The accompanying unaudited condensed consolidated financial statements (the “Financial Statements”) of Wendy’s/Arby’s Group, Inc. (“Wendy’s/Arby’s” or “Wendy’s/Arby’s Group” and, together with its subsidiaries, the “Company”, “we”,“Company,” “we,” “us” or “our”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and, therefore, do not include all information and footnotes required by GAAP for complete financial statements. In our opinion, however, the Financial Statements contain all adjustments necessary to present fairly our financial position as of AprilJuly 4, 2010 and results of our operations for the three months ende d Apriland six months ended July 4, 2010 and March 29,June 28, 2009 and our cash flows for the threesix months ended AprilJuly 4, 2010 and March 29,June 28, 2009. The results of operations for the three months and six months ended AprilJuly 4, 2010 are not necessarily indicative of the results to be expected for the full 2010 fiscal year. These Financial Statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended January 3, 2010 (the “Form 10-K”).

We report on a fiscal year consisting of 52 or 53 weeks ending on the Sunday closest to December 31. Our 2009 fiscal year consisted of 53 weeks with our fiscal fourth quarter containing 14 weeks. BothAll three month and six month periods presented contain 13 weeks.weeks and 26 weeks, respectively. All references to years and quarters relate to fiscal periods rather than calendar periods.

During the three months ended March 29,first half of 2009, the Company received proceeds from dispositions of $6,246$7,680 consisting of $3,384 from the sale of 10 Wendy’s International, Inc. (“Wendy’s”) units to a franchisee and $2,862$4,296 related to other dispositions. These sales resulted in a net gain of $2,334$304 which is included inas an offset to “Depreciation and amortization.”

During the fourth quarter of 2008, we recognized an allowance for collectability of $21,227 to reduce the then carrying amount of the notes to $24,983. As a result, we recognized income of $4,909 during the three months and six months ended AprilJuly 4, 2010, were not significant.as the repayment proceeds exceeded the carrying value of the DFR Notes.  This gain is included in “Investment income (expense), net.”

The carrying amounts of current accounts, notes receivable and non-current notes receivable (excluding the DFR notes described above)(included in “Deferred costs and other assets”) approximated fair value due to the effect of related allowances for doubtful accounts and notes receivable. The carrying amounts of accounts payable and accrued expenses and advertising funds’ restricted assets and liabilities approximated fair value due to the short-term maturities of those items.

The following table presents our financial assets and liabilities (other than cash and cash equivalents) measured at fair value on a recurring basis as of AprilJuly 4, 2010 by the valuation hierarchy as defined in the fair value guidance:

The Company incurred corporate restructuring charges in 2009, primarily related to severance in conjunction withas a result of the merger with Wendy’s (the “Wendy’s Merger”).  The balance of thisSuch restructuring accrual, which is included in “Accrued expenses and other liabilities,” was $2,917$1,498 at AprilJuly 4, 2010 and $5,630 at January 3, 2010. Total payments related toThe reduction in this accrual during the threesix months ended AprilJuly 4, 2010 were $2,713.reflects total payments of $4,168 partially offset by net adjustments of $36. We do not expect to incur any additional corporate restructuring charges with respect to the Wendy’s Merger.

Wendy’s is a partner in a Canadian restaurant real estate joint venture (“TimWen”) with Tim Hortons Inc. Wendy’s 50% share of the joint venture is accounted for using the Equity Method. Our equity in earnings from TimWen is included in “Other operating expense, net.”

Presented below is an unaudited summary of activity related to our portion of TimWen included in our Condensed Consolidated Balance Sheets and Condensed Consolidated Statements of Operations:

Due to market conditions and other factors present during the first quarter ofsix months ended June 28, 2009, we recorded other than temporary losses of $3,127$3,916 attributable primarily to the decline in fair value of three of our cost investments.

The effective tax rate for the three months ended AprilJuly 4, 2010 and March 29,June 28, 2009 was 60.2%42.1% and 30.6%36.5%, respectively.  The effective rates vary from the U.S. federal statutory rate of 35% due to the effect of (1) changes in our estimated full year tax rates, (2) state income taxes, net of federal income tax benefit, (3) non-deductible expenses, and (4) tax credits.

The effective tax rate for the six months ended July 4, 2010 and June 28, 2009 three monthwas 26.7% and 48.5%, respectively. The effective rates vary from the U.S. federal statutory rate of 35% due to the effect of (1) state income taxes, net of federal income tax benefit, (2) non-deductible expenses, (3) a reduction in our state valuation allowances forin 2010, (4) adjustments to our uncertain tax positions, and (5) tax credits.

For the threesix months ended AprilJuly 4, 2010 and March 29,June 28, 2009, we increased our unrecognized tax benefits for prior periods by $2,818$2,921 and $1,172,$1,184, respectively.  Additionally, we increased interest on unrecognized tax benefits for these periods by $831$1,201 and $368,$773, respectively.  There were no other significant changes to unrecognized tax benefits and related interest and penalties in the threesix months ended AprilJuly 4, 2010 and March 29,June 28, 2009.

The Internal Revenue Service (the “IRS”) is currently conducting an examination of our 2010 and 2009 U.S. Federal income tax return years as part of the Compliance Assurance Process (“CAP”). As part of CAP, tax years are audited on a contemporaneous basis so that all or most issues are resolved prior to the filing of the tax return.  The Company participated in CAP beginning with the tax period ended December 28, 2008 and Wendy’s has been a participant since its 2006 tax year. Any matters relating to our December 28, 2008 U.S. Federal income tax return and to Wendy’s U.S. Federal income tax returns for 2007 and prior years have been settled.

Wendy’s/Arby’s U.S. Federal income tax returns for periods ended December 31, 2006 through September 29, 2008 are not currently under examination by the IRS. Our foreign income tax returns are open to examination primarily for periods ending on or after January 1, 2006. Certain of these foreign income tax returns are currently under examination. Someand some of our state income tax returns are currently under examination. Certain of these

Basic lossincome per share is computed by dividing net lossincome by the weighted average number of common shares outstanding.

Diluted lossincome per share for the three months and six months ended AprilJuly 4, 2010 and March 29,June 28, 2009 washas been computed by dividing net income by the same as basic lossweighted average number of shares plus the potential common share effect of dilutive stock options and non-vested restricted common shares, both computed using the treasury stock method. For the three months and six months ended July 4, 2010, we excluded 15,796 and 16,048, respectively, of potential common shares from our diluted per share sincecalculation as they would have had anti-dilutive effects. For the three months and six months ended  June 28, 2009, we reported a lossexcluded 24,178 and therefore, the effect20,648, respectively, of all potentially dilutive securities on the losspotential common shares from our diluted per share calculation as they would have been anti-dilutive.had anti-dilutive effects.

We manage and internally report our operations in two segments: (1) the operation and franchising of Wendy’s restaurants and (2) the operation and franchising of Arby’s restaurants. We evaluate segment performance and allocate resources based on each segment’s operating profit (loss).

There have been no material changes in total assets by segment since January 3, 2010.

Wendy’s/Arby’s has not entered into anythe following new or revised transactions with related parties since those reported in our last Form 10-K except10-K:

Wendy’s/Arby’s and the management company formed by certain former executives and a director, (the “Management Company”), entered into a services agreement (the “Services Agreement”) which commenced on July 1, 2009 and will continue until June 30, 2011, unless sooner terminated. Under the Services Agreement, the Management Company will assist us with strategic merger and acquisition consultation, corporate finance and investment banking services and related legal matters. During the second quarter of 2010, in addition to the regular quarterly fee to the Management Company, we paid the Management Company $2,465 in fees for corporate finance advisory services in connection with the following agreement:negotiation and execution of the Credit Agreement.

On April 5, 2010, the Wendy’s independent purchasing cooperative Quality Supply Chain Co-op (“QSCC”) and the Arby’s independent purchasing cooperative (“ARCOP”), in consultation with Wendy’s/Arby’s Restaurants, established the Strategic Sourcing Group Co-op, LLC (“SSG”(the “SSG”). The SSG was formed to manage and operate purchasing programs which combine the purchasing power of both Wendy’s and Arby’s Company-owned and franchised restaurants to create buying efficiencies for certain non-perishable goods, equipment and services.services utilized by both brands.

In order to facilitate the orderly transition of this purchasing function for the Company’s North American operations, Wendy’s/Arby’s Restaurants transferred certain contracts, assets and certain Wendy’s/Arby’s Restaurants purchasing employees to the SSG in the second quarter of 2010. Wendy’s/Arby’s Restaurants has committed to pay approximately $4,900 of expenses of the SSG, which was expensed in the first quarter of 2010 and included in “General and administrative,” and will be paid over a 24 month period.  Future operations are expected to be funded primarily from fees collected by suppliers and paid to SSG.The SSG is exploring various alternatives for its sources of funding for future operations. Effective April 5, 2010, the SSG will be leasingleased 2,300 square feet of office space from Arby’s Restaurant Group, Inc. until December 31, 2016 unless terminated earlier for an a verage annual base rental of $51.

This “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of Wendy’s/Arby’s Group, Inc. (“Wendy’s/Arby’s” and, together with its subsidiaries, the “Company” or “we”) should be read in conjunction with our accompanying unaudited condensed consolidated financial statements included elsewhere herein and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended January 3, 2010 (the “Form 10-K”).  There have been no significant changes as of AprilJuly 4, 2010 to the application of our critical accounting policies or guarantees and commitments as described in Item 7 of our Form 10-K.  Cer tainCertain statements we make under thist his Item 2 constitute “forward-looking statements” under the Private Securities Litigation Reform Act of 1995.  See “Special Note Regarding Forward-Looking Statements and Projections” in “Part II – Other Information” preceding “Item 1.”  You should consider our forward-looking statements in light of our unaudited condensed consolidated financial statements, related notes, and other financial information appearing elsewhere in this report, our Form 10-K and our other filings with the Securities and Exchange Commission.

Wendy’s/Arby’s is the parent company of its wholly-owned subsidiