Building on a Strong Foundation

to Deliver Shareholder Value

Wendy’s International, Inc.

1996 Shareholder Report

QUALITY IS OUR RECIPE

Wendy’s restaurants serve the best

hamburgers in the busi-

ness, made with fresh

beef and a choice of toppings, plus

fries, Frostys, soft drinks

and a variety of fresh, healthy

food — salads,

grilled chicken sand-

wiches, baked potatoes and chili.

Tim Hortons restaurants feature

great coffee and a full line

of delicious baked goods — donuts,

bagels, muffins, pies,

croissants, cookies and

cakes — as well as

soups and sandwiches.

Our mission is to deliver

total quality with great

food, excellent service, competitive

prices and a sparkling atmosphere

for each customer who visits our

Wendy’s and Tim

Hortons restaurants.

Wendy’s is the third-largest quick-service restaurant chain in the world

featuring hamburgers, with 4,933 restaurants open in the United States,

Canada and 32 other countries and territories — about one quarter are

company operated and the remainder are franchised. Wendy’s was founded

by Dave Thomas in 1969. Tim Hortons is the largest coffee and fresh baked

goods restaurant chain in Canada with 1,384 restaurants. Founded in 1964,

Tim Hortons merged with Wendy’s International, Inc. in December 1995.

A B O U T W E N D Y ’ S I N T E R N A T I O N A L , I N C .

Operations (In millions) 1996 1995 1994 1993 1992(1)

Systemwide salesWendy’s $ 4,784 4,495 4,227 3,924 3,613Tim Hortons $ 646 541 440 377 341

Retail sales $ 1,567 1,462 1,366 1,289 1,207 Revenues $ 1,897 1,746 1,592 1,482 1,381Income before income taxes $ 255 165 150 118 104 Net income $ 156 110 97 81 66 Capital expenditures $ 307 218 172 137 140

Financial Position (In millions)

Total assets $ 1,781 1,509 1,215 1,100 1,013Property and equipment, net $ 1,208 1,007 865 787 745 Long-term obligations $ 242 337 145 201 234 Shareholders’ equity $ 1,057 819 702 624 553

Per Share Data `

Net income — fully diluted $ 1.19 .88 .79 .67 .56 Dividends $ .24 .24 .24 .24 .24Shareholders’ equity $ 8.16 6.81 5.94 5.33 4.80 Market price at year end $ 20.88 21.25 14.38 17.38 12.63

Ratios

Domestic company operating profit margin % 13.3 15.1 15.7 14.9 14.2

Pretax profit margin % 13.4 9.5 9.4 8.0 7.5Return on average assets(2) % 17.6 13.6 15.0 13.4 13.1Return on average equity % 16.6 14.5 14.7 13.8 12.7 Long-term debt to equity % 23 41 21 32 42 Debt to total capitalization % 19 29 17 24 30 Price to earnings % 18 24 18 26 23

Restaurant Data

Domestic Wendy’s open at year endCompany 1,191 1,200 1,168 1,132 1,117 Franchise 3,178 2,997 2,826 2,657 2,490

International Wendy’s open at year endCompany 124 111 96 92 91 Franchise 440 359 321 287 264

Total Wendy’s 4,933 4,667 4,411 4,168 3,962 Tim Hortons 1,384 1,197 943 721 628 Total Units 6,317 5,864 5,354 4,889 4,590 Average net sales per domestic

Wendy’s restaurant (In thousands)Company $ 1,049 1,014 1,001 978 924 Franchise $ 978 974 982 960 907 Total domestic $ 998 986 988 966 912

Average sales per Tim Hortons standard restaurant (In thousands) $ 668 641 623 596 607

Other Data

Primary shares (In thousands) 131,290 122,041 120,588 119,247 117,864 Registered shareholders at year end 82,000 63,000 57,000 56,000 56,000Number of employees at year end 49,000 47,000 45,000 44,000 43,000

(1) Fiscal year 1992 includes 53 weeks. (2) Return on average assets is computed using income before income taxes and interest charges.

Six-Year Selected Financial Data

1991

3,224308

1,0391,187

795286

966682240504

.45

.244.439.25

13.36.7

11.610.7

483221

1,0802,408

82234

3,804546

4,350

874843852

621

115,83653,00040,000

We have introduced Tim

Hortons in select U.S. markets

(Buffalo, Minneapolis andDetroit) and plan to expandduring 1997, primarily in nor-thern U.S. cities near Canadaplus Columbus, Ohio, andCharleston, W.Va.

During 1996, Wendy’s ac-

quired (or agreed to acquire)

about 120 restaurants fromRoy Rogers, Hardee’s and Rax, and will convert them toWendy’s and Tim Hortons.

The Company continues to

innovate with new productssuch as the Spicy ChickenSandwich, Crispy ChickenNuggets and Fresh StuffedPitas at Wendy’s... and bagels at Tim Hortons.

Wendy’s International, Inc. has

a broad platform for growth

with its domestic Wendy’srestaurant business as the foun-dation. The Company expectsincreasing contributions fromits international Wendy’s divi-sion, Tim Hortons in Canadaand Tim Hortons in theUnited States.

The Company features two

very strong brands — Wendy’sand Tim Hortons — as well as a solid financial condition,excellent management andpeople resources, and anextremely effective marketingprogram.

Wendy’s is a strong brand

with superior rankings withinthe quick-service restaurantcategory. Consumer ratings ofattributes such as “Quality”and “Overall Satisfaction” atWendy’s remain substantiallyhigher than our competitors.

Wendy’s aggressive yet

responsible restaurant devel-

opment continues. Over thepast five years, the Companyhas opened more than 1,400new Wendy’s and now operates4,933 Wendy’s worldwide —4,369 in the United States, 229 in Canada, 67 in Japan and the remainder in 31 othercountries.

A total of 463 new Wendy’s

restaurants either opened orwere under construction dur-ing 1996, a 9.5 percent increasefrom the 423 units in 1995. Of the 463 units, 137 wereinternational. The Companyexpects to develop at least 310 domestic and 150 interna-tional restaurants in 1997.

We expect to continue

Tim Hortons’ aggressive

development in Canada, featuring the flexibility of multiple building types — full-size restaurants, satellitelocations, drive-through-onlylocations, combination units,kiosks and carts. Our goal is to have 2,000 units open inCanada by the year 2000.

Tim Hortons’ systemwide

sales have grown in excess of20 percent compounded overthe past four years and samestore sales increased nearly fivepercent in 1996. Tim Hortonsgenerates income from threeareas — franchise royalties,sales of dry goods to fran-chisees and rental income.

12.3% Wendy’s

18.3% Smaller Chains

69.4% Other MajorChains*

Chain Sales Share of U.S. Quick-Service Hamburger Market

*McDonald’s, Burger King and Hardee’s

9293949596

3,95

4

91

3,53

2

4,30

1 4,66

7 5,03

6 5,43

0

Total SystemwideSales($ millions)

9293949596

1,20

7

91

1,03

9

1,28

9

1,36

6 1,46

2 1,56

7

Retail Sales($ millions)

I N V E S T O R I N F O R M A T I O N A T A G L A N C E

1 9 9 6 H A M B U R G E R C A T E G O R Y

Wendy’s market share grew 1.2 sharepoints from 1991 to 1996.

Source: Consumer Reports on Eating Share Trends (CREST)

9293949596

104

91

79

118 15

0 165

255

Pretax Income($ millions)

9293949596

66

91

52

81

97 110

156

Net Income($ millions)

9293949596

42

91

48

32

21

41

23

Long-Term Debtto Equity(percent)

9293949596

553

91

504

624 70

2

819

1,05

7

Shareholders’Equity($ millions)

Financial Highlights

1996 1995 1994

Systemwide SalesWendy’s $ 4,784,077,000 $ 4,494,844,000 $ 4,227,212,000Tim Hortons $ 645,956,000 $ 541,266,000 $ 440,350,000

Number of Restaurants Wendy’s 4,933 4,667 4,411Tim Hortons 1,384 1,197 943

Average Unit SalesWendy’s $ 998,000 $ 986,000 $ 988,000Tim Hortons* $ 668,000 $ 641,000 $ 623,000

Revenues $ 1,897,144,000 $ 1,746,280,000 $ 1,591,587,000Net Income $ 155,948,000 $ 110,070,000 $ 97,432,000Shareholders’ Equity $ 1,056,772,000 $ 818,779,000 $ 701,927,000

Per Share $ 8.16 $ 6.81 $ 5.94Long-Term Debt-to-Equity Ratio 23% 41% 21%

* Standard Units

Average sales per Wendy’s domestic company-operated restaurant

have increased for 10 consecutive years to $1.05 million in 1996.

Average sales per Tim Hortons standard restaurant grew from

$641,000 in 1995 to $668,000 in 1996.

Pretax profits and pretax profit margins have increased each year

since 1991.

Net income increased from $52 million, or 45 cents per share,

in 1991 to $156 million, or $1.19 per share, in 1996.

Wendy’s International, Inc. has ample financial resources to continue

its growth plan:

● $224 million in cash and short-term investments

● $200 million available from revolving credit facilities

● $190 million in cash flow from operations

● A debt-to-equity ratio of 23 percent

Shareholders’ equity has increased from $504 million in 1991 to

$1.06 billion, or $8.16 per share, at the end of 1996.

Wendy’s has paid a dividend for 75 consecutive quarters.

The Company’s five-year compounded total return to shareholders

has been 17.5 percent.

Letter to Shareholders 2-5 An Evolving Paradigm for Growth 2-3 Remembering Jim Near 4-5Domestic Wendy’s Operations 6-10 International Wendy’s Operations 11-13 Tim Hortons 14-17

Corporate Responsibility 18-19 Management’s Discussion and Analysis 20-24 1996 Financial Results, Notes to Financial Statements 25-36 Management’s Statement of Responsibility,

Report of Independent Accountants 37 Board of Directors, Executive Management, Officers 38-39Corporate and Shareholder Information 40

1

T A B L E O F C O N T E N T S

As we prepare for 1997 and beyond, I am excited about our Company’senormous opportunities. With $5.4billion in systemwide sales during1996 and a total of 6,501 locationsopen or under construction, we areone of the largest and most successfulrestaurant chains in the world. We are extremely well positioned with an outstanding organization, two superiorbrands in Wendy’s and Tim Hortons,and a solid, long-term strategy.

Every sign points toward continuedgrowth for our Company, includingour resiliency during 1996. We over-came severe weather and competitors’deep discounting in the first part ofthe year to post record results in thekey measures of performance — aver-age unit sales, retail sales, revenues,pretax income and net income.

Yet, 1996 was a bittersweet year due to the unexpected death of our dearfriend and Chairman Jim Near.

Fortunately, Jim had the vision to helpus build a deep and talented manage-ment group at Wendy’s over the pastseveral years.

Our disciplined approach paid off

Severe winter weather throughoutmuch of the United States negativelyimpacted our sales during the first sev-eral months of the year, but we slowlyrebounded and gained momentum.We began posting stronger sales duringthe summer months by adhering toour disciplined approach to the busi-ness, staying focused on operationsand ensuring the health of our system.

While our competitors resorted todeep discounting and other extremetactics, we focused on the things thatmake our Company unique — highquality food, a predictable and familiar

Dear Fellow Shareholder:

Wendy’s is evolving from a company that has traditionally been

driven by its domestic business to one that has multiple growth

engines. As our U.S. Wendy’s business nears 4,500 restaurants,

we are driving this evolution to maintain superior sales and

earnings growth.

The strategy is to broaden our foundation and build for a pros-

perous future. This evolution began more than three years ago

when we recruited John Wright as President of our International

Division. John’s mission has been to accelerate Wendy’s growth

outside of the U.S. and Canada and his team is making excellent

progress. We added to the process in late 1995 when we

acquired the Canadian restaurant giant Tim Hortons. And, we

added to our platform again during 1996 by beginning to

expand Tim Hortons into selected U.S. markets.

While the domestic Wendy’s business is our foundation and

most significant contributor to sales and earnings, our other

businesses will become more important in the next few years.

Historically, the Company’s growth was driven primarily by new

unit development in the U.S., average unit volume expansion

and margin expansion. In 1997, we expect improvements in all

of these areas and we anticipate increasing contributions from

our international division, Tim Hortons in Canada and Tim

Hortons in the U.S.

In addition, we are in a great position to take advantage of real

estate opportunities, such as our recent acquisitions of restau-

rants from Hardee’s (44 units), Roy Rogers (40) and Rax (31). One

reason is that we are underpenetrated in nearly every market in

which we operate. We also have multiple options for various

Gordon F. Teter Chairman, CEO and President

2

A N E V O L V I N G P A R A D I G M F O R G R O W T H

experience at every Wendy’s and TimHortons restaurant, great facilities andgreat people. In the final analysis, wemanaged to overcome a bump in theroad. We regained momentum andnow we are focused on the excitingpath ahead.

Our strategy proved to be wise.Despite the difficult start, average unitsales at Wendy’s domestic companyoperated restaurants increased 3.4 per-cent to a record $1.05 million.

Systemwide sales grew 7.8 percent,retail sales increased 7.2 percent andrevenues were up 8.6 percent. Pretaxincome reached an all-time high of $254.8 million and net income climbed 42 percent to a record $155.9 million.

Our financial position was also out-standing as we ended 1996 with adebt-to-equity ratio of 23 percent. We had $223.8 million in cash andshort-term investments at year end aswell as $200 million in committed

credit lines available and $190 mil-lion in cash flow from operations.Shareholders’ equity increased from$818.8 million to a record $1.06 billionand we paid our 75th consecutivequarterly dividend. The annual divi-dend rate was 24 cents a share andwhile we review the dividend rate eachyear, we continue to believe the mostprudent use of our income is to rein-vest into restaurant development.

During 1996, our stock traded in arange from $163/4 to $23 per share and closed at $20.875 per share at our fiscal year end on December 29,down slightly from the prior year end.The overall weak performance in therestaurant industry certainly had a negative impact on our stock price.

We are confident that our solid foun-dation and excellent continued perfor-mance will be reflected in a strongerstock valuation in 1997.

While we posted excellent overallresults, higher delivered food costs to our restaurants and higher laborcosts put pressure on our operatingmargins. In the intensely competitiverestaurant environment, we chose toabsorb these costs and limit priceincreases to sustain our solid growth in transactions, especially in the lastseven months of the year. We have several initiatives under way toimprove margins in 1997 while wekeep our long-term perspective ofcontinuing to build customer trafficin our restaurants.

Growth strategy continues in ‘97

At Wendy’s, we’ve been executing thesame key strategies since 1989 (seepages 6-10) and we anticipate contin-ued success. Our transition from a

types of real estate — traditional Wendy’s, combination units,

full-size Tim Hortons, satellite Tim Hortons and joint ventures

with partners. We have the capital required to make acquisitions

and the expertise to rapidly and successfully complete deals.

Another important contributor in the past few years has been

our “Simultaneous Equation” — or buying and selling of restau-

rants to improve the Wendy’s system. This is a permanent and

sustainable part of our business. As the Company grows, our

expertise in buying restaurants from franchisees and competitors

is a significant corporate asset. We often improve acquired

restaurants and then sell the units to new or existing franchisees.

Pretax gains related to franchising restaurants were $37.8

million in 1995 and $63.2 million in 1996.

International Wendy’s

Tim Hortons Canada

Tim Hortons U.S.

Simultaneous Equation

Transaction Opportunities

Domestic Wendy’s

3

Multiple growth engines

Wendy’s domestic business provides a broad foundation as theCompany builds other strong contributors to sales and earnings.

James W. Near1938-1996

Looking back at some of the inspirational comments Jim shared

over the years with the Wendy’s family, it’s clear that he was a

wonderful man as well as a super restaurant operator and a great

leader. When Jim died suddenly in July 1996, at age 58, we

mourned his passing and we still miss him dearly.

We find great solace in Jim’s words about the future. We, too,

believe that the best days are still ahead of us at Wendy’s. Jim

was always planning and working to inspire the Wendy’s family.

We keep that in mind every time we make an important decision.

We factor in Jim’s philosophy, and in that way, his imprint on the

Company will continue.

And, what an imprint Jim made. He had one of the best minds in

the restaurant industry. He started at age 15 as a short-order cook

for a Burger Boy Restaurant in his hometown of Columbus, Ohio,

unit for every 22,000 people for ourlargest competitor. We have tremen-dous domestic growth opportunitieswith traditional Wendy’s and specialsites such as convenience/fuel centers,universities and airports. In addition,we are well capitalized to build newunits and acquire competitors’ units.In 1996, we acquired or agreed toacquire about 120 units from com-petitors as real estate for conversion to our concepts.

Internationally, we’ve grown to 564Wendy’s units and expect improvingreturns after building a “foundation”over the past three years with regionaloffices, solid operations and an out-standing people base in four keyregions — Canada, Asia/Pacific, LatinAmerica/Caribbean and Europe/Middle East.

In Canada, our goal is to be operating2,000 Tim Hortons restaurants by theyear 2000 and we plan to accelerateTim Hortons growth in selected U.S.

markets — including Detroit,Columbus, Ohio, West Virginia andBuffalo — where we’ve built oracquired restaurants from competitors.We expect to have open at least 90 Tim Hortons in the U.S. by the end of the year.

Transitions and valuable additions

I close this letter by acknowledgingsome of the changes in the Wendy’sfamily. First, our directors have elected me as Chairman of Wendy’sInternational, Inc. I retained the titlesof CEO and President, and I look forward to continuing to work withour great team here at Wendy’s.

This was a seamless transition thatbegan in 1995 when Jim Near passedthe CEO title to me while retaininghis role as Chairman. I mentioned

company driven by our U.S. Wendy’sbusiness to one with multiple plat-forms — domestic Wendy’s plus inter-national Wendy’s and Tim Hortons —continued in 1996. And, it will acceler-ate in 1997.

We opened or began construction in 1996 on a record 727 new restau-rants — 326 Wendy’s in the U.S., 137 Wendy’s internationally, 234 TimHortons in Canada (18 of which were combination units) and 30 Tim Hortons in the U.S. In 1997, we anticipate opening or beginningconstruction on 750 to 800 newrestaurants worldwide by acceleratingthe growth of international Wendy’sand Tim Hortons U.S. units.

In the U.S., we remain underpene-trated with one Wendy’s restaurant forevery 61,000 people, compared to one

“I am so proud to be part of the Wendy’s

family. I want you to be proud of it...

We want to be No. 1 and we can be No. 1...

Dave Thomas and I learned this saying as

teenagers working in full-service restaurants:

Treat every customer as if your job depends

on it — because it does... The most prosperous

time for Wendy’s is ahead of us.”

4

R E M E M B E R I N G J I M N E A R

and worked in the business his entire career. His career at

Wendy’s spanned 21 years and included running 39 successful

Wendy’s franchised restaurants in the 1970s.

In 1986, he rejoined the Company as President and Chief

Operating Officer. In 1989, he became our CEO and in 1991 he

was appointed Chairman of the Board. As for his professional

legacy, Jim will be remembered for leading our executive man-

agement team in engineering Wendy’s turnaround in the late

1980s. He refocused the Company on the basics — restaurant

operations. During his five years as CEO, Wendy’s profits tripled

and the Company added about 600 restaurants.

The restaurant industry recognized Jim’s accomplishments with

its “Triple Crown” of top awards. In 1992, we were thrilled as

Jim was named Operator of the Year by Nation’s Restaurant

News, Executive of the Year by Restaurants & Institutions and he

received the Leadership Award from Restaurant Business. And,

just this past autumn, at Wendy’s Franchise Update Meeting, Jim

was posthumously inducted into Wendy’s Hall of Fame.

His personal legacy is perhaps even more inspiring. Not only did

Jim have a passion for serving customers, he had genuine com-

passion for people. Being around Jim made all of us better indi-

viduals. His love of people, especially his many friends through-

out the Wendy’s system, was evident every time he visited one

of our restaurants. Jim was the kind of person that whenever

you think about him, you smile.

Dave Thomas and Gordon Teter

earlier in this letter that Jim died inJuly of 1996 and not a day goes by that we don’t think about him and hispassion for the business. Dave Thomasand I include Jim’s perspective inevery major decision we make.

Losing Jim this year crystallized in ourminds the importance of continuing to build a deep and talented manage-ment team. That’s why I am so pleasedthat we added Frederick “Fritz” Reedto our management team in 1996 asExecutive Vice President, GeneralCounsel and Secretary. He was electedto our board in 1995, previously was a senior partner of the law firm Vorys,Sater, Seymour and Pease and has 20years of legal and finance experience.Fritz will become our Chief FinancialOfficer in April.

At that time, John Casey, our currentVice Chairman and CFO, will assumea senior advisor role to the corpora-tion as he nears retirement. John mademany significant contributions as CFOand played a critical role in Wendy’s

turnaround in the late 1980s. We thank him for 16 years of outstandingservice.

Other changes in executive manage-ment include the appointment of Jack Schuessler as President and COOof U.S. Operations (he was previouslyEVP, U.S. Operations) and JohnWright as President and COO of our International Division (he waspreviously President, InternationalDivision). Paul House continues asPresident and COO of Tim Hortons.

We also welcomed three new boardmembers, all of whom bring a wealth of senior level experience toour Company: Ron Joyce, 66, SeniorChairman and Co-Founder of TimHortons, was appointed to the boardin 1996; True Knowles, 59, retired

President and COO of Dr Pepper Company, and Andrew McCaughey,74, former Chairman and CEO ofScott’s Hospitality in Canada, wereappointed in January 1997.

In addition to our top managementteam and current board, I’m also confident that we have the best groupof franchisees in the restaurant busi-ness and an excellent organization —including our corporate and regionalstaffs, our restaurant managers andemployees. Just as people were key to the Company’s success when Davefounded Wendy’s in 1969, our strongpeople base is vital today.

Finally, we thank you for your on-going support as customers and shareholders, and we look forward to a prosperous 1997.

Gordon F. TeterChairman, CEO and President

5

5-piece Crispy Chicken Nuggets —that helped drive traffic into ourrestaurants and improved sales. Wealso introduced a larger and plumpermarinated grilled chicken breast filletsandwich. We offered special promo-tional sandwiches such as the SmokyBacon Cheeseburger and PepperJackBacon Cheeseburger to attract newcustomers and build incremental sales.And, we are planning to introduce in 1997 an exciting new product — Fresh Stuffed Pitas — that has de-livered strong incremental sales in test markets.

Our system-wide dedication to highquality products is just one of the rea-sons we overcame a difficult first halfof the year in sales and delivered a

We still embrace the simple butextremely effective principles thatDave Thomas followed when hefounded the first Wendy’s restaurant in 1969 on East Broad Street inColumbus, Ohio — serve hot, freshhamburgers that are made to orderwith a choice of toppings... and, ofcourse, treat each customer right.

We’ve updated Dave’s initial strategy abit over 27 years, expanded the menuand built a system of 4,933 totalWendy’s restaurants (4,369 are in theU.S). But the basics are still the same.In fact, the long-term corporate strate-gy that we initiated in 1989 and have followed since has proven to beextremely effective. We absolutelyrefuse to veer off course from ourobjectives to grow the Company, build a world-class brand, increasesales and profitability, and deliversuperior shareholder value.

To deliver on those objectives, we’vefollowed these four key strategies:

● Exceed Customers’ Expectations

● Grow a Healthy System Responsibly

● Create a Performance-Driven ● Culture

● Create the Wendy’s Difference

Exceeding customers’ expectations

The first part of our strategy is to makeevery customer visit outstanding. Thatmeans making the Wendy’s experienceunique for customers with hamburgersmade from fresh beef hot off the grill,whole white meat chicken fillet sand-wiches and an array of fresh salads.The breadth of our menu and ourfocus on fresh preparation and sand-wiches made for each individual cus-tomer clearly distinguishes Wendy’sfrom the competition.

This year we added two permanentadditions to the menu — the innova-tive Spicy Chicken Sandwich and the

Domestic Wendy’s 6

New product introductions

Wendy’s Spicy Chicken sandwichwas a successful addition to thepermanent menu in 1996.

A G G R E S S I V E B U T R E S P O N S I B L E G R O W T H

3.4 percent increase in average unitsales at our company-operated res-taurants. Our franchised restaurantsincreased their average unit sales by 0.4 percent.

Even when severe weather caused aslump in sales during the first part of1996, we refused to join our competi-tors in resorting to deep discounting.Instead, we protected the Wendy’sbrand and continued to offer our customers high-quality choices, newproducts and an everyday “Super ValueMenu” with as many as 11 productspriced at 99 cents each. Our new, allwhite meat chicken nuggets, for exam-ple, are a great value priced at 99 centsevery day in most markets.

Our salads, baked potatoes, chili andgrilled chicken sandwiches also pro-vide customers with healthier choices.That is a key reason why customersrate Wendy’s No. 1 in the quick-service restaurant (QSR) industry inattribute ratings such as highest qualityfood, most nutritious food, freshestfood and overall satisfaction.

Having modern, efficient and “Sparkle”clean restaurants also enables Wendy’sto attract customers. Besides creating a pleasant atmosphere for customers,new and remodeled units help usdeliver higher productivity.

About 30 percent of our units havebeen built within the past four yearsand we continue to invest in retro-fitting our existing restaurants. Retro-fitting includes adding multiple cashregisters and a second drive-throughwindow to speed service for our customers. About 62 percent of ourU.S. company-operated restaurantsnow feature a second drive-throughwindow.

Restaurant development contributes significantly to our overall growth in sales and

revenue as well as earnings. Over the past five years, we’ve grown the Wendy’s system

by about 1,400 units and Tim Hortons expanded by about 900 units. We’ve expanded

our system by aggressively developing new sites, working together with a strong group

of nearly 900 Wendy’s and Tim Hortons franchisees to build new restaurants, and by

acquiring competitive sites.

Most importantly, we’ve maintained the health of our system and continued to build

average unit sales during this expansion. Our franchise royalty collection rate at Wendy’s

is about 99 percent and average unit sales at domestic company restaurants have in-

creased from $786,000 in 1987 to about $1.05 million. By comparison, some of our com-

petitors have experienced declining average unit sales while more aggressively growing

their number of restaurants.

Our growth strategy will remain aggressive, disciplined and responsible. We will focus

on cities, markets and countries where we can deliver the highest return on investment.

7

A superior employee base

Our focus on excellent restaurantoperations helps attract customersand build sales.

9293949596

3,96

2

91

3,80

4 4,16

8 4,41

1 4,66

7 4,93

3

Number ofWendy’s Units

We’ve also been adding our WenViewTM

system, an electronic menu board thatdisplays a customer’s order and prices.Customers like the menu boardbecause it has improved order accura-cy, which is important because abouttwo thirds of our food is eaten off site.

Growing a healthy Wendy’s system

We’ve built the Company’s foundationwith 4,369 Wendy’s restaurants in the U.S. and we continue to expandour national presence. We opened 231new Wendy’s restaurants in the U.S.in 1996 and had another 95 under construction.

The key is to aggressively build thesystem while responsibly planning andexecuting development.

That means further penetrating exist-ing markets to improve customers’perceptions of convenience in findingWendy’s restaurants. We also focus onspecial sites such as travel centers thatinclude a Wendy’s as well as a conve-nience store and motor fuel facility.

In 1996, we formalized a corporaterelationship with Exxon that resultedin building a Wendy’s next to anExxon motor fuel facility and conve-nience store in two Dallas-area loca-tions. Our franchisees have developedsimilar combination units in variousother U.S. locations and we hope to expand this concept in 1997 in locations that provide high customertraffic and above average return oninvestment.

We are also focusing on special sitedevelopment in university locations,hospitals, airports and malls. Weopened a new Wendy’s unit this yearin New York’s LaGuardia Airport andadded a second unit at Houston’sIntercontinental Airport. Overall, wenow have 315 special site Wendy’slocations in the U.S. and internationalmarkets. We expect to open an addi-tional 50 special site Wendy’s in 1997.

8

Faster service = More sales

Wendy’s electronic menu boardand second pick-up window speed service for customers andprovide added convenience andimproved order accuracy.

C A R E F U L N U R T U R I N G O F T H E B R A N D S

Equation,” a process in which we purchase and sell Wendy’s restaurants.

Simultaneous equation goals

● Increase overall sales and averageunit sales as we acquire and signifi-cantly improve restaurants.

● Improve the health of the system byselling proven cash-flow restaurants tonew or existing franchisees.

● Build a larger base of successful newand minority franchisees.

● Generate increasing rental income as we sell restaurants by frequentlyretaining the real estate and renting to franchisees.

● Enhance shareholder value when wesell restaurants and realize asset gains.

A performance-driven culture

The emphasis we’ve placed on build-ing a superior people base enables theCompany to successfully take on newopportunities. In addition to the acqui-sition of Tim Hortons in December of 1995, we’ve steadily increased devel-opment and our acquisition pace.

As competitive sites became availablein 1996, we were able to move swiftlyto make acquisitions of 40 Roy Rogersin New York, 44 Hardee’s in Detroitand 31 Rax in Columbus and WestVirginia. These acquisitions willincrease our presence for Wendy’s inNew York and for both Wendy’s andTim Hortons in Detroit, Columbusand West Virginia. We could not dothis without an outstanding manage-ment team and employee base.

In addition to the role in restaurantdevelopment, our strong people base isalso important to performance at theunit level. Our restaurant managementand quality employees are one reason

Success today in the restaurant business requires creating superior value for

consumers — not just lowering prices, but doing hundreds of things well. It

requires commitment to a long-term strategy even when market forces result

in a difficult operating environment.

At Wendy’s and Tim Hortons, that means creating an experience consumers can

get only at our restaurants. It means offering high-quality food, a varied menu

and unique atmosphere. It means delivering competitive pricing... a predictable

and familiar experience... satisfying and filling food... and friendly and courteous

service to customers.

That’s why consumers know Wendy’s as “fresh, hot off the grill and choice of

toppings” as well as the caring image portrayed by Dave Thomas in our adver-

tising. And, that’s why Canadian consumers know Tim Hortons as their favorite

morning stop.

Another critical part in building ahealthy system is our franchise com-munity. Our 434 Wendy’s franchiseesare business partners and we strive tohelp them build a successful and prof-itable business. Our reputation for fostering an outstanding relationshipwith franchisees helps us grow the sys-tem. In the past year, we’ve receivedmore than 10,000 inquiries fromprospective franchisees and brought 44 into the system. Today, more than70 percent of our Wendy’s restaurantsare owned by franchisees. We expectan additional 30 to 40 new franchiseesto join the system in 1997.

New and existing franchisees play animportant role in the “Simultaneous

Balanced Marketing

Wendy’s long-term strategy protects its brands with balanced marketing — we feature everyday values at 99 cents, a core menu of hamburgers, chicken sand-wiches and salads, and special tastes such as the Smoky Bacon Cheeseburger.

9

Eating healthy, with taste!

Wendy’s is introducing new FreshStuffed Pitas with four deliciousvarieties — Garden RanchChicken, Chicken Caesar, ClassicGreek and Garden Veggie.

V A L U E

B A L A N C E D M A R K E T I N G

C O R ES P E C I A LT A S T E S

customers choose Wendy’s as theirpersonal favorite, and retention ofquality people is a key factor contribut-ing to better restaurant operations.

Turnover in our general manager rankshas been 20 percent or less per yearover the last six years, down from 55percent as recently as 1987, providingstability and continuity in our restau-rants. Each full-time manager, includ-ing assistants, receive “WeShare” stockoptions each year based on 10 percentof their annual salary as well as perfor-mance bonuses, so they are closelyaligned with the success of the entirecorporation.

Creating the Wendy’s difference

Two of our greatest assets are theWendy’s brand and Dave Thomas...and we remind customers of that eachtime we advertise. We balance ourmarketing carefully, focusing on greattasting food and a clear message aboutsuperior everyday value.

For example, we regularly promoteitems on our everyday Super ValueMenu to drive customer traffic into

our restaurants. At other times, wefocus on the core menu — ham-burgers and chicken sandwiches. To increase check totals, we promotespecial tastes such as our PepperJackBacon Cheeseburger.

Considering that our largest competi-tor outspends us by about five to onein marketing dollars, it is critical thatour message be efficient and effective.And, the high advertising awarenessfor both Wendy’s and Dave Thomasvalidate our efforts. We leverage thestrengths that we’ve developed overthe years and remind customers of the unique experience available atWendy’s.

Of course, the effectiveness of ourmarketing is boosted by our adver-tising spokesman and founder DaveThomas. Dave is one of the most recognizable people in America and is so effective that our total ad aware-ness rating approaches or surpasses our two major competitors.

10

Pho

to: R

ob

ert

Levi

te

500th commercial —

A Dave milestone

Eight years and 500 commercialsafter Dave Thomas began as ourspokesman, Wendy’s advertising campaign has reached record adawareness levels. Dave was recog-nized in 1996 by the GuinnessBook of World Records for havingmade the most television commer-cials by a founder-spokesperson.

Q U A L I T Y I N E V E R Y T H I N G W E D O

Our commitment to quality begins with the food in our restaurants. Our

customers have learned to anticipate and be rewarded with a high-quality

experience each time they visit a Wendy’s or Tim Hortons.

At Wendy’s, our chicken sandwiches are whole white breast meat and our

hamburgers are made from fresh beef. Our salads are made fresh multiple

times every day in each restaurant, starting with heads of lettuce and a

variety of produce.

At Tim Hortons, our pledge is: “Always Fresh.” We bake twice daily to

ensure freshness in our wide variety of delicious donuts, cookies, croissants,

muffins, pies and cakes. We also have a 20-minute coffee pledge to our

customers — which means we either sell each pot of our specially blended

coffee within 20 minutes of brewing, or we replace it with fresh coffee.

After three years of building a strongfoundation and an outstanding peoplebase in key foreign regions, Wendy’sinternational business is poised to contribute significantly to the corpo-ration’s overall profitability.

Following our carefully devised strategic plan, Wendy’s internationalgrowth is accelerating and the brand is becoming more established outsideof the U.S.

The execution of our strategy actuallystarted with hiring John Wright asPresident of the International Divisionin 1993. John brought extensive inter-national restaurant experience to ourorganization and he began building anexperienced management team. Ourinternational division also began estab-lishing new partnerships in interna-tional markets, focused on developinga base of strong franchisees and startedbuilding an infrastructure.

The infrastructure included manage-ment, operations, training, humanresources, finance, marketing anddevelopment staffs with experience in both the restaurant business andinternational operations. It also in-cluded developing regional offices tofocus on four key areas: Canada, Asia/Pacific, Latin America/Caribbean andEurope/Middle East.

Within these regions, we have con-centrated our development in thelargest countries with stable economiesand governments as well as strong or emerging middle classes. In total,we’ve invested in the future with additional general and administrativecosts to build a strong foundation.

The foundation is set for growth

Today, the foundation is in place with564 total international Wendy’s restau-rants, and we are making progress. In1996, we opened 112 new internationalWendy’s, mostly franchised, and hadanother 25 under construction at year

International Wendy’s

H I G H E S T - Q U A L I T Y F O O D

11

Customers perceive Wendy’sas offering the highest-qualityfood in the quick-servicerestaurant industry.

Wendy’s in 34 countries

The Company is focused ongrowth in four key regions of the world, including Europe.

Wendy’s

Other Major Quick-Service Hamburger Chains

91 92 93 94 95 96

41%

22%21%

45%

27%

17%

Source: Independent Research Company Tracking Study

rant and we anticipate an accelerationof new unit growth.

Other important countries forWendy’s in the Far East include thePhilippines, New Zealand, Indonesiaand Hong Kong. We are exploringopportunities in Australia and we havesigned an agreement to develop restau-rants in China’s Shanghai Valley.

In the Europe/Middle East region, weare focused on Company and fran-chised restaurant development in theUnited Kingdom. From a base ofseven units, we opened seven newrestaurants in the U.K. during 1996.Initial sales results are encouraging andwe are committed to improving ourreturn on investment in this importantmarket. As we further penetrate theU.K., our strategy centers on establish-

end. That’s up from 70 new unitsopened in 1995 and 50 new unitsopened in 1994.

International development in 1996 waspaced by Canada, where we opened 28restaurants and had another six underconstruction at year end. Our relation-ship with Tim Hortons has blossomedas we opened 18 combination units inCanada in 1996, bringing our total to41 of this exciting joint developmentand restaurant use concept.

In the Asia/Pacific region, which wecall the “engine” of our internationaloperations, we opened 52 restaurantsin 1996 — more than our entire in-ternational division opened just two years ago.

Asia/Pacific is the fastest growing partof our international operations. InIndonesia, for example, we opened 19new restaurants during 1996, a rate ofdevelopment we expect to continue. In Japan, we opened our 67th restau-

ing Wendy’s superior brand image bydelivering high quality food as well asa familiar and predictable experiencefor customers. Achieving critical massin the market will also enable us tobegin television advertising.

In the Latin America/Caribbeanregion, we’ve taken advantage of awonderful opportunity by forming a joint venture with the owners of an established restaurant chain inArgentina. Together, we plan to con-vert 20 to 25 of their restaurants inArgentina to Wendy’s, as well as open

12 Growing in the Far East

The Asia/Pacific region is thefastest growing part of our international operations with 52 restaurant openings in 1996.

F O C U S E D G R O W T H W I T H S T R O N G P A R T N E R S

Latin America represents a long-term growth opportunity for Wendy’s and the quick-

service restaurant industry. We envision future opportunities in Brazil, Costa Rica, Chile

and Venezuela, but our current focus is in Argentina. It is the fourth largest country in

the region with a population of more than 33 million people and gross domestic product

that ranks second in South America. We have formed a real estate joint venture with the

founders of Pumpers, a top restaurant chain in Argentina, and we are converting selected

units to Wendy’s restaurants as well as developing new sites.

Our local franchisee is providing the operators, employees, supply lines and relation-

ships with local communities while Wendy’s is providing capital and a world-class brand.

Together, we expect to rapidly expand in this very healthy market. In fact, in just more

than one year, we have converted and opened eight Wendy’s in Buenos Aires and the

units are performing above expectations.

It’s a great partnership and a solid business strategy that we hope to expand in certain

countries where we can develop similar strong partnerships.

Europe/Middle East

Status● United Kingdomstores primarily company operated

Priorities ● United Kingdom,Greece, Turkey

Strategy● Expand franchis-ing in the UnitedKingdom

● Grow with existingfranchisees

Latin America/Caribbean

Status● Solid presence inthe Caribbean

● South Americaentry under way

● 100% franchisedand joint ventures

Priorities ● Argentina, PuertoRico, Venezuela,Brazil, Mexico

Strategy● Joint venture innew countries

● Grow with existingfranchisees in theCaribbean andCentral America

Asia/Pacific

Status● Solid presence inmost major markets

● Largest opportunity

● 100% franchisedand joint ventures

Priorities ● Japan, Indonesia,Philippines

Strategy● Grow with existingfranchisees

Canada

Status● Strongest penetra-tion of a single country

● Potential to morethan double penetra-tion

● 50% franchised

Priorities ● Ontario, BritishColumbia, Alberta

Strategy● Grow with Companyand franchised stores

● Continue develop-ment of combinationunits with Tim Hortons

20 to 25 new Wendy’s units over thenext three to four years.

We also signed an agreement inFebruary 1997 with a new franchisee in Venezuela. This group has acquiredand plans to convert up to 32 Tropi-Burger restaurants to Wendy’s restau-rants beginning in 1997. TropiBurgerhas been the flagship concept of Grupo Tropi, which operates severalother restaurant concepts, since 1969.

Overall, our international franchise system is becoming healthier, havingopened 98 franchised Wendy’s restau-rants this past year. Our goal is toincrease unit development in 1997 tomore than 150 international Wendy’srestaurants open or under construction.

As we accelerate development, the key is to leverage the investments wehave made, drive average unit sales and franchise revenues. Our goal is to accelerate profitability in 1997 and the future.

13

New opportunities in South America

A joint venture in Argentina is expected toproduce a significant presence for Wendy’sin this important market.

INTERNATIONAL GROWTH PLANS

Tim Hortons

“Always fresh, great coffee and deli-cious baked goods”... those are some of the words that Canadians use whentalking about the country’s favoriterestaurant chain — Tim Hortons. It’sbeen that way since 1964 when thefirst Tim Hortons restaurant opened in Hamilton, Ontario.

Today, Tim Hortons is Canada’s largestchain featuring coffee and fresh bakedgoods, and the future is brighter thanever. Tim Hortons has delivered excellent financial results with totalsales growing more than 20 percentcompounded over the past four yearsand average sales per standard restau-rant growing from $596,000 in 1993 to $668,000 (U.S. dollars) in 1996.

Just consider the chain’s spectaculargrowth. In 1975, there were 50 units.By 1984 there were 200 units. By 1990,the chain grew to 500 locations. Atyear-end 1996 there were 1,384 unitsopen, primarily in Canada.

In December 1995, Tim Hortonsmerged with Wendy’s International,Inc., and the marriage is goingsmoothly. The two companies arecombining resources to deliver on aplan to operate 2,000 Tim Hortonsunits in Canada by the year 2000,expand the number of Wendy’s-TimHortons combination units and begindevelopment in the U.S.

Financially, 1996 proved to be anothergreat year for Tim Hortons as samestore sales grew at about five percent.Income derived from franchise royal-

ties, rental income and sales of drygoods to franchised units was on target.

Development continues at an aggres-sive pace as the chain opened 200 newunits in 1996 and operated a total of1,384 restaurants at year end. Another64 units were under construction atyear end and expansion began into the U.S. during the year. Wendy’sInternational, Inc. completed the acquisition of 44 Hardee’s restaurantsin Detroit and conversion of about 30 of those units to Tim Hortonsrestaurants is under way.

14 A variety of menu choices

Tim Hortons offers customers abroad menu that features coffee as well as a line of fresh-madesoups and sandwiches.

W E N D Y ’ S & T I M H O R T O N S — A G R E A T C O M B I N A T I O N

Another 31 Rax restaurants wereacquired in Columbus, Ohio, andCharleston, W. Va., and most of thoseunits will be converted to Tim Hortons.

A great brand, a great concept

We are optimistic about the future forTim Hortons because it is an estab-lished brand in Canada that is trea-sured by consumers. It’s also a uniqueconcept which is right for today’s marketplace.

The menu features high-quality coffee,which makes up the largest portion of Tim Hortons’ sales volume, and afull-range of baked goods — donuts,Timbits,TM muffins, pies, cakes, tarts and fancies, tea biscuits and croissants— which are all made twice daily.

The menu also includes a variety ofsandwiches made on fresh-baked bread plus soups so delicious that TimHortons now sells more soup in

Canada than any other restaurantchain. The sandwich and soup lineuphelps build lunch and dinner sales.

In 1996, we added a successful bagelline to the permanent menu and cus-tomer response has been outstanding.Full-sized Tim Hortons restaurantswere selling more than 250 bagels perday at year end. And, bagels will be avery important part of our menu as weexpand Tim Hortons into the U.S.

A restaurant giant in Canada

The quick-service restaurant (QSR)industry in Canada generates about$6.4 billion in sales (U.S. dollars),about one-third of the overall restau-rant industry sales. At year-end 1996,Tim Hortons’ market share was about14 percent of the QSR segment.

More importantly, Tim Hortons com-mands about 48 percent of the coffeeand donut segment within the QSRcategory. We have a great opportunityto grow our sales in Canada, where the coffee and donut segment is

Wendy’s Founder Dave Thomas and Tim Hortons’ Co-Founder Ron Joyce were pictured

this past year on the cover of promotional coffee cans. “Ron & Dave’s Special Blend”

was sold at selected supermarkets in the U.S. and part of the proceeds were donated to

a children’s hospital. The limited edition container was filled with Tim Hortons’ famous,

fine-ground coffee and commemorated the blending of Wendy’s and Tim Hortons.

The relationship, which began five years ago when we developed combination units

through a joint venture, is getting stronger. The merger joined two companies with similar

restaurant operating principles and a commitment to high quality.

The synergy is most evident to consumers in our 5,000-square-foot combination restau-

rants. Wendy’s and Tim Hortons share a dining room but customers order and pick up

their food from separate counters. Most combination units have separate pick-up windows.

Most importantly, the combination works because more than two thirds of Tim Hortons’

customers visit in the morning before Wendy’s opens or during the afternoon snack

hours. Wendy’s is busiest at midday and at dinner.

A full line of baked goods

Donuts, Timbits,TM muffins, pies,cakes, tarts and fancies make uppart of Tim Hortons deliciouslineup of baked goods.

15

A special blend

We continue to make progress com-bining Wendy’s and Tim Hortonswith a special blend of coffee, ourcompany founders (Ron Joyce, left,and Dave Thomas) and combina-tion restaurants.

Quality and freshness

at Tim Hortons

Tim Hortons starts with qualityingredients and ensures freshnessby baking items such as muffinstwice daily.

31 percent of the QSR category, and in the United States, where thecoffee and donut segment is under-penetrated with about two percent of the QSR category.

Tim Hortons is uniquely positioned to gain market share and grow formany reasons, including our high-quality food, solid operations, out-standing people and a great franchisebase. We have effective marketing thatcenters on eight national advertisingcampaigns per year. And, our conceptworks well because we are convenientand we meet consumers needs withvarious store designs.

Our very first restaurant was about1,200 square feet. Our standard unitsize has expanded ever since, up to3,000 square feet in certain locationstoday. We’ve expanded because ourmenu is so diverse and there is a needfor more seating.

Our standard full-sized restaurants,most of which are open 24 hours a day,

include a bakery that can supply thefront counter as well as several satelliteTim Hortons in a defined area. Therestaurants also feature a modern,clean and attractive seating area and adrive-through pick-up window.

As pictured on the cover of this report,we also operate Wendy’s-Tim Hortonscombination units that total about5,000 square feet. Investment costs fora combination unit are about 25 per-cent less than building two separatefree-standing units so we continue toexpand in appropriate locations. Wehad a total of 43 combination unitsopen at year-end 1996 and expect toopen an additional 20 units in 1997.

Tim Hortons fits anywhere

A variety of building sizes andstyles such as kiosks and cartsenables Tim Hortons to adapt todowntown locations, conveniencecenters, fuel centers, airport termi-nals and universities.

16

O U R U . S . G A M E P L A N

In locations where we need a smallerconcept, we have satellite units. Theseinclude 2,000-square-foot restaurantsthat look like a full-sized restaurant,but are smaller without a bakery. Wealso have drive-through-only units,kiosks and mobile carts that require aslittle as 35 square feet of floor space.

Our wide variety of units enables us to adapt Tim Hortons to any location,including convenience stores, traveland fuel centers, airport terminals,hospitals and universities. All of thesesatellite units are serviced with freshbaked goods from a nearby full-sizedTim Hortons with a bakery.

A broad base for growth

Tim Hortons is a diverse companywith three main businesses that gener-ate income:

● We are the franchisor for nearly all ofour Tim Hortons units (we operatedless than five percent of the 1,384 units open at year end). Our stronggroup of 426 franchisees range fromfamily operators to large corporationssuch as Scott’s Restaurants and Esso.Franchise revenue continues to groweach year as we expand the system andwe anticipate opening or beginningconstruction on a total of about 270Tim Hortons in 1997, including ourexpansion into the U.S.

● We own about 18 percent of the realestate involved with Tim Hortons andlease to franchisees about 65 percent ofour restaurant locations. This providesa steady stream of income.

● We distribute coffee and other goodsfrom six warehouses throughoutCanada to Tim Hortons restaurants.

Yes, we’ve got bagels!

Tim Hortons expanded itsmenu in 1996 with a full line of delicious bagels andcream cheeses.

The U.S. market represents a huge opportunity considering that no other chain offers

the unique combination of Tim Hortons’ high-quality coffee, fresh baked goods and a full

line of bagels. In the highly mobile U.S. marketplace, Tim Hortons’ emphasis on quick

service and pick-up windows should be a hit with American consumers.

We will focus on establishing a presence in key markets — such as Detroit, Columbus

(Ohio), Charleston (W. Va.), Buffalo and Boston — through acquisitions and conversions of

competitors’ restaurants and by building restaurants. By the end of 1997, we should have

at least 90 Tim Hortons units open in the U.S.

The long-term strategy is to build brand awareness for Tim Hortons and to expand

aggressively in additional markets in the northeastern part of the U.S. — achieving

critical mass and profitability as quickly as possible.

17

Adapting for the U.S. market

Tim Hortons will offer U.S. consumers a unique variety of high-quality coffee andbaked goods, excellent service and conven-ience with pick-up windows.

Corporate Responsibility

OVERVIEW

When Dave Thomas opened his firstrestaurant, he established a set of prin-ciples for the business. The principleswere based on honesty, integrity, teamwork and a positive caring attitude forour employees, franchisees, communi-ties and all with whom we do busi-ness. Those principles are still thefoundation for the Company as westrive to be the restaurant of choice,employer of choice and franchisor ofchoice.

DIVERSITY INITIATIVES

Our established relationships with the National Minority SupplierDevelopment Council, U.S. HispanicChamber of Commerce, NAACP andthe International Franchise AssociationMinorities in Franchising Committeecontinue to provide national and localsupport for Wendy’s diversity initia-tives. In 1996, Wendy’s also developedcollaborative relationships with theUrban League, Women’s FoodserviceForum, Black Enterprise Magazineand the National Hispanic CorporateCouncil to enhance the Company’sefforts in providing economic parti-cipation for minorities and womenwithin the Wendy’s system.

Equal opportunity employment

Our employees are committed to creating a work environment free ofdiscrimination and harassment, whereeach person can maximize his or herpotential. Wendy’s continues to be aleader in workforce diversity andworks to maintain this reputation.

Supplier diversity

Wendy’s International, Inc. continuesto contribute to the economic growthof the minority/female business com-munity by forming relationships withexperienced minority- and female-owned businesses for the purchase ofgoods and services. The Company’ssupplier diversity initiative in 1996resulted in a 25.9% increase in pur-chases from minority- and female-owned businesses over the previousyear and 1996 marked the fifth con-secutive year of increases.

Employment Results

Minority FemaleTotal 1996/1995 1996/1995

Officials & Mgrs. 5,355 28.5/25.9% 39.0/39.0%Professionals 160 11.9/12.0% 60.0/53.2%Total Population 49,793 48.5/45.1% 53.8/54.3%

18

The Carlholms accept the challenge

It was a Sunday afternoon in 1994

when Randy Carlholm relaxed in his

home and watched on television

Wendy’s Three-Tour Challenge.

