases in utility, distribution and freight costs;

· Federal, state and local legislative activity, such as minimum wage increases and mandated health and welfare benefits which is expected to continue to increase 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 results in increased operating costs.

· A significant portion of both our Wendy's and Arby's restaurants are franchised and, as a result, we receive revenue in the form of royalties (which are generally based on a percentage of sales at franchised restaurants), rent and other fees from franchisees. Arby's franchisee related accounts receivable and estimated reserves for uncollectibility have increased, and may continue to increase, as a result of the deteriorating financial condition of some of our franchisees. The deteriorating financial condition of these franchisees also affects their ability to make required contributions to national and local advertising programs;

· Weakness in the overall credit markets, including higher borrowing costs in the lending markets typically used to finance new unit development and remodels. These tightened credit conditions and economic pressures are negatively impacting franchisees, including the ability of some franchisees to meet their commitments under development, rental and franchise license agreements; and

· Continued competition for development sites among QSR competitors and other businesses.

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

Business Highlights

We believe there are significant opportunities to grow our business, strengthen our competitive position and enhance our profitability through the execution of the following strategies:

· Revitalizing the Wendy's and Arby's brands by creating innovative new menu items, expanding our breakfast daypart at Wendy's, increasing Arby's customer traffic by targeting our "medium Arby's customers" and improving affordability at Arby's by expanding everyday value menu items;

· Continued improvement in Wendy's Company-owned restaurant profitability;

· Realizing cost savings related to the Wendy's/Arby's integration;

· Strategically growing our franchise base by leveraging our brands to expand in North America as well as into new international markets with dual branded Wendy's and Arby's franchised restaurants; and

· Acquisitions of other restaurant companies.

Key Business Measures

We track our results of operations and manage our business using the following key business measures:

· Same-Store Sales

We report Arby's North America Restaurants same-store sales commencing after a store has been open for fifteen continuous months. Wendy's North America Restaurants same-store sales are reported after a store has been open for at

least fifteen continuous months as of the beginning of the fiscal year. These methodologies are consistent with the metrics used by our management for internal reporting and analysis. Same-store sales exclude the impact of currency translation.

· Restaurant Margin

We define restaurant margin as sales from Company-owned restaurants (excluding sales of bakery items and kid's meal promotion items to franchisees) less cost of sales (excluding costs of bakery items and kid's meal promotion items), divided by sales from Company-owned restaurants (excluding sales of bakery items and kid's meal promotion items to franchisees). Restaurant margin is influenced by factors such as restaurant openings and closures, price increases, the effectiveness of our advertising and marketing initiatives, featured products, product mix, the level of our fixed and semi-variable costs, and fluctuations in food and labor costs.

Merger with Wendy's International, Inc.

On September 29, 2008, we completed the Wendy's Merger in an all-stock transaction in which Wendy's shareholders received 4.25 shares of Wendy's/Arby's Class A Common Stock for each share of Wendy's common stock owned. Our consolidated results of operations commencing September 29, 2008 include Wendy's results of operations.

Senior Notes

On June 23, 2009, Wendy's/Arby's Restaurants, LLC ("Wendy's/Arby's Restaurants"), a direct wholly-owned subsidiary of Wendy's/Arby's, issued $565.0 million principal amount of Senior Notes (the "Senior Notes"). The Senior Notes will mature on July 15, 2016 and accrue interest at 10.00% per annum, payable semi-annually on January 15 and July 15, with the first payment on January 15, 2010. The Senior Notes were issued at 97.533% of the principal amount, representing a yield to maturity of 10.50% and resulting in net proceeds paid to us of $551.1 million. The $13.9 million discount is being accreted and the related charge included in interest expense until the Senior Notes mature. The Senior Notes are fully and unconditionally guaranteed, jointly and severally, on an unsecured basis by certain direct and indirect domestic subsidiaries of Wendy's/Arby's Restaurants (collectively, the "Guarantors").

Deerfield

On December 21, 2007, we completed the sale (the "Deerfield sale") of our majority capital interest in Deerfield & Company LLC ("Deerfield"), our former subsidiary, to Deerfield Capital Corp. ("DFR") resulting in non-cash proceeds aggregating $134.6 million, consisting of 9.6 million shares of convertible preferred stock of DFR ("the DFR Preferred Stock") with a then estimated fair value of $88.4 million and $48.0 million principal amount of series A senior secured notes of DFR due in December 2012 (the "DFR Notes") with a then estimated fair value of $46.2 million. As discussed in the Form 10-K, we recorded a valuation allowance of $21.2 million during the fourth quarter of 2008 for these DFR Notes. We also owned an additional 0.2 million common shares in DFR.

The DFR Notes bear interest at the three-month LIBOR (0.28% at September 27, 2009) plus a factor, initially 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 DFR Notes are secured by certain equity interests of DFR and certain of its subsidiaries. As of September 27, 2009, there is no publicly available information from DFR, known economic trends or indications from the credit markets that we anticipate will affect the collectability of our DFR Notes.

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 9.6 million preferred shares we held into a like number of shares of common stock. During the first quarter of 2008, our Board of Directors approved the distribution of our 9.8 million shares of DFR common stock, which also included the 0.2 million common shares of DFR 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 and our then outstanding Class B common stock.

Related Party Transactions

Wendy's/Arby's has not entered into any transactions with related parties since the date of our last Form 10-Q except for the following agreement:

Supply Chain Relationship Agreement

During the 2009 fourth quarter, Wendy's and its franchisees entered into a purchasing co-op (the "Co-op") relationship agreement (the "Co-op Agreement"). The Co-op will manage food and related product purchases and distribution services for the Wendy's system in the United States and Canada. The Co-op's supply chain management will ensure continuity of supply and provide consolidated purchasing efficiencies while monitoring possible obsolete inventory. The system's current purchasing function is being performed and paid for by Wendy's. In order to facilitate the orderly transition of the current purchasing function, Wendy's will transfer certain contracts and certain current Wendy's purchasing employees to the Co-op in January 2010. Pursuant to the terms of the Co-op Agreement, Wendy's is required to pay $15.5 million to the Co-op over an 18 month period in order to provide funding for start-up costs and cash reserves, as well as pay for services provided by the Co-op. Future operations of the Co-op will be paid by all members of the Co-op. The Co-op, as an independent organization, is not expected to be consolidated with the Company's financial statements. Wendy's expects to expense all required payments under the Co-op Agreement in the fourth quarter of 2009.

Presentation of Financial Information

We report on a fiscal year consisting of 52 or 53 weeks ending on the Sunday closest to December 31. All quarters presented contain 13 weeks. Because our 2009 fiscal year ending on January 3, 2010 will contain 53 weeks, our fourth quarter of 2009 will contain 14 weeks. All references to years and quarters relate to fiscal periods rather than calendar periods.

Results of Operations

Three Months Ended September 27, 2009 Compared with Three Months Ended September
28, 2008


                                                                 Three Months Ended
                                                      September        September         Total
                                                       27, 2009         28, 2008        Change
                                                                    (In Millions)
Revenues:
Sales                                                $      806.1     $      287.6     $   518.5
Franchise revenues                                           97.1             22.8          74.3
                                                            903.2            310.4         592.8
Costs and expenses:
Cost of sales                                               684.1            239.9         444.2
General and administrative                                   97.9             36.1          61.8
Depreciation and amortization                                47.1             16.5          30.6
Impairment of long-lived assets                              15.5             14.2           1.3
Facilities relocation and corporate restructuring             1.7             (0.1 )         1.8
                                                            846.3            306.6         539.7
Operating profit                                             56.9              3.8          53.1
Interest expense                                            (36.5 )          (13.6 )       (22.9 )
Investment income, net                                        0.7              6.7          (6.0 )
Other than temporary losses on investments                      -             (8.1 )         8.1
Other income, net                                             1.3              0.8           0.5
Income (loss) from continuing operations before
income taxes                                                 22.4            (10.4 )        32.8
Provision for income taxes                                   (8.1 )           (2.9 )        (5.2 )
Income (loss) from continuing operations                     14.3            (13.3 )        27.6
Income from discontinued operations, net of income
taxes                                                         0.4              1.2          (0.8 )
Net income (loss)                                    $       14.7     $      (12.1 )   $    26.8

Restaurant statistics:
Wendy's same-store sales:  Third Quarter 2009
North America
Company-owned restaurants        (1.4)%
North America franchised
restaurants                       0.4%
North America systemwide         (0.1)%

                                                     Third
Arby's same-store sales:   Third Quarter 2009     Quarter 2008
North America
Company-owned restaurants        (6.5)%              (7.2)%
North America franchised
restaurants                     (10.2)%              (4.3)%
North America systemwide         (9.0)%              (5.1)%

Restaurant margin:
                           Third Quarter 2009
Wendy's                          16.5%

                                                     Third
                           Third Quarter 2009     Quarter 2008
Arby's                           12.1%               16.6%

Restaurant count:            Company-owned         Franchised      Systemwide
Wendy's restaurant count:
Restaurant count at June
28, 2009                                1,395            5,213           6,608
Opened                                      1               13              14
Closed                                    (1)             (13)            (14)
Restaurant count at
September 27, 2009                      1,395            5,213           6,608

Arby's restaurant count:
Restaurant count at June
28, 2009                                1,170            2,575           3,745
Opened                                      2               12              14
Closed                                    (7)             (13)            (20)
Restaurant count at
September 27, 2009                      1,165            2,574           3,739
Total Wendy's/Arby's
restaurant count at
September 27, 2009                      2,560            7,787          10,347

Sales

Our sales, which were generated primarily from our Company-owned restaurants, increased $518.5 million to $806.1 million for the three months ended September 27, 2009 from $287.6 million for the three months ended September 28, 2008. The increase in sales was due to the Wendy's Merger which added 1,395 Company-owned restaurants as of September 27, 2009 that generated $536.8 million in sales during the 2009 third quarter. Wendy's North America Company-owned same-store sales, excluding the impact of fewer restaurants serving breakfast in the third quarter of 2009 as compared to the third quarter of 2008, would have increased approximately 0.1%. Excluding the effect of the Wendy's Merger, sales decreased $18.3 million, which is attributable to the 6.5% decrease in same-store sales of our Arby's North America Company-owned restaurants stemming from lower customer traffic primarily impacted by (1) the previously described industry-wide restaurant trends, negative economic trends and competitive pressures in "Introduction and Executive Overview - Our Business" and (2) a decrease in the number of national advertising campaigns. These negative factors were partially offset by aggressive Arby's promotions which had a positive impact on same-store sales during the 2009 third quarter as compared to the 2008 third quarter.

Franchise Revenues

Total franchise revenues, which were generated entirely from franchised restaurants, increased $74.3 million to $97.1 million for the three months ended September 27, 2009 from $22.8 million for the three months ended September 28, 2008. The increase in franchise revenue was due to the Wendy's Merger which added 5,213 franchise restaurants as of September 27, 2009 to the Wendy's/Arby's restaurant system that generated $76.7 million in franchise revenue during the 2009 third quarter. Wendy's franchise store sales were not significantly impacted by changes in the number of restaurants serving breakfast in the third quarter of 2009. Excluding the effect of the Wendy's Merger, franchise revenues decreased $2.4 million, which is attributable to the 10.2% decrease in same-store sales for Arby's North America franchised restaurants. Same-store sales of our Arby's North America franchise restaurants decreased primarily due to the same factors discussed above under "Sales." In addition, franchise restaurants were negatively affected by the impact of (1) less aggressive promotions in the third quarter of 2009 than at Company-owned restaurants and
(2) less national media advertising, which had a greater negative impact than on Company-owned restaurants as certain franchise markets do not participate in local advertising.

Restaurant Margin

Our consolidated restaurant margin decreased to 15.0% for the three months ended September 27, 2009 from the Arby's 16.6% for the three months ended September 28, 2008. The 2009 third quarter restaurant margin reflects the mix of the Wendy's restaurant margin of 16.5% and the Arby's restaurant margin of 12.1%. Wendy's restaurant margin for the third quarter of 2008 was 12.5%. The increase in the Wendy's margin is primarily attributable to improvements in commodity costs and in certain controllable costs primarily due to operational initiatives, combined with price increases in the latter part of the 2008 third quarter. The decrease in the Arby's margin was primarily attributable to (1) the effect of the decrease in Arby's same-store sales without comparable reductions in fixed and semi-variable costs and (2) the targeted product discounting of selected Arby's menu items. These negative factors were partially offset by improvements in the cost of commodities.

General and Administrative

Our general and administrative expenses increased $61.8 million to $97.9 million for the three months ended September 27, 2009 from $36.1 million for the three months ended September 28, 2008. The increase was primarily due to the Wendy's Merger which added $53.4 million of Wendy's-related general and administrative expenses. Excluding these Wendy's-related expenses, our general and administrative expenses increased $8.4 million principally due to (1) $3.3 million of integration costs related to the Wendy's Merger, (2) a $3.2 million increase in certain incentive compensation accruals due to stronger consolidated performance as compared to plan in the 2009 third quarter compared to weaker consolidated performance as compared to plan in the 2008 third quarter, (3) a $2.3 million increase in salaries and wages due to staffing and other expenses associated with the establishment of the shared services center in Atlanta, Georgia and (4) a $1.5 million increase in the allowance for doubtful accounts primarily associated with the collection of Arby's franchise receivables. These increases were partially offset by (1) a $1.4 million decrease in fees for professional and strategic services provided to us under the terms of a services agreement with a management company (the "Management Company") formed by our chairman, who is our former Chief Executive Officer, and our Vice Chairman, who is our former President and Chief Operating Officer, and a director, who is our former Vice Chairman and (2) a $1.2 million decrease in costs associated with our corporate aircraft.

Depreciation and Amortization

                                                                      Three Months Ended
                                                           September 27,
                                                                2009            September 28, 2008
                                                                        (In Millions)

Arby's restaurants, primarily properties                   $         14.3       $              15.9
Wendy's restaurants, primarily properties                            31.4                         -
Other                                                                 1.4                       0.6
                                                           $         47.1       $              16.5

Impairment of Long Lived Assets

                                                                      Three Months Ended
                                                           September 27,
                                                                2009            September 28, 2008
                                                                        (In Millions)

Arby's restaurants, primarily properties at
underperforming locations                                  $         15.2       $               4.6
Wendy's restaurants                                                   0.3                         -
General Corporate - aircraft                                            -                       9.6
                                                           $         15.5       $              14.2

Facilities Relocation and Corporate Restructuring

The expense for the three months ended September 27, 2009 represents Wendy's
merger-related severance costs incurred in the 2009 third quarter.

Interest Expense
. . .