Proceeds from the golf tournament

benefit The Dave Thomas Foundation

for Adoption, and Dave appealed

to viewers during public service

announcements to consider adopt-

ing a waiting child.

When a toll-free telephone number

for the National Adoption Center

appeared on the screen, Randy called

for information. He and his wife,

Leslie, had been considering adop-

tion. After the couple reviewed the

information, they worked with a local

agency to adopt Rick and Matt (then

9 and 7), who had been in foster care

for 18 months after their birth mother

was unable to care for them.

“It was love at first sight,” said Leslie.

“They really wanted a mom and dad.

I believe that if Randy hadn’t been

watching Wendy’s Three-Tour

Challenge and made the call,

we wouldn’t have pursued

adoption. It is a miracle.”

For more than a year now, the Carlholmshave been a family thanks in part to TheDave Thomas Foundation for Adoption.

Franchise diversity

Our commitment to attract minorityand female business entrepreneurs is reflected by our participation andsupport of events such as the DowJones/Wall Street Journal BlackEntrepreneurship Conference and the Black Enterprise EntrepreneursConference. In addition, more than 36 percent of all new franchisees thatjoined the Wendy’s system in 1996were minority and/or female. That was a 20 percent increase over 1995.

Statistics are only part of Wendy’scommitment to build business rela-tionships with minority and femaleentrepreneurs. Wendy’s franchiseessuch as Junior Bridgeman are the realfoundation. Junior joined Wendy’sfamily in 1985 by acquiring five restau-rants and has since expanded his fran-chised restaurant group to 51 units inWisconsin and Kentucky.

Franchisee Junior Bridgeman

HIGH SCHOOL HEISMAN

Wendy’s High School HeismanProgram, in its third year, recognizesmale and female high school seniorsfor athletic achievements, academicexcellence and community service. In1996, more than 8,000 students werenominated and 120 state winners wereselected. From that group, 12 nationalfinalists were chosen for a trip to NewYork in December for the HeismanAwards ceremony. Erin Dromgoole, ofMillbury, Mass., and Chris Kirchhoff,of Worthington, Ohio, were named1996 Wendy’s High School HeismanAwards winners. The awards were cre-ated in a partnership of Wendy’s, theNational Association of SecondaryPrincipals and the Downtown AthleticClub, home of the Heisman MemorialTrophy.

ENVIRONMENTAL STATEMENT

Our commitment to buy from envi-ronmentally responsible suppliers con-tinues to assist in reducing the wastestream. The reduction in weight of our primary and secondary packaginghas made a significant impact on thereduction of our packaging materials.The Company continues to monitorthe environmental goals establishedwith our suppliers and we requirethem to report on an annual basis.

CHARITABLE CONTRIBUTIONS

Wendy’s International, Inc. is commit-ted to various causes ranging fromsupporting the United Way to eventswhere our restaurant employees vol-unteer within their local communities.Corporately, we are focused primarilyon two charities — The Dave ThomasFoundation for Adoption and the TimHorton Children’s Foundation.

“Every child deserves a family”

The Dave Thomas Foundation wasfounded in 1992 with a mission tohelp connect American children withloving families through adoption. The program is funded by two highprofile events — Wendy’s Three-TourChallenge (a made-for-television golfevent) and Wendy’s SKI FamilyChallenge. Funding also comes fromthe proceeds from Dave Thomas’books, Company initiatives, generousfriends and Wendy’s franchisees.

The Foundation focuses on sharing apositive message about adoptionthroughout the United States. Theprogram includes grants, public serviceannouncements on television andposters and special signage in Wendy’srestaurants.

The Foundation has worked with the National Adoption Center in creating a “Faces of Adoption” site on the world wide web (http://www.adopt.org/adopt). The site featuresmore than 400 photos of childrenwaiting to be adopted.

Dave Thomas has appeared beforeCongress on two occasions, urging theenactment of an adoption tax credit tomake adoption more affordable forfamilies. Dave’s efforts paid off whenCongress passed the tax credit andPresident Clinton signed it into law.

Wendy’s High School Heisman winners for 1996 were Erin Dromgoole, left, and Chris Kirchhoff, pictured with Dave Thomasand former college Heisman Trophy winnerArchie Griffin.

Children’s camps —

A wonderful adventure

Each summer, thousands of lives are

touched by the Tim Horton Children’s

Foundation. Youngsters from across

Canada and parts of the U.S. experi-

ence an adventure that includes a

10-day visit to one of the Foundation’s

four camps.

The non-profit, charitable organiza-

tion, founded in 1974 by Ron Joyce,

Senior Chairman and Co-Founder of

Tim Hortons, operates the camps for

monetarily underprivileged children.

Funding comes from donations from

The TDL Group Ltd., individual Tim

Hortons store owners, suppliers and

from public donations collected

through counter coin boxes located

at the restaurants.

Store owners in Canada and the U.S.

work with schools, churches, local

agencies and organizations to select

participants ranging from 7 to 12

years of age. The Foundation covers

the cost for sending the children to

the beautiful camps, including their air

transportation, food and lodging.

Tim Horton Children’s Foundation provides a summer to remember for underprivileged kids.

RESULTS OF OPERATIONS

1996 Overview

Wendy’s International, Inc. (the company) achieved recordnet income and earnings per share in 1996. Fully dilutedearnings per share increased 35% to $1.19 in 1996, comparedwith $.88 per share in 1995, and $.79 in 1994. The companyalso reported a 42% increase in net income to $155.9 millionin 1996, compared with $110.1 million in 1995, and $97.4million in 1994. The 1995 and 1994 net income includedcompensation expense paid to the sole shareholder of TimHortons (Hortons), which occurred while Hortons was aprivate company. During 1995, there were also significantcharges, including legal, accounting and professional fees,environmental and other reserves, and other costs related tothe acquisition. All these expenses are included as “specialcharges” in the Consolidated Statement of Income.

Systemwide sales, which include all company-operated andfranchised Wendy’s and Hortons, reached $5.430 billion in1996, compared with $5.036 billion in 1995, and $4.667 bil-lion in 1994. Average net sales for both Wendy’s andHortons restaurants increased again in 1996. This markedthe tenth consecutive year that domestic company-operatedWendy’s average sales increased over the prior year. Thecompany and its franchisees opened a total of 343 Wendy’sand 200 new Hortons restaurants. There were 184 restau-rants under construction at year-end 1996.

Retail Sales

Retail sales increased 7.2% to $1.567 billion in 1996 from$1.462 billion in 1995 which compared with a 7.0% increaseover 1994. Retail sales include sales from company-operatedrestaurants, bakery sales, and warehouse sales of dry goodsand supplies to Hortons’ franchisees. The largest componentof retail sales was from Wendy’s domestic company-operatedrestaurants which reflected increases in average unit net salesof 3.4% in 1996 and 1.3% in 1995. This also includes theaddition of 15, 37, and 26 average Wendy’s company-operat-ed domestic restaurants open in 1996, 1995, and 1994,respectively. The bakery and warehouse sales increased 9.3%in 1996 and 22.6% in 1995, in line with the increase in thenumber of franchised restaurants serviced.

The improvement in average Wendy’s company domesticrestaurant sales was a result of the ongoing quality plus valuestrategy, the addition of the Spicy Chicken Sandwich and5-piece Crispy Chicken Nuggets to the permanent menu,solid restaurant operations, and effective marketing cam-paigns. The average number of transactions in domesticcompany-operated Wendy’s increased approximately 1.1% in1996 compared with a .4% increase in 1995, and 1.2% in1994. Domestic selling prices increased only .7% during theyear, while 1995 increased only .2% and no price change wasreflected in 1994. This is consistent with the company’s con-tinued emphasis on its everyday value strategy in theextremely intense competitive environment.

Wendy’s International, Inc. and Subsidiaries

20

The following chart reflects average net sales per domesticWendy’s restaurant for the last three years:

1996 1995 1994

Company $1,049,000 $1,014,000 $1,001,000Franchise $978,000 $974,000 $982,000Total domestic $998,000 $986,000 $988,000

Franchise Revenues

Royalty income from franchisees, rental income from leasedproperties, franchise fees, and gains from restaurant disposi-tions are included in franchise revenues. Reserves againstcollection of these franchise revenues are also provided. Thefranchise fees primarily include reimbursement for variouscompany costs and expenses related to establishing the fran-chisees’ business, and include initial equipment packages forHortons’ franchisees.

Royalties, before reserves, increased $11.6 million or 8.3% in1996, and $10.4 million or 8.0% in 1995. An average of 177more franchise domestic Wendy’s restaurants were open in1996 and an average of 263 more were open in 1995.Hortons’ royalties increased 17.7% in 1996 and 23.7% in1995, primarily reflecting the increase in the number of fran-chise restaurants open coupled with positive same store salesgrowth of approximately 5% in 1996 and 5% in 1995.

Management reviews reserves on a regular basis and believesthe company has adequate levels for royalty and other fran-chise-related receivables and contingencies. When the out-look changes for reserve levels established in prior years,they are modified accordingly and the impact is reflected ingeneral and administrative expense, as discussed below.

Rental income from restaurants leased increased $12.7 mil-lion in 1996 compared with an increase of $11.6 million in1995. These increases reflect the additional number ofrestaurants being leased to franchisees. At the end of 1996,1,366 restaurants were leased to franchisees, versus 1,219 in1995, and 1,033 in 1994. Of these, Hortons leased 904 tofranchisees in 1996, 815 in 1995, and 682 in 1994.

Pretax gains from franchising Wendy’s restaurants amountedto $63.2 million in 1996 for 179 restaurants, compared with$37.8 million in 1995 for 120 restaurants, and $11.6 millionfor 49 restaurants in 1994. Additionally, pretax gains result-ing from sale of properties which were previously leased byfranchisees from Wendy’s amounted to $3.4 million in 1996,$3.8 million in 1995, and $2.4 million in 1994. Franchisefees were $35.1 million in 1996, $40.6 million in 1995, and$32.6 million in 1994.

Cost of Sales and Restaurant Operating Costs

Domestic Wendy’s cost of sales increased to 60.1% of retailsales in 1996 from 58.7% in 1995, and 58.0% in 1994.Domestic food costs, as a percent of retail sales, were 30.0%in 1996, 29.1% in 1995, and 29.3% in 1994. This reflected

Management’s Review and Outlook

unfavorable delivered prices primarily for chicken and baconduring 1996. Also chicken products were extremely popularin 1996, and a higher portion of sales came from these prod-ucts. For 1995, the improvement in food costs reflectedfavorable purchase prices for beef and chicken offset byhigher produce prices.

Labor costs for Wendy’s domestic restaurants were 26.0% ofretail sales in 1996, compared with 25.6% in 1995, and 24.8%in 1994. The percentages reflect increases in restaurant labordue to inflation in the restaurant labor wage rate. This con-tinues to be driven by demand throughout the industry forquality labor to provide quality service to customers. In thelatter part of 1996, labor rates were also impacted by mini-mum wage increases. The company continues to controllabor costs by adherence to its labor guidelines. Sales perlabor hour increased to $25.81 in 1996 reflecting a 1.7%increase in productivity following a .9% increase in 1995.

Cost of sales for the Wendy’s bakery and Hortons’ ware-house operations increased $12.3 million in 1996, and $23.7million in 1995, reflecting additional sales to franchisees dueto the increased number of restaurants serviced.

Wendy’s domestic company restaurant operating costsincreased $20.1 million in 1996, $12.6 million in 1995, and$11.4 million in 1994. Domestic restaurant operating costs asa percent of retail sales were 26.6% in 1996, 26.2% in 1995,and 26.3% in 1994. Rent, salaries and benefits, maintenance,and expenditures related to food safety were higher in 1996.As a percent of sales, costs were consistent in 1995 and 1994.

Domestic Company Operating Margin

The domestic company operating margin for Wendy’s was13.3% in 1996, 15.1% in 1995, and 15.7% in 1994. Thedecline in 1996 reflected several factors, including theadverse impact of weather on sales the first third of the year,and the higher cost of key products, particularly chicken.During the year, the company successfully promoted chick-en products such as the Spicy Chicken Sandwich and 5-piece Crispy Chicken Nuggets, which when combined withhigher prices from suppliers, resulted in food costs being ahigher percent of sales. The decline of the operating marginin 1995 reflected average sales increases from domesticWendy’s restaurants of 1.3% which were not sufficient toprovide leverage on costs as a percent of retail sales.Increasing labor rates also contributed to margin declines inboth years, with a minimum wage rate increase effective inthe fourth quarter of 1996. The company elected to absorbthe cost increases to maintain a value position, and sellingprices were only increased .7% in 1996 and .2% in 1995.However, in each quarter of 1996 the operating margin dif-ference improved relative to 1995, and in the fourth quarterwas only .5% lower than 1995. The following chart detailsthe domestic company operating margin.

Wendy’s International, Inc. and Subsidiaries

21

1996 1995 1994% of Sales % of Sales % of Sales

Retail sales 100.0% 100.0% 100.0%Cost of sales 60.1 58.7 58.0Company restaurant

operating costs 26.6 26.2 26.3

Domestic company operating margin 13.3% 15.1% 15.7%

Operating Costs

Operating costs include rent expense related to propertiesleased to franchisees and cost of equipment sold to Hortons’franchisees as part of the initiation of the franchise business.Training and other costs necessary to ensure a successfulHortons franchise opening, costs to operate and maintain thewarehouse, and bakery operations are also included in oper-ating costs. Costs that can not be directly related to generat-ing revenue are included in general and administrativeexpenses. Depreciation on properties owned and leased tofranchisees is included in depreciation expense.

There were 815 total restaurants leased by the company andthen subleased to franchisees in 1996 versus 692 in 1995, and568 in 1994. Rental expense increased $4.6 million in 1996and $3.1 million in 1995 reflecting the growth in the num-ber of properties being leased to franchisees. In 1996, thehigher rent expense was offset by lower cost of equipmentand related expenses reflecting fewer new store openings byHortons’ franchisees during 1996.

General and Administrative Expenses

General and administrative expenses were $136.5 million or7.2% of revenues in 1996 compared with $136.4 million or7.8% in 1995, and $120.6 million or 7.6% in 1994. Salariesand related benefits, the largest component of general andadministrative expenses, increased $7.6 million in 1996 and$7.7 million in 1995. This primarily reflects annual merit-based compensation increases and administrative positionadditions to support growth in the Wendy’s and Hortonsconcepts. Salaries and other general and administrativeexpenses in 1996 and 1995 also reflect investments in theinternational division to further develop Wendy’s outside ofthe United States and Canadian markets.

In 1996, reserves originally provided for environmentalissues related to Hortons were reduced $6.6 million toreflect current estimates. In 1995 and 1994, there wereaccruals for a Hortons benefit plan, provided by the previousowner, amounting to $3.4 million and $2.2 million, respec-tively, for which no similar expense applies in 1996 andfuture years. After adjusting for these items, general andadministrative expenses, as a percent of revenues, wereapproximately the same for the last three years.

Special Charges

Special charges for 1995 and 1994 included the profit sharingcontributions made to the sole shareholder of Hortons,which occurred while Hortons was a private company, there-fore these costs no longer apply. In addition, 1995 specialcharges also included professional fees incurred to effectuatethe Hortons transaction, reserves for environmental issuesand contingencies, and costs related to organizing Canadianoperations to blend the Wendy’s and Hortons concepts.

Interest

Net interest expense decreased in 1996 primarily as a resultof higher interest income of $16.2 million compared with$10.2 million in 1995, and $9.0 million in 1994. Interestincome increased in 1996 compared with 1995 primarily as aresult of an increase in notes receivable taken for restaurantdispositions. Interest expense was $23.0 million in 1996,which includes distributions on the company-obligatedmandatorily redeemable preferred securities, $20.5 million in1995, and $22.2 million in 1994. Interest expense wasreduced in 1995 due to debt retirements but increased in1996 reflecting additional borrowings in December 1995 andSeptember 1996.

Income Taxes

The effective income tax rate for 1996 was 38.8% comparedwith 33.3% for 1995, and 35.2% for 1994. A tax benefit of$6.6 million related to Canadian operations was realized in1995 pursuant to further successful developments related tothe 1993 Canadian reorganization. The increase in 1996 alsoreflects the income generated by Hortons, which has a highertax rate than domestic operations.

FINANCIAL POSITION

Overview

Total assets increased $272.3 million or 18.0% over 1995 pri-marily due to additions to property and equipment forrestaurant development, and as a result of the acquisition ofrestaurants which have been subsequently leased to fran-chisees. Additionally, notes receivable from restaurant dispo-sitions during 1996 were $103.4 million, an increase of $39.8million over 1995. Total cash and short-term investmentsamounted to $223.8 million at year-end 1996 compared with$213.8 million at year-end 1995. Return on average assetswas 17.6% in 1996 compared with 13.6% in 1995, reflectingthe improvement in net income in 1996 and the nonrecur-ring special charges in 1995.

Common shareholders’ equity increased 29.1% in 1996, andtotaled over $1 billion for the first time. On a per share basis,equity increased to $8.16 per share in 1996 from $6.81 pershare in 1995. The company’s return on average equityincreased to 16.6% in 1996 from 14.5% in 1995, reflectingthe nonrecurring special charges in 1995. Long-term debtdecreased during the year as the $100 million, 7% convert-ible debentures previously outstanding were all converted to

Wendy’s International, Inc. and Subsidiaries

22

common shares in April 1996. In September 1996, the com-pany raised $200 million by issuing company-obligatedmandatorily redeemable preferred securities. These securi-ties have characteristics of both traditional debt and tradi-tional preferred securities, and are classified between long-term liabilities and common shareholders’ equity on thecompany’s balance sheet.

The company tries to maintain a strong balance sheet toensure that system growth can proceed and also to ensurethat it can take advantage of special opportunities, such asadding Hortons to the Wendy’s system. Total assets areapproximately two-and-one-half times liabilities and thedebt-to-equity ratio is 23% at year-end 1996 compared with41% in 1995. Standard & Poors and Moody’s have given thecompany debt ratings of BBB+ and Baa-l, respectively.

The following chart shows year-end reserve balances relatedto royalty receivables and other franchise-related receivablesand contingencies by balance sheet category:

December 29, December 31,(In millions) 1996 1995

Accounts receivable, net $4.3 $ 7.4Notes receivable, net .5 .6Other assets 2.4 2.5Accrued expenses, other 1.5 .3

$8.7 $10.8

The reduction in reserve balances reflects continuedstrengthening of the financial condition of the Wendy’s andHortons’ franchise communities.

Cash Flow

Cash provided by operating activities increased 15.2% to$189.9 million in 1996, compared with $164.9 million in1995, and $168.0 million in 1994. In all three years, cashprovided by operating activities was primarily used for capi-tal expenditures, dividend payments, debt repayment, andacquisitions of franchised restaurants.

Cash proceeds of $78.7 million were realized in 1996 fromthe sale of Wendy’s company-operated restaurants to fran-chisees, while $40.4 million was provided in 1995, and $21.1million was provided in 1994. Over the last three years, thecompany used $114.6 million to acquire Wendy’s franchiserestaurants and $41.7 million to purchase competitors’ con-cepts to be converted to Wendy’s or Hortons. The companyissued $200 million in company-obligated mandatorilyredeemable preferred securities in 1996 and $200 million oflong-term debt in 1995. The company also repaid $204.0million in long-term obligations during the last three years.

During 1996, capital expenditures amounted to $307.3 mil-lion. New restaurant expenditures amounted to $194.2 mil-lion; $65.4 million was spent for improvements to existingrestaurants; and $47.7 million was spent for other additions.These included Hortons’ expenditures of $50.3 million for

new restaurant development, which are leased to franchisees.Current plans are to open or have under construction about520 new Wendy’s restaurants, of which approximately 120 to140 will be company-operated Wendy’s sites, and 270 newHortons in 1997. Capital expenditures are expected to beapproximately $359 million in 1997 including approximately$93 million for Hortons. Cash flow from operations, cashand investments on hand, possible asset sales, and cash avail-able through existing revolving credit agreements, andthrough the possible issuance of securities should provide forthe company’s projected cash requirements through 1997,including cash for capital expenditures, future acquisitions ofrestaurants from franchisees, or for other corporate purposes.

Tim Hortons

Hortons is the second largest quick-service restaurant chainin Canada and at year end had 1,384 restaurants open. Thecompany believes there are significant opportunities toexpand the Hortons concept throughout Canada and theUnited States. The concept is extremely flexible andincludes standard units with a bakery, both with and withoutdrive-through windows, double-drive-through buildings,and various other satellites, kiosks, and carts. In addition,combination units shared with the Wendy’s concept are uti-lized. Future expansion in Canada is anticipated to be pri-marily through franchising, and the company plans to openor have under construction about 195 Canadian Hortons in1997. Hortons will also be developed in the United States,initially with a higher mix of company-operated units. Thecompany has purchased 44 Hardee’s in Detroit, and agreedto purchase 31 Rax restaurants in Ohio and West Virginia,with approximately 60 of these to be converted to Hortons.The company plans to build a substantial presence in thesemarkets to build recognition of the Hortons brand and toeffectively utilize marketing.

Since Hortons is primarily a franchise operation in Canada,financial success depends on developing new stores andincreasing the average unit sales. This results in royalties,rental income, and revenue from warehouse sales. In 1996,200 new Hortons were opened and including United Statesmarket development, the company anticipates the number ofnew units to increase in future years. The average unit samestore sales increased approximately 5%, in local currency, in1996. As a result royalties increased 18%, rental incomeincreased 20%, and warehouse sales increased 12% over1995. In total, systemwide Hortons sales advanced 19% dur-ing the year.

Wendy’s of Canada

Canada is the company’s largest international market. During1996, Canadian Wendy’s same store sales for company-operated restaurants increased 1.4% in local currency, thisfollows a 5.6% increase in 1995. In 1996, 11 company-operated Wendy’s and 17 franchised Wendy’s opened in

Canada, bringing the total restaurants to 229 at year end.Included in these restaurants are combination units ofWendy’s and Hortons which have proven successful with 41units open at the end of 1996. In 1997, the company plans toopen 14 company and 29 franchise Wendy’s restaurants inCanada.

International

International Wendy’s expansion outside of Canada acceler-ated in 1996 with 84 new international restaurants open. Atyear-end 1996, there were 335 Wendy’s open outside theUnited States and Canada. International growth continues tobe primarily through franchising, but real estate joint ven-tures and company-operated units are also being planned.The company intends to increase international developmentin 1997 and future years with plans for opening or havingunder construction 130 new Wendy’s in international mar-kets outside Canada. The primary markets are Asia and thePacific, Latin America and the Caribbean, and Europe andthe Middle East.

Inflation

Financial statements determined on a historical cost basismay not accurately reflect all the effects of changing priceson an enterprise. Several factors tend to reduce the impact ofinflation for the company. Inventories approximate currentmarket prices, there is some ability to adjust prices, and lia-bilities are repaid with dollars of reduced purchasing power.

MANAGEMENT’S OUTLOOK

While 1996 proved to be a challenge, particularly the firstthird of the year, results were gratifying. Managementbelieves it has a solid foundation to leverage the companyagainst the still extremely competitive environment which isexpected to continue in 1997. The company intends toadhere to its long established strategies of exceeding cus-tomer expectations, fostering a performance-driven culture,delivering the balanced message of brand equity plus valuein outstanding advertising, and creating a healthy restaurantsystem. The company believes that its success depends onproviding quality products and everyday value, not in dis-counting products. Menu variety is also an important part ofcustomer satisfaction. Restaurants are remodeled on a recur-ring basis to maintain a fresh image and increase conve-nience for consumers. When combined with effective mar-keting, the goal of these initiatives is to increase the numberof transactions and average sales per restaurant.

New restaurant development continues to be very important.Both Wendy’s and Hortons restaurant concepts are underpen-etrated in domestic and international markets. The companyintends to grow aggressively, but responsibly, focusing on themarkets with the best potential for sales and return on invest-ment. Each new company-operated unit must meet minimum

Wendy’s International, Inc. and Subsidiaries

23

operational and financial requirements before being approvedfor development. A total of 543 new restaurants were addedthis year, with another 184 under construction. Current planscall for 750 to 800 new units to be open or under constructionin 1997. Of these, approximately 500 are planned to beWendy’s restaurants and 270 are planned to be Hortons.While the majority of units will continue to be traditionalsites, special sites, such as shopping malls and universities, willcontribute to this growth. Likewise, a significant part of futuregrowth is expected to come from outside the United Statesfor Wendy’s and outside of Canada for Hortons.

The company will continue its strategy to develop the over-all health of the Wendy’s system by acquiring restaurantsfrom, and selling restaurants to, franchisees where prudent.Acquired restaurants, which may be underperforming, canbe improved and then operated profitably by the company orrefranchised to a qualified franchisee. Franchised Wendy’srestaurants may also be acquired due to geographic or opera-tional benefits to existing company-operated markets. Sellingrestaurants generates cash which is used for new develop-ment, conversions, acquisitions, or remodeling programs.During the last three years, the company purchased 220franchised Wendy’s, and sold 348 company-operated restau-rants to franchisees. Underperforming restaurants, whethercompany or franchise operated, are monitored carefully andrevitalized where economically feasible or closed if necessaryfor the financial health of the system.

The strength and vitality of the franchise community is anessential part of the continued success of the company’s sys-tem. Various strategies have been developed to assist individ-ual franchisees and the overall franchise system. The aim ofthese strategies is to encourage responsible new restaurantdevelopment, add new franchisees, enhance minority repre-sentation, increase royalty income, and maintain a high roy-alty receivable collection rate. The company will continue tomaintain appropriate reserves against franchise receivables.

The company is optimistic about development of Hortons inthe United States, but this concept does not yet enjoy thesuperior brand recognition it has in Canada. There is alsosignificant competition from established baked goods anddonut outlets. The company will adhere to the strategies dis-cussed above, and educate potential consumers on thevirtues of Hortons.

The company adopted Financial Accounting StandardNumber 121 - “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of ”in 1996. This regulation requires continual monitoring oflong-term assets and a reduction in their carrying value ifevidence of an impairment is determined. The company didnot record any impairments of carrying values of assets.

Under Financial Accounting Standard Number 123 -“Accounting for Stock-Based Compensation”, the companyhas elected to account for stock-based compensation undercurrent guidance, APB Opinion No. 25, “Accounting forStock Issued to Employees,” (Opinion 25). Companieswhich elect to continue using the rules of Opinion 25 mustmake pro forma disclosures of net income and earnings pershare as if this new statement had been applied. See Note 6to the Consolidated Financial Statements.

Safe Harbor Statement

Certain information contained in this annual report, particu-larly information regarding future economic performanceand finances, plans and objectives of management, is for-ward-looking. In some cases, information regarding certainimportant factors that could cause actual results to differmaterially from any such forward-looking statement appeartogether with such statement. In addition, the following fac-tors, in addition to other possible factors not listed, couldaffect the company’s actual results and cause such results todiffer materially from those expressed in forward-lookingstatements. These factors include competition within thequick-service restaurant industry, which remains extremelyintense, both domestically and internationally, with manycompetitors pursuing heavy price discounting; changes ineconomic conditions; consumer perceptions of food safety;harsh weather, particularly in the first and fourth quarters;changes in consumer tastes; labor and benefit costs; legalclaims; risks inherent to international development; the con-tinued ability of the company and its franchisees to obtainsuitable locations and financing for new restaurant develop-ment; governmental initiatives such as minimum wage rates,taxes and possible franchise legislation; and other factors setforth in Exhibit 99 to the company’s Form 10-K filed withthe Securities and Exchange Commission.

Wendy’s International, Inc. and Subsidiaries

24

WENDY’S DOMESTIC AND INTERNATIONAL RESTAURANTS

Total Wendy’s Wendy’s Company Operated Wendy’s Franchised

1996 1995 1994 1996 1995 1994 1996 1995 1994

Open at beginning of year 4,667 4,411 4,168 1,311 1,264 1,224 3,356 3,147 2,944Opened 343 333 298 89 98 76 254 235 222Closed (77) (77) (55) (10) (14) (20) (67) (63) (35)Acquisitions within the system 283 203 82 104 83 33 179 120 49Dispositions within the system (283) (203) (82) (179) (120) (49) (104) (83) (33)

Open at end of year 4,933 4,667 4,411 1,315 1,311 1,264 3,618 3,356 3,147

Wendy’s International, Inc. and Subsidiaries

Years ended December 29, 1996, December 31, 1995, and January 1, 1995

(In thousands, except per share data) 1996 1995 1994

RevenuesRetail sales $1,566,888 $1,461,880 $1,365,723Franchise revenues 330,256 284,400 225,864

1,897,144 1,746,280 1,591,587

Costs and expensesCost of sales 976,666 890,363 817,500Company restaurant operating costs 379,404 351,062 332,880Operating costs 54,710 60,216 52,461General and administrative expenses 136,461 136,424 120,621Depreciation and amortization of property and equipment 88,957 80,573 74,538Other (income) expense (683) 2,595 1,220Special charges 49,672 28,905Interest, net 6,812 10,230 13,169

1,642,327 1,581,135 1,441,294

Income before income taxes 254,817 165,145 150,293Income taxes 98,869 55,075 52,861

Net income $ 155,948 $ 110,070 $ 97,432

Primary earnings per common share $1.20 $.90 $.81

Fully diluted earnings per common share $1.19 $.88 $.79

Dividends per common share $.24 $.24 $.24

Primary shares 131,290 122,041 120,588

Fully diluted shares 133,785 130,230 128,718

See accompanying Notes to the Consolidated Financial Statements.

25Consolidated Statement of Income

26

Wendy’s International, Inc. and Subsidiaries

December 29, 1996, and December 31, 1995

(Dollars in thousands) 1996 1995

AssetsCurrent assets

Cash and cash equivalents $ 218,956 $ 206,127Short-term investments 4,795 7,682Accounts receivable, net 53,250 49,555Notes receivable, net 11,003 12,272Deferred income taxes 15,760 18,389Inventories and other 33,199 27,254

336,963 321,279

Property and equipment, net 1,207,944 1,006,744Cost in excess of net assets acquired, net 51,636 42,927Deferred income taxes 12,938 19,233Other assets 171,953 118,978

$1,781,434 $1,509,161

Liabilities and Shareholders’ EquityCurrent liabilities

Accounts and drafts payable $ 108,629 $ 108,182Accrued expenses

Salaries and wages 24,741 23,158Taxes 18,502 20,828Insurance 30,337 29,320Other 18,874 21,691

Due to officer 63,221Current portion of long-term obligations 6,681 29,469

207,764 295,869

Long-term obligationsTerm debt 197,622 297,029Capital leases 44,206 40,200

241,828 337,229

Deferred income taxes 62,956 47,853

Other long-term liabilities 12,114 9,431

Commitments and contingencies

Company-obligated mandatorily redeemablepreferred securities of subsidiary Wendy’s Financing I,holding solely Wendy’s Convertible Debentures 200,000

Shareholders’ equityPreferred stock, authorized: 250,000 sharesCommon stock, $.10 stated value, authorized: 200,000,000 shares

Issued: 113,148,000 and 103,993,000 shares, respectively 11,315 10,399Capital in excess of stated value 312,570 199,804Retained earnings 740,311 614,799Unrealized loss on investments (969) (1,504)Translation adjustments (4,743) (3,007)

1,058,484 820,491Treasury stock at cost: 129,000 shares (1,712) (1,712)

1,056,772 818,779

$1,781,434 $1,509,161

See accompanying Notes to the Consolidated Financial Statements.

Consolidated Balance Sheet

27

Wendy’s International, Inc. and Subsidiaries

See accompanying Notes to the Consolidated Financial Statements.

Years ended December 29, 1996, December 31, 1995, and January 1, 1995

(In thousands) 1996 1995 1994

Cash flows from operating activitiesNet income $155,948 $110,070 $ 97,432Adjustments to reconcile net income to net cash

provided by operating activitiesDepreciation and amortization 94,981 84,452 80,194Deferred income taxes 23,394 (4,393) (2,082)Net gain from restaurant dispositions (63,190) (37,810) (11,588)Net (gain) loss on other asset dispositions (124) 760 (68)Net reserves for receivables and other contingencies (8,855) 15,424 1,403Changes in operating assets and liabilities net of effects

of acquisitions and dispositions of restaurantsAccounts and notes receivable (3,443) (11,091) (12,673)Inventories and other (6,476) (1,245) (616)Accounts and drafts payable and accrued expenses (6,956) 7,370 11,215

Increase in other assets (571) (3,243) (82)Other changes, net 5,220 4,603 4,860

Net cash provided by operating activities 189,928 164,897 167,995

Cash flows from investing activitiesProceeds from restaurant dispositions 78,716 40,412 21,065Proceeds from other asset dispositions 30,951 19,139 18,621Capital expenditures (307,284) (217,532) (172,427)Acquisition of franchises (59,119) (42,746) (12,761)Proceeds from marketable securities 4,111 14,509 20,694Other investing activities (9,364) (1,519) (1,884)

Net cash used in investing activities (261,989) (187,737) (126,692)

Cash flows from financing activitiesProceeds from issuance of trust preferred securities 200,000Proceeds from issuance of term debt 285,410 10,488Proceeds from issuance of common stock 12,192 20,653 7,360Principal payments on long-term obligations (29,434) (169,017) (5,581)Dividends paid on common stock (30,436) (24,565) (25,071)(Payment) loan due officer, net (63,221) (5,057) 22,005Other financing activities (4,084) 1,428 (2,284)

Net cash provided by financing activities 85,017 108,852 6,917

Effect of exchange rate changes on cash (127) 476 (279)

Increase in cash and cash equivalents 12,829 86,488 47,941

Cash and cash equivalents at beginning of period 206,127 119,639 71,698

Cash and cash equivalents at end of period $218,956 $206,127 $119,639

Supplemental disclosures of cash flow informationInterest paid $30,556 $19,939 $21,478

Interest received 15,676 10,040 8,512

Income taxes paid 71,840 53,364 55,614

Debt converted to common stock 98,714 84

Capital lease obligations incurred 6,156 7,717

Acquisition of franchises

Fair value of assets acquired, net 64,803 67,291 15,859

Cash paid 59,119 42,746 12,761

Liabilities assumed 5,684 24,850 3,098

Consolidated Statement of Cash Flows

Wendy’s International, Inc. and Subsidiaries

See accompanying Notes to the Consolidated Financial Statements.

28

Years ended December 29, 1996, December 31, 1995, and January 1, 1995

(In thousands) 1996 1995 1994

Common stock at stated valueBalance at beginning of period $ 10,399 $ 10,179 $ 10,082

Exercise of options 103 220 97Conversion of subordinated debentures 813

Balance at end of period 11,315 10,399 10,179

Capital in excess of stated valueBalance at beginning of period 199,804 171,888 162,122

Exercise of options, including tax benefits 14,865 27,832 9,766Conversion of subordinated debentures 97,901 84

Balance at end of period 312,570 199,804 171,888

Retained earningsBalance at beginning of period 614,799 529,294 456,933

Net income 155,948 110,070 97,432Dividends paid (30,436) (24,565) (25,071)

Balance at end of period 740,311 614,799 529,294

Unrealized loss on investments (969) (1,504) (723)

Translation adjustments (4,743) (3,007) (3,787)

Pension liability adjustment (3,212)

Treasury stock at cost (1,712) (1,712) (1,712)

Shareholders’ equity $1,056,772 $818,779 $701,927

Common sharesBalance issued at beginning of period 103,993 101,787 100,823

Exercise of options 1,031 2,200 964Conversion of subordinated debentures 8,124 6

Balance issued at end of period 113,148 103,993 101,787

Treasury shares (129) (129) (129)

Common shares issued and outstanding 113,019 103,864 101,658

Common shares issuable uponconversion of exchangeable shares 16,450 16,450 16,450

Common shares issued, issuable, and outstanding 129,469 120,314 118,108

Consolidated Statement of Shareholders’ Equity

NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of business

The company’s principal business is the operation of quick-service restaurants serving high-quality food. At year-end1996 the company and its franchise owners operated 4,933 ofthese restaurants under the name “Wendy’s” in 50 states andin 33 other countries and territories.

Additionally, the company and its franchise owners operated1,384 restaurants under the name “Tim Hortons” in Canadawith 22 units open in the United States.

Fiscal year

The company’s fiscal year ends on the Sunday nearest toDecember 31.

Basis of presentation

The Consolidated Financial Statements include the accountsof the company and its subsidiaries. All significant intercom-pany accounts and transactions have been eliminated inconsolidation.

For purposes of the Consolidated Statement of Cash Flows,the company considers short-term investments with originalmaturities of three months or less as cash equivalents.

The preparation of financial statements in conformity withgenerally accepted accounting principles requires manage-ment to make estimates and assumptions. The most signifi-cant of these estimates are related to reserves for receivables,workers’ compensation insurance, income taxes, and contin-gencies. These affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reportedamounts of revenues and expenses during the reporting periods. Actual results could differ from these estimates.

In 1995, special charges included the profit sharing contri-bution made to the sole shareholder of Hortons (prior toacquisition) of $29.6 million, and legal, accounting, andother professional fees of $4.0 million to effectuate theHortons transaction. Also, reserves of $13.5 million for envi-ronmental issues and contigencies, and miscellaneous coststo organize Canadian operations to blend the Wendy’s andHortons concepts were included.

Due to officer of $63.2 million as of December 31, 1995,primarily represents profit sharing contributions anddemand notes payable to the former sole shareholder ofHortons.

Inventories

Inventories, amounting to $17.0 million and $16.4 million atDecember 29, 1996, and December 31, 1995, respectively,are stated at the lower of cost (first-in, first-out) or market,and consist primarily of restaurant food items, new equip-ment and parts, and paper supplies.

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Property and equipment

Depreciation and amortization are recognized on thestraight-line method in amounts adequate to amortize costsover the following estimated useful lives: buildings, up to 25years; leasehold improvements, up to 25 years; restaurantequipment, up to 15 years; other equipment, up to ten years;and property under capital leases, the primary lease term.Interest cost associated with the construction of new restau-rants is capitalized, while certain other costs, such as groundrentals and real estate taxes, are expensed as incurred.

Property and equipment, at cost, at each year end consistedof the following:

(In thousands) 1996 1995

Land $ 319,284 $ 288,029Buildings 532,682 471,599Leasehold improvements 333,239 251,176Restaurant equipment 420,288 383,701Other equipment 70,142 65,643Capital leases 74,267 67,420

1,749,902 1,527,568

Accumulated depreciationand amortization (541,958) (520,824)

$1,207,944 $1,006,744

Cost in excess of net assets acquired

The cost in excess of net assets acquired is amortized on thestraight-line method over periods ranging from ten to 40years which, for leased restaurants, include the original leaseperiod plus renewal options, if applicable. The companyperiodically reviews goodwill and, based upon undiscountedcash flows, impairments will be recognized when a perma-nent decline in value has occurred. Accumulated amortiza-tion of cost in excess of net assets acquired was $19.2 millionand $16.6 million at December 29, 1996, and December 31,1995, respectively.

Other assets

Included in other assets is the long-term portion of notesreceivable amounting to $121.3 million and $72.6 million atDecember 29, 1996, and December 31, 1995, respectively.The carrying amount of notes receivable currently approxi-mates fair value.

Pre-opening costs

The company capitalizes certain operating costs which areincurred prior to the opening of a new restaurant. Thesecosts are amortized over a one-year period.

Capitalized software development costs

The company capitalizes internally developed software costswhich are amortized over a seven-year period.

Advertising costs

The company expenses advertising costs as incurred.

Notes to the Consolidated Financial Statements

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Franchise operations

The company grants franchises to independent operators who inturn pay technical assistance/franchise fees which may includeequipment, royalties, and in some cases, rents for each restaurantopened. A technical assistance/franchise fee is recorded asincome when each restaurant commences operations. Royalties,based upon a percent of monthly net sales, are recognized asincome on the accrual basis. The company has establishedreserves related to the collection of franchise royalties and otherfranchise-related receivables and commitments (see Note 9).

Franchise owners receive assistance in such areas as real estatesite selection, construction consulting, purchasing, and mar-keting from company personnel who also furnish these ser-vices to company-operated restaurants. These franchiseexpenses are included in general and administrative expenses.

Foreign operations

At December 29, 1996, the company and its franchiseowners operated 229 Wendy’s restaurants and 1,362 TimHortons restaurants in Canada. Additionally, 335 Wendy’srestaurants were operated by the company and its franchiseowners in other foreign countries and territories. The func-tional currency of each foreign subsidiary is the respectivelocal currency.

Net income per share

Primary earnings per common share is computed by dividingnet income available to common shareholders by the weightedaverage number of common shares outstanding and dilutivecommon share equivalents during each period, including thecompany-obligated mandatorily redeemable preferred securi-ties. Fully diluted computations assume full conversion of thesubordinated debentures into common shares, when dilutive,and the elimination of related expenses, net of income taxes.

NOTE 2 TERM DEBT

Term debt at each year end consisted of the following:

(In thousands) 1996 1995

Notes, unsecured, and Mortgages Payable with aweighted average interestrate of 6.5%, due ininstallments through 2010 $ 4,432 $ 27,351

Industrial DevelopmentRevenue Bonds, with aweighted average interestrate of 11.3%, due ininstallments through 2002 591 761

6.35% Notes, due December 15, 2005 96,524 96,251

7% Debentures, due December 15, 2025 96,464 96,429

7% Convertible Subordinated Debentures, due April 1, 2006 99,915

198,011 320,707Current portion (389) (23,678)

$197,622 $297,029

The industrial development revenue bonds were issued toprovide funds for the acquisition, construction, andimprovement of various restaurants.

The 7% convertible debentures were redeemed by the com-pany in April 1996. The conversion price was $12.30 percommon share and resulted in the entire balance being con-verted to common stock amounting to 8,124,000 shares.

The 6.35% notes and 7% debentures are unsecured andunsubordinated. They are not redeemable by the companyprior to maturity.

In 1995, the company entered into interest rate swaps tomanage its exposure to interest rate fluctuations on the6.35% and 7% securities issued in December 1995. Thecompany reflects realized and unrealized gains and losses onhedging instruments as an adjustment to the carrying valueof the hedged asset or liability. Accordingly, realized lossesrelated to these interest rate swaps amounting to $3.6 millionand $3.4 million, respectively, have been recorded as a reduc-tion of the carrying value of the notes and debentures andwill be amortized to interest expense over the term of therelated debt.

Based on quoted market prices for the convertible subordi-nated debentures and future cash flows for all other termdebt, the fair value of total term debt was approximately$191 million at December 29, 1996, and $394 million atDecember 31, 1995.

The combined aggregate amounts of future maturities for allterm debt are as follows:

(In thousands)

1997 $ 3891998 3711999 3142000 2842001 139Later years 196,514

$198,011

The company has unused contractual lines of credit aggre-gating $200 million from various financial institutions, gen-erally at their respective prime rates.

Net interest expense for each year consisted of thefollowing:

(In thousands) 1996 1995 1994

Total interest charges $ 20,257 $ 20,456 $22,176Distributions on trust

preferred securities 2,772Interest income (16,217) (10,226) (9,007)

$ 6,812 $ 10,230 $13,169

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NOTE 3 COMPANY-OBLIGATED MANDATORILY

REDEEMABLE PREFERRED SECURITIES

In September 1996, Wendy’s Financing I (the trust) issued$200,000,000 of $2.50 Term Convertible Securities, Series A(the trust preferred securities). Wendy’s Financing I, a statu-tory business trust, is a wholly-owned consolidated sub-sidiary of the company with its sole asset being $202 millionaggregate principal amount of 5% Convertible SubordinatedDebentures due September 15, 2026, of Wendy’s (the trustdebenture).

The trust preferred securities are non-voting (except in lim-ited circumstances), pay quarterly distributions at an annualrate of 5%, carry a liquidation value of $50 per share and areconvertible into the company’s common shares at any timeprior to the close of business on September 15, 2026, at theoption of the holder. The trust preferred securities are con-vertible into common shares at the rate of 1.8932 commonshares for each trust preferred security (equivalent to a con-version price of $26.41 per common share). The companyhas executed a guarantee with regard to the trust preferredsecurities. The guarantee, when taken together with thecompany’s obligations under the trust debenture, the inden-ture pursuant to which the trust debenture was issued, andthe applicable trust document, provides a full and uncondi-tional guarantee of the trust’s obligations under the trustpreferred securities.

Based on the quoted market price, fair value of the trust pre-ferred securities was approximately $208 million atDecember 29, 1996.

NOTE 4 LEASES

The company occupies land and buildings and uses equip-ment under terms of numerous lease agreements expiring onvarious dates through 2086. Terms of land only and land andbuilding leases are generally for 20 to 25 years. Many ofthese leases provide for future rent escalations and renewaloptions. Certain leases require contingent rent, determinedas a percentage of sales, when annual sales exceed specifiedlevels. Most leases also obligate the company to pay the costsof maintenance, insurance, and property taxes.

At each year end capital leases consisted of the following:

(In thousands) 1996 1995

Buildings $ 74,268 $ 67,420Accumulated amortization (35,188) (33,967)

$ 39,080 $ 33,453

At December 29, 1996, future minimum lease payments forall leases, and the present value of the net minimum leasepayments for capital leases, were as follows:

Capital Operating(In thousands) Leases Leases

1997 $ 10,370 $ 46,3191998 9,577 44,7531999 8,010 41,2332000 6,370 37,1022001 5,554 33,501Later years 46,327 225,220

Total minimum lease payments 86,208 $428,128

Amount representing interest (35,710)

Present value of net minimum lease payments 50,498

Current portion (6,292)

$ 44,206

Total minimum lease payments have not been reduced byminimum sublease rentals of $2.6 million under capitalleases, and $230.4 million under operating leases due in thefuture under noncancelable subleases.

Rent expense for each year is included in company restau-rant operating costs and amounted to:

(In thousands) 1996 1995 1994

Minimum rents $50,806 $45,142 $41,348Contingent rents 12,817 9,709 8,589

$63,623 $54,851 $49,937

In connection with the franchising of certain restaurants, thecompany has leased land, buildings, and equipment to therelated franchise owners.

Most leases provide for monthly rentals based on a percent-age of sales, while others provide for fixed payments withcontingent rent when sales exceed certain levels. Lease termsare approximately ten to 20 years with one or more five-yearrenewal options. The franchise owners bear the cost ofmaintenance, insurance, and property taxes.

The company generally accounts for the building and equip-ment portions of the fixed payment leases as direct financingleases. The land portion of leases and leases with rents basedon a percentage of sales are accounted for as operating leases.

At each year end the net investment in financing leases,included in other assets, consisted of the following:

(In thousands) 1996 1995

Total minimum lease receipts $ 33,531 $ 37,206Estimated residual value 4,615 4,618Amount representing

unearned interest (17,727) (19,579)Current portion, included

in accounts receivable (931) (979)

$ 19,488 $ 21,266

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At each year end assets leased under operating leasesconsisted of the following:

(In thousands) 1996 1995

Land $116,181 $ 97,581Building 234,870 184,394Equipment 27,626 29,659

378,677 311,634Accumulated amortization (73,308) (72,184)

$305,369 $239,450

At December 29, 1996, future minimum lease receipts wereas follows:

Financing Operating (In thousands) Leases Leases

1997 $ 2,942 $ 33,3231998 2,955 31,8641999 2,829 29,7882000 2,743 27,5322001 2,570 24,455Later years 19,492 69,549

$33,531 $216,511

Rental income for each year is included in franchiserevenues and amounted to:

(In thousands) 1996 1995 1994

Minimum rents $35,267 $28,612 $23,140Contingent rents 39,622 33,542 27,462

$74,889 $62,154 $50,602

NOTE 5 INCOME TAXES

The provision for income taxes at each year end consisted ofthe following:

(In thousands) 1996 1995 1994

CurrentFederal $50,658 $ 51,641 $49,802State and local 4,290 3,864 4,403Foreign 20,527 3,963 738

75,475 59,468 54,943

DeferredFederal 14,235 7,724 (1,418)State and local 1,258 (476) (213)Foreign 7,901 (11,641) (451)

23,394 (4,393) (2,082)

$98,869 $ 55,075 $52,861

The temporary differences which give rise to deferred taxassets and liabilities at each year end consisted of thefollowing:

(In thousands) 1996 1995

Deferred tax assetsLease transactions $ 4,049 $ 3,996Reserves not currently

deductible 13,597 18,896Foreign operations 12,464 14,748All other 2,696 2,390

32,806 40,030

Valuation allowance (2,585) (1,466)

$30,221 $38,564

Deferred tax liabilitiesLease transactions $ 7,615 $ 8,264Property and equipment

basis differences 34,886 30,049Installment sales 18,215 7,540All other 3,763 2,942

$64,479 $48,795

Deferred tax assets for foreign operations have been estab-lished primarily for net operating loss carryovers and excesscapital allowances. In 1996 and 1995, the deferred tax assetsrelated to non-Canadian foreign operations are offset by avaluation allowance. As a result of the regionalization andlegal entity restructuring of Canadian operations and theacquisition of Tim Hortons, the company reduced the valua-tion allowance by $7.3 million in 1995, primarily due to therealization of Canadian tax benefits.

A reconciliation of the statutory U.S. Federal income tax rateof 35 percent to the company’s effective tax rate for eachyear is shown below:

(In thousands) 1996 1995 1994

Income taxes atstatutory rate $89,186 $57,801 $52,602

Effect of foreignoperations 6,090 (2,993) (853)

State and local taxes,net of federal benefit 3,606 2,209 2,737

Canadian restructuringbenefit (3,936) (279)

Other (13) 1,994 (1,346)

Income taxes at effective rate $98,869 $55,075 $52,861

NOTE 6 STOCK OPTION AND SHAREHOLDER RIGHTS PLANS

The company has various stock option plans which provideoptions for certain employees and outside directors to pur-chase common shares of the company. Grants of options toemployees and the periods during which such options can beexercised are at the discretion of the compensation commit-tee of the Board of Directors. Grants of options to outsidedirectors and the periods during which such options can beexercised are specified in the plan applicable to directors anddo not involve discretionary authority of the Board. Alloptions expire at the end of the exercise period. Options aregranted at the fair market value of the company’s commonshares on the date of grant and no amounts applicable there-to are reflected in net income. The company makes norecognition of the options in the financial statements untilthey are exercised. Pro forma disclosures are provided for1995 and 1996 as if the company adopted the cost recogni-tion requirements under Financial Accounting StandardNumber 123 (SFAS 123) – “Accounting for Stock-BasedCompensation.”

On August 2, 1990, the Board of Directors adopted theWeShare Stock Option Plan (WeShare Plan), a non-qualifiedstock option plan to provide for grants of options equal toten percent of each eligible employee’s earnings, with aminimum of 20 options to be made to each eligibleemployee annually. An aggregate of 5.2 million commonshares of the company have been reserved pursuant to theWeShare Plan.

The options have a term of ten years from the grant date andbecome exercisable in installments of 25 percent on each ofthe first four anniversaries of the grant date. On August 1,1996, August 3, 1995, and August 9, 1994, approximately896,000 options, 785,000 options, and 865,000 options weregranted to eligible employees at an exercise price of $17.38per share, $18.31 per share, and $15.38 per share, respectively.

In addition, the Board of Directors also adopted the 1990Stock Option Plan (1990 Plan) on August 2, 1990, andamended the 1990 Plan on August 1, 1991, and February 23,1994. An aggregate of 12.5 million common shares of thecompany have been reserved for issuance to key employeesand outside directors under the 1990 Plan, as amended.

On August 1, 1996, August 3, 1995, and August 9, 1994,approximately 1.4 million options, 1.3 million options, and1.3 million options were granted under the 1990 Plan at anexercise price of $17.38 per share, $18.31 per share, and$15.38 per share, respectively.

The following is a summary of stock option activity for thelast three years:

Shares Under Weighted Average(Shares in thousands) Option Price Per Share

Balance at January 2, 1994 8,541 $ 9.90Granted 2,500 15.68Exercised (964) 7.64Canceled (423) 12.17

Balance at January 1, 1995 9,654 11.52Granted 2,262 18.28Exercised (2,200) 9.39Canceled (414) 14.78

Balance at December 31, 1995 9,302 13.52Granted 2,994 17.77Exercised (1,031) 11.82Canceled (518) 16.16

Balance at December 29, 1996 10,747 $14.74

Options exercisable to purchase common shares totaled 5.1million, 4.2 million, and 4.6 million at December 29, 1996,December 31, 1995, and January 1, 1995, respectively. Sharesreserved under the plans at each year end were 12.0 millionin 1996, 12.5 million in 1995, and 14.1 million in 1994.

The fair value of each option granted during 1996 isestimated on the date of grant using the Black-Scholesoption-pricing model with the following assumptions: (1) dividend yield of 1.3%, (2) expected volatility of 25%, (3) risk-free interest rate of 6.1%, and (4) expected life offour years.

The weighted average fair value of options granted during1996 and 1995 was $4.70, and $4.49, respectively.

The following tables summarize stock options outstandingand exercisable at December 29, 1996:

(Shares in thousands) Options Outstanding

WeightedAverage Weighted

Range of Remaining AverageExercise Options Contractual ExercisePrices Outstanding Life Price

$ 5 – $13 2,771 4.2 $ 8.4313 – 16 2,749 7.2 14.9616 – 18 2,441 9.5 17.3618 – 21 2,786 8.6 18.51

$ 5 – $21 10,747 7.3 $14.74

(Shares in thousands) Options Exercisable

WeightedRange of AverageExercise Options ExercisePrices Exercisable Price

$ 5 – $13 2,770 $ 8.4313 – 16 1,608 14.8616 – 18 33 17.1718 – 21 676 18.27

$ 5 – $21 5,087 $11.83

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On December 29, 1995, the company acquired all of the stockof 1052106 Ontario Limited (Ontario), formerly 632687Alberta Ltd., the parent company of the Tim Hortons donutrestaurant chain, for 16.45 million shares of a Canadian sub-sidiary of the company exchangeable for 16.45 million com-mon shares of Wendy’s International, Inc. The exchangeableshares may be exchanged at any time until December 29,2005, at which time they must be exchanged. Tim Hortons isthe leading franchisor of bakery and coffee shops in Canada.The transaction was accounted for as a pooling of interests. Inconnection with the acquisition, $4.0 million in professionalfees to effectuate the transaction were incurred.

Additionally during 1995, the company acquired 33 Wendy’srestaurants in the Little Rock market for cash of $37.0million and 47 restaurants in the Pittsburgh market for $4.0million cash and notes of $23.0 million. Three other restau-rants were acquired for $1.7 million during 1995.

During 1994, the company acquired 29 Wendy’s restaurantsin the Kansas City market for cash of $10.5 million and theassumption of certain liabilities. The company acquired fourother domestic restaurants from franchisees for $2.3 millionduring 1994.

NOTE 8 DISPOSITIONS

The company franchised 178 domestic and one Canadianrestaurant during 1996. Additionally, 118 domestic and twoCanadian restaurants were franchised during 1995, and 49domestic restaurants were franchised in 1994. These transac-tions resulted in pretax gains of approximately $63.2 million,$37.8 million, and $11.6 million in 1996, 1995, and 1994,respectively, and are included in franchise revenues.

Notes receivable related to dispositions were $103.4 millionat December 29, 1996, and $63.6 million at December 31,1995, and are included in notes receivable and other assets.

NOTE 9 COMMITMENTS AND CONTINGENCIES

At December 29, 1996, and December 31, 1995, the com-pany’s reserves established for doubtful royalty receivableswere $2.0 million and $3.6 million, respectively. Reservesrelated to possible losses on notes receivable, real estate,guarantees, claims, and contingencies involving franchiseestotaled $6.7 million at December 29, 1996, and $7.2 millionat December 31, 1995. These reserves are included inaccounts receivable, notes receivable, other assets, and otheraccrued expenses.

The company has guaranteed certain leases and debtpayments of franchise owners with average annual obliga-tions of $18.0 million over the next two years. In the eventof default by a franchise owner, the company generallyretains the right to acquire possession of the relatedrestaurants.

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Had compensation expense been recognized for 1996 and1995 grants for stock-based compensation plans in accor-dance with provisions of SFAS 123, the company wouldhave recorded net income and earnings per share as follows:

(In thousands, except per share data) 1996 1995

Net income $153,489 $109,359Primary earnings per common share $1.18 $.90Fully diluted earnings per common share $1.17 $.88

The impact of applying SFAS 123 in this pro forma disclo-sure is not indicative of future amounts. SFAS 123 does notapply to grants prior to 1995, and additional grants in futureyears are anticipated.

The company has a Shareholder Rights Plan (Rights Plan)which provides for the distribution of one preferred stockpurchase right (Right), as a dividend for each outstandingcommon share. Each Right entitles a shareholder to buy oneten-thousandth of a share of a new series of preferred stockfor $25 upon the occurrence of certain events. Rights wouldbe exercisable once a person or group acquires 15 percent ormore of the company’s common shares, or ten days after atender offer for 15 percent or more of the common shares isannounced (these thresholds were 20 percent until theRights Plan was amended effective December 29, 1995). Nocertificates will be issued unless the Rights Plan is activated.

Under certain circumstances, all Rights holders, except theperson or company holding 15 percent or more of the com-pany’s common shares, will be entitled to purchase commonshares at about half the price that such shares traded forprior to the announcement of the acquisition. Alternatively,if the company is acquired after the Rights Plan is activated,the Rights will entitle the holder to buy the acquiring com-pany’s shares at a similar discount. The company can redeemthe Rights for one cent per Right under certain circum-stances. If not redeemed, the Rights will expire on August10, 1998.

NOTE 7 ACQUISITIONS

During 1996, the company acquired 41 Wendy’s restaurantsin the New York market for cash of $20.6 million and 52Wendy’s restaurants primarily in the South Carolina marketfor cash of $27.5 million. Eleven other restaurants wereacquired for $11.0 million during 1996.

In addition, the company acquired 40 Roy Rogers restau-rants in the New York area for $17.7 million. These sites willbe converted to Wendy’s restaurants and at year-end 1996ten of these have been converted. Additionally, 44 Hardee’srestaurants in the Detroit market were acquired for $24.0million. Of these sites, approximately 30 will be converted toTim Hortons restaurants and ten to Wendy’s restaurants.

The company is self-insured for most workers’ compensa-tion, general liability, and automotive liability losses subjectto per occurrence and aggregate annual liability limitations.The company is also self-insured for health care claims foreligible participating employees subject to certain deductiblesand limitations. The company determines its liability forclaims incurred but not reported on an actuarial basis.

The company has entered into long-term purchase agree-ments with some of its suppliers. The range of prices andvolume of purchases under the agreements may varyaccording to the company’s demand for the products andfluctuations in market rates.

The company and its subsidiaries are parties to various legalactions and complaints arising in the ordinary course ofbusiness; many of these are covered by the company’s self-insurance or other insurance programs. It is the opinion ofthe company that the ultimate resolution of such matterswill not materially affect the company’s financial conditionor earnings.

The company has undertaken to complete environmentalassessments of its properties belonging to one of itsCanadian subsidiaries. Although the ultimate amount ofreclamation obligations to be incurred is uncertain, the com-pany originally estimated such amounts, representing assess-ment, cleanup, and remediation costs, to be approximately$11.7 million at year-end 1995. At December 29, 1996, thecompany estimates these obligations to be approximately$5.1 million.

NOTE 10 RETIREMENT PLANS

The company’s retirement program covers substantially allfull-time employees qualified as to age and service. The pro-gram includes a contributory defined benefit pension planand a defined contribution plan for management and admin-istrative employees. The defined benefit pension plan allowsfor employee contributions and provides a matching benefitfrom the company in addition to a basic benefit which isindependent of employee contributions. The pension planalso provides for a guaranteed rate of return on employeeaccount balances. The defined contribution plan provides foran annual discretionary contribution which is determinedeach year by the Board of Directors. The defined contribu-tion plan allows for 401(k) contributions, acceptance of qual-ified rollovers, a loan feature, and a choice of four investingoptions, one of which is common stock of the company. Inaddition, the retirement program includes a noncontributorydefined benefit pension plan for all eligible crew employeesand shift supervisors of the company.

The company also has supplemental retirement plans forcertain key employees to replace benefits otherwise notavailable from the pension and profit sharing plans due to

Wendy’s International, Inc. and Subsidiaries

35

the limitations imposed under the Internal Revenue Codeand to assure that projected benefit levels were not decreasedby the changes to the retirement program which were imple-mented January 1, 1989.

The funded status of the pension plans for each year endconsisted of the following:

(In thousands) 1996 1995

Accumulated benefit obligation:Vested $(38,120) $(34,811)Nonvested $ (4,394) $(4,035)

Projected benefit obligation $(45,197) $(41,763)Fair value of plan assets 48,705 41,354Unrecognized net transition asset (192)Unrecognized net loss 355 6,579Unrecognized prior service costs 3,466 142

Prepaid pension cost $ 7,329 $ 6,120

In determining the present value of benefit obligations, dis-count rates of 7.25% and 7.0% were used in 1996 and 1995,respectively. The expected long-term rate of return on assetsused was 8.5% in 1996 and 1995. The assumed rate ofincrease in compensation levels was 8.0% for 1996 and 1995.Plan assets as of December 29, 1996, consisted of debt andequity instruments and cash equivalents.

Net periodic pension cost for each year consisted of the following:

(In thousands) 1996 1995 1994

Service cost $ 4,478 $ 3,756 $ 3,761Interest cost on

projected benefitobligation 3,105 2,903 2,432

Return on plan assets (5,161) (8,580) 564Net amortization 1,930 5,533 (3,139)

$ 4,352 $ 3,612 $ 3,618

The company provided for profit sharing and supplementalretirement benefits of $4.3 million, $3.6 million, and $2.8million for 1996, 1995, and 1994, respectively.

The company had an agreement with the former Chairmanof the Board which, as a result of his death in 1996, requiredthe company to expense $1.3 million under this agreementin the third quarter of 1996.

NOTE 11 ADVERTISING COSTS

The Wendy’s National Advertising Program, Inc. (WNAP) isa not-for-profit corporation which was established to collectand administer funds contributed by the company and alldomestic franchise owners. These contributions total 2% ofnet sales and are used for advertising programs designed toincrease sales and enhance the reputation of the companyand its franchise owners. Since 1993, the domestic systemhas agreed to increase national advertising spending from 2%to 2.5% of net sales. During 1996, 1995, and 1994, the com-pany contributed $31.8 million, $30.3 million, and $29.0million, respectively, to WNAP. These contributions wererecognized in company restaurant operating costs. AtDecember 29, 1996, and December 31, 1995, the company’spayable to WNAP amounted to $2.5 million and $2.3 mil-lion, respectively.

Total advertising expense of the company amounted to $62.2million, $62.1 million, and $58.2 million in 1996, 1995, and1994, respectively.

NOTE 12 SEGMENT REPORTING

The company operates exclusively in the food-service indus-try. The following presents information about the companyby geographic area. There were no material amounts of rev-enues or transfers among geographic areas.

(In thousands) United States International Corporate Total

1996Revenues $1,514,819 $382,325 $1,897,144Income before

income taxes 255,791 64,804 (65,778) 254,817Identifiable

assets* 1,193,276 209,245 29,012 1,431,533

1995Revenues $1,402,918 $343,362 $1,746,280Income before

income taxes 240,765 48,921 (124,541) 165,145Identifiable

assets* 972,126 169,844 26,679 1,168,649

1994Revenues $1,307,551 $284,036 $1,591,587Income before

income taxes 213,701 38,314 (101,722) 150,293Identifiable

assets* 811,071 127,794 27,151 966,016

*Excludes cash and cash equivalents, deferred income taxes, certain othercurrent assets, and investments.

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NOTE 13 QUARTERLY FINANCIAL DATA (UNAUDITED)

Quarter First Second Third Fourth(In thousands, except per share data) 1996 1995 1996 1995 1996 1995 1996 1995

Revenues $409,883 $398,008 $491,911 $437,370 $506,575 $451,542 $488,775 $459,360Gross profit * 87,964 87,939 135,937 115,990 132,204 117,975 130,259 122,735Net income 19,454 15,636 49,304 40,039 46,941 36,237 40,249 18,158Primary earnings per common share .16 .13 .38 .33 .36 .30 .30 .15Fully diluted earnings per

common share .16 .13 .38 .32 .36 .29 .30 .15

* Total revenues less cost of sales, company restaurant operating costs, and operating costs.

To Our Shareholders Management is responsible for the preparation of the finan-cial statements and other related financial informationincluded in this Annual Report. The financial statementshave been prepared in conformity with generally acceptedaccounting principles, incorporating management’s reason-able estimates and judgments, where applicable.

The company maintains a system of internal accounting con-trols designed to provide reasonable assurance that assets aresafeguarded, that transactions are executed as authorized, andthat transactions are recorded and reported properly. Thecontrol system is supported by written policies and proce-dures, appropriate divisions of responsibility and authorityand an effective internal audit function. Even effective inter-nal controls, no matter how well designed, have inherentlimitations, such as the possibility of human error or theoverriding of controls. Further, changes in conditions mayhave an impact on the effectiveness of controls over time.

The company assessed its internal control systems as ofDecember 29, 1996, using the criteria for effective internalcontrols as described in Internal Control – IntegratedFramework issued by the Committee of SponsoringOrganizations of the Treadway Commission. This in-depthreview focused on the effectiveness and efficiency of opera-tions, the reliability of financial reporting and compliancewith applicable laws and regulations. Based on this assess-ment, the company believes that, as of December 29, 1996, itssystem of internal control met those criteria. The companyintroduced and began the self assessment of internal controlsystems at Tim Hortons in 1996. Management has made acommitment to complete this in-depth review in 1997.

The company engages Coopers & Lybrand L.L.P. as indepen-dent public accountants to perform an independent audit ofthe financial statements. Their report, which appears herein,is based on obtaining an understanding of the company’saccounting systems and procedures and testing them as theydeem necessary.

The Board of Directors has an Audit Committee composedentirely of outside directors. The Audit Committee meetsperiodically with representatives of internal audit andCoopers & Lybrand L.L.P., and both have unrestricted accessto the Audit Committee.

Gordon F. TeterChairman, Chief Executive Officer and President

John K. CaseyVice Chairman and Chief Financial Officer

Lawrence A. LaudickVice President, General Controller and Assistant Secretary

To The Shareholders of Wendy’s International, Inc.

We have audited the accompanying consolidated balancesheet of Wendy’s International, Inc. and Subsidiaries as ofDecember 29, 1996 and December 31, 1995, and the relatedconsolidated statements of income, shareholders’ equity, andcash flows for the years ended December 29, 1996,December 31, 1995 and January 1, 1995. These financialstatements are the responsibility of the company’s manage-ment. Our responsibility is to express an opinion on thesefinancial statements based on our audits.

We conducted our audits in accordance with generallyaccepted auditing standards. Those standards require that weplan and perform the audit to obtain reasonable assuranceabout whether the financial statements are free of materialmisstatement. An audit includes examining, on a test basis,evidence supporting the amounts and disclosures in thefinancial statements. An audit also includes assessing theaccounting principles used and significant estimates made bymanagement, as well as evaluating the overall financial state-ment presentation. We believe that our audits provide a rea-sonable basis for our opinion.

In our opinion, the financial statements referred to abovepresent fairly, in all material respects, the consolidated finan-cial position of Wendy’s International, Inc. and Subsidiariesas of December 29, 1996 and December 31, 1995, and theconsolidated results of their operations and their cash flowsfor the years ended December 29, 1996, December 31, 1995and January 1, 1995, in conformity with generally acceptedaccounting principles.

Columbus, OhioFebruary 19, 1997

Wendy’s International, Inc. and Subsidiaries

37Management’s Statement of Responsibility forFinancial Statements

Report of Independent Accountants

EXECUTIVE MANAGEMENT, DIRECTORS AND OFFICERS

John K. CaseyRetiring Vice Chairman and CFOAge 64Elected 1988Committees: Executive, Finance

Joined Wendy’s 1981. Priorcorporate experience includesBorden, Inc. and Mobil Oil.Holds graduate degrees in law and finance.

Ronald V. JoyceSenior Chairman and Co-FounderThe TDL Group Ltd.Age 66Elected 1996

Became franchisee of originalTim Hortons store in 1965, full partner in Tim Hortons in1967, and sole owner in 1975.

Ronald E. MusickEVP Finance andInformation TechnologyAge 56Elected 1987Committees: Executive, Finance

Joined Wendy’s 1973. Held titleof Treasurer until 1981 when he joined a Wendy’s subsidiary.Returned to corporate staff in1986. Graduate of the BowlingGreen College of Commerce.

Gordon F. TeterChairman, CEO and PresidentAge 53Elected 1990Committees: Executive, Finance

Joined Wendy’s in 1987. 20 years in restaurant businessincludes executive positions withRed Robin, Ponderosa andCasa Lupita. Holds a graduatedegree from Purdue University.

R. David ThomasSenior Chairman of the Board and FounderAge 64Elected 1969 Committees: Board Membership,Executive*, Finance*

Founded Wendy’s 1969. 52 years in the restaurant business, includes 6 years as a Kentucky Fried Chicken franchisee.

W. Clay HamnerChairman and CEOMontrose Capital Corporation(Private merchant bank)Durham, NCAge 51Elected 1987Committees: Audit,Board Membership

The HonorableErnest S. Hayeck

National Judicial CollegeFaculty,Retired Judge, Trial Court of MassachusettsWorcester, MAAge 72Elected 1993Committees: Audit

Janet HillVice PresidentAlexander & Associates, Inc.(Corporate consulting firm specializing in human resourceplanning, corporate responsibilityand communications)Washington, DCAge 49Elected 1994Committees: Compensation

Thomas F. KellerR.J. Reynolds Professor ofBusiness Administration,Fuqua School of Business,Duke UniversityDurham, NCAge 65Elected 1991Committees: Audit*

Fielden B. Nutter, Sr.President and CEOF. B. Nutter Leasing Company,Chairman and CEOJohn Henry Rock Drills, Inc.(Real estate leasing/management company and equipment manufacturer, respectively)Belle, WVAge 72Elected 1980Committees: Compensation*

James V. PickettChairmanThe Pickett Companies,Managing Director of the realestate investment group of Banc One Capital Corporation (Real estate /finance)Dublin, OHAge 55Elected 1982Committees: Audit, BoardMembership*

Thekla R. ShackelfordOwner/President School Selection Consulting(Educational consulting firm)Gahanna, OHAge 62Elected 1984Committees: BoardMembership, Compensation

Founders and Directors Executive Management and Directors

Directors

*Denotes Chairperson of Committee

Andrew G. McCaugheyFormer Chairman/CEOScott’s Hospitality Inc.(Restaurants, hotels, school buses, photo shops)Aurora, OntarioAge 74Elected 1997Committees: Audit

True H. KnowlesFormer President/COODr Pepper Company,and Executive V.P.Dr Pepper/Seven UpCompanies Inc.Dallas, TXAge 59Elected 1997Committees: Compensation

Corporate Governance

● The majority of the BoardMembership Committee andthe committee chairperson areoutside directors.

● The Compensation Committeeis comprised of all outside directors.

● The Executive and FinanceCommittees are chaired by the Company’s Founder.

● Members of the Board havebroad, diverse and relevantbackgrounds in senior manage-ment positions, the restaurantindustry, retail, finance andlegal.

● A policy against the payment ofgreenmail is in place.

Wendy’s International, Inc.38

Frederick R. Reed, Esq.Chief Financial Officer, General Counsel and SecretaryAge 48Elected 1995Committees: Board Membership,Executive

Joined Wendy’s in 1996. FormerSenior Partner at Vorys, Sater,Seymour and Pease. 20 yearsexperience in finance and legal.B.A. Harvard University;J.D. The Ohio State University

College of Law.

George CondosEVP DevelopmentAge 43

Joined Wendy’s 1977.Advanced through restaurantoperations; previous position as SVP Southwest Region.Former independent restaurantowner.

Charles W. RathEVP MarketingAge 60

Joined Wendy’s 1987. Notre Dame graduate withprior experience in senior-levelmarketing, advertising and sales management positions in national corporations andadvertising agencies.

John T. SchuesslerPresident and Chief Operating Officer U.S. OperationsAge 46

Joined Wendy’s in 1976.Advanced through restaurantoperations; previous position as SVP Northeast Region.Graduate of Spring HillCollege.

John W. WrightPresident and Chief Operating Officer International DivisionAge 49

Joined Wendy’s 1993. Priorrestaurant operations expe-rience with PepsiCo,Gino’s, Arthur Treacher’sand Isleys. Graduate of theUniversity of Delaware.

Senior Vice Presidents

Emil J. BrolickStrategic Planning and Research

John F. BrownleyTreasurer

Donald F. CalhoonCorporate Marketing

Kathie T. ChesnutR&D, Quality Assurance and Purchasing

Rosalyn S. FarbAdministration

Robert L. JareckiInformation Technology

Kathleen A. McGinnisHuman Resources and Training

Vice Presidents

Raymond W. Baker

John D. Barker

Robert E. Bauer

Daniel L. Boone

Robert B. Cortelyou

Charles D. Finlay

Walter Fuehrer

Gilles M. Gallant

Dennis A. Hecker

Karen F. Ickes

Joseph C. Kovalcik

Lawrence A. LaudickGeneral Controller andAssistant Secretary

Dennis L. Lynch

John C. McPartland

Larry N. Nelson

Edwin L. Ourant

Kathleen M. Schmelzer

Henry J. Sherowski

Peter J. Stephens

James R. Thompson

Ronald E. Wallace

Stephen D. Warren

W. Stephen Wirt

Restaurant Operations

Northeast Region

Robert G. ZoellerSenior Vice President

Division Vice Presidents

Edward J. Rafter

Paul T. Keck

Robert J. Romeo

Midwest Region

Jack C. WhitingSenior Vice President

Division Vice Presidents

David I. Poling

Gary A. Rozanczyk

Upper U.S. Region

Joyce L. EufemiSenior Vice President

Division Vice Presidents

Raymond M. Shimmon

John H. Smith

Carin L. Stutz

Southeast Region

Edward L. AustinSenior Vice President

Division Vice Presidents

A. Michael Moore

Esau Sims, Jr.

C. Dawn Voss

Southwest Region

Stephen D. FarrarSenior Vice President

Division Vice Presidents

Eric J. Colah

Dennis R. Farrow

Richard J. LeBlé

International

Regional Vice Presidents

Jan L. Hubrecht

Rajesh A. Jolly

Vice Presidents

Charles R. Bruce

James J. Rieger

Wendy’s Restaurants of Canada Inc.

Brion G. GrubeSenior Vice President

Division Vice President

Neil G. Lester

The New Bakery Co.of Ohio, Inc.

Stanley W. AugsburgerVice President and General Manager

Executive Management

Paul D. HousePresident and Chief Operating Officer

Alfred LaneExecutive Vice President,General Counsel

Donald B. SchroederExecutive Vice President

Henry J. SvazasSenior Vice President

Vice Presidents

John W. Barber

Paul T. Conway

Cyril D. Garland

Nick S. Javor

Susan A. Layman

William A. Moir

Vice Presidents – Canadian Operations

Christian M. J. de Jaham

Grant D. Joyce

James R. Rushak

Vice President – U.S. Operations

Christos G. Laganos

The TDL Group Ltd.Tim Hortons

39

WENDY’S INTERNATIONAL, INC.

Stock Symbol/Exchange: WEN (NYSE)

1996 DATA:

Stock price range: $163/4 - $23Dividend: $.24Fully-diluted EPS: $1.19Shareholders’ equity per share: $8.16Capitalization: 19% debt, 81% equityCash and short-term investments:

$224 millionShares outstanding: 129.5 millionMarket capitalization: $2.7 billionSystemwide sales:

Wendy’s: $4.78 billionTim Hortons: $646 millionTotal: $5.43 million

Number of Units: Wendy’s: 4,933Tim Hortons: 1,384Total: 6,317

TRANSFER AGENT AND REGISTRAR

American Stock Transfer& Trust Company

Shareholder Services Department40 Wall Street, 46th FloorNew York, NY 100051-800-937-54491-800-278-4353 (Dividend reinvestment)http: //www.amstock.com

SHAREHOLDER INQUIRIES

Inquiries regarding address corrections,lost certificates, dividends, direct deposit, changes of registration, stock certificate holdings, dividend reinvest-ment, and other shareholder accountmatters should be directed to Wendy’stransfer agent, American Stock Transfer & Trust Company.

DIVIDEND REINVESTMENT

AND STOCK PURCHASE PLAN

Wendy’s shareholders of record mayelect to have cash dividends automati-cally reinvested in additional shares of Wendy’s through the DividendReinvestment and Stock PurchasePlan. Additional shares may also bepurchased by investing voluntary cashpayments of $20 to $20,000, but notmore than a total of $20,000 annually.Participation is entirely voluntary. Allfees associated with stock purchasesmade under the Plan are paid for byWendy’s International, Inc. As ofMarch 3, 1997, 64 percent of all regis-tered shareholders were participants.

To receive an informational brochure/enrollment form, please contactAmerican Stock Transfer & TrustCompany at the address or telephonenumber listed on this page.

COMMON SHARES

Wendy’s shares are traded primarily onthe New York Stock Exchange (tradingsymbol, WEN). Options in Wendy’sshares are traded on the Pacific StockExchange. At March 3, 1997, theCompany had approximately 82,000shareholders of record.

ANNUAL MEETING

The Annual Meeting of Shareholdersof Wendy’s International, Inc. will beheld at 10:00 a.m., April 29, 1997, at the Aladdin Shrine Temple, 3850Stelzer Road, Columbus, Ohio 43219.Shareholders are cordially invited toattend.

FORM 10-K

The Company’s Annual Report onForm 10-K will be sent free of chargeto shareholders upon request to theInvestor Relations Department at theCorporate Office.

DIVIDEND HISTORY

Wendy’s quarterly dividend is current-ly $.06 per share. Wendy’s has paid 75 consecutive dividends. Additionalinformation on dividends can beobtained by contacting the InvestorRelations Department at the CorporateOffice.

DEBT RATING

Standard & Poors . . . BBB+Moody’s . . . . . . . . . . Baa-1(As of 12/31/96.)

STOCK SPLIT HISTORY

September 1977 ......................4-for-3June 1978 ................................2-for-1March 1981.............................3-for-2November 1982......................3-for-2March 1984.............................4-for-3March 1985.............................4-for-3May 1986.................................5-for-4

(Example: 100 shares of Wendy’s com-mon stock purchased in 1976 equaled1,333 at 12/31/96.)

MARKET PRICE OF COMMON STOCK

1996 High Low Close

First Quarter $221/2 $171/8 $181/8Second Quarter 20 163/4 185/8Third Quarter 221/4 163/4 211/2Fourth Quarter 23 181/4 207/8

1995 High Low Close

First Quarter $175/8 $143/8 $163/8Second Quarter 187/8 16 177/8Third Quarter 223/4 17 211/8Fourth Quarter 221/4 191/4 211/4

PRODUCT INFORMATION

A complete nutritional and ingredientinformation brochure for Wendy’sproducts is available by writing to theConsumer Relations Department atthe Corporate Office.

ENVIRONMENTAL BROCHURE

For a copy of Wendy’s environmentalbrochure, “Meeting The Challengeand Finding Solutions,” write toWendy’s Environmental Commitmentat the Corporate Office.

CERTIFIED PUBLIC ACCOUNTANTS

Coopers & Lybrand L.L.P.Columbus, Ohio

LEGAL COUNSEL

Vorys, Sater, Seymour and PeaseColumbus, Ohio

Corporate/Shareholder Information

91 92 93 94 95 96

COMPARISON OF FIVE-YEAR

CUMULATIVE TOTAL RETURN

Assumes $100 invested 12/31/91 inWendy’s stock, S&P 500 and industrypeer group (dividends reinvested).

Wendy’s International, Inc.Industry Peer GroupS&P 500

$100

$224

40

FINANCIAL INFORMATION

Investor Relations:

General inquiries:Marsha GordonShareholder Relations Specialist (614) 764-3019 Fax: (614) 764-3330email: marsha–gordon@wendys.e-mail.com

Analysts and portfolio managers:John D. Barker Vice President, Investor Relations(614) 764-3044 Fax: (614) 764-3330email: john–barker@wendys.e-mail.com

Media inquiries:Denny Lynch Vice President, Communications (614) 764-3413

Information requests/

shareholder newsline:

A recorded message system allows you to request printed financial information, dividend reinvestment information and to listen to current news releases and prior day common stock closing price. (614) 764-3105

Internet:

Visit Wendy’s website athttp://www.wendys.com where you will find investor information, news releases, advertising, product, franchis-ing and nutritional information, as well as information about Wendy’sfounder, Dave Thomas, and The DaveThomas Foundation for Adoption.

Investor information via internet and fax is also available from the following sources:http: //www.investquest.comhttp: //www.prnewswire.com1-800-758-5804 (press releases faxed — refer to code 962050)

Videotapes:

Two videotapes are available for in-vestment clubs and other interestedgroups. A corporate identity video or a financial update video is available by writing or calling the Investor Relations Department at the Corpo-rate Office. Please specify which video you would like to receive.

GENERAL INFORMATION

Consumer inquiries, concerns

and information requests: (614) 764-3100

Franchise inquiries:

Wendy’s: (614) 764-8434Tim Hortons: (905) 845-6511

Store location inquiries: (614) 764-6800

CORPORATE OFFICES

Wendy’s International, Inc.4288 West Dublin Granville RoadP.O. Box 256Dublin, Ohio 43017-0256(614) 764-3100

Tim Hortons 874 Sinclair RoadOakville, Ontario L6K 2Y1(905) 845-6511

WENDY’S SUPPORTS NAIC

Wendy’s is proud to be a corporatemember of the National Associationof Investors Corporation (NAIC).The NAIC, a non-profit organiza-tion with over 500,000 members,provides a program of investmentinformation, education and support.Wendy’s participates in severalNAIC sponsored programs duringthe year including the Low CostInvestment Plan, Own Your Shareof America, Investor InformationReports (green sheets), the NationalInvestors Expo and regional inves-tor fairs. Visit the Wendy’s booth atthe following investor fairs in 1997:

March 11-12 W. Palm Beach, FLApril 5 Chicago, ILApril 5 Columbus, OH May 3 Pittsburgh, PA August 21-23 Cleveland, OH October 18 Seattle, WA November 8 Baltimore, MD

For more information, please callthe NAIC at (810) 583-6242.

HAVE YOU VISITED ANY OF THESE ”NONTRADITIONAL“ WENDY’S UNITS?

Wendy’s/Tim Hortons combination units — Pontiac, MI; Pickerington, OH; Hopkins, MN and throughout Canada

Atlanta International Airport

Dallas-Fort Worth International Airport

LaGuardia Airport — New York

Houston Intercontinental Airport

Portland International Airport

Exxon — (various locations throughout U.S.)

Mapco — (various locations throughout U.S.)

Petro — (various locations throughout U.S.)

Wilco — (various locations throughout U.S.)

Texaco — (various locations throughout U.S.)

Citgo — (various locations throughout U.S.)

Mobil — (various locations throughout U.S.)

Pilot Oil — (various locations throughout U.S.)

QuikTrip — (various locations throughout U.S.)

U.S. Marine Base — Camp Lejeune, NC

U.S. Navy Bases — Italy and Iceland

The Ohio State University — Columbus

University of Florida — Gainesville

University of Michigan — Ann Arbor

University of Kentucky — Lexington

Rutgers University — Piscataway and New Brunswick, NJ

University of Texas — Austin

University of Oklahoma — Norman

Michigan State University — East Lansing

Mississippi State University — Starkville

University of Toledo — Ohio

West Virginia University — Morgantown

Eastern Michigan University — Ypsilanti

University of California — Santa Barbara

The Ohio State University Medical Center

Miami Valley Hospital — Dayton, OH

Harper Hospital — Detroit, MI

Memorial Medical Center — Savannah, GA

Wendy’s International, Inc.

4288 West Dublin Granville Road

P.O. Box 256

Dublin, Ohio 43017-0256

®

printed on recycled paper with a 10 percent post-consumer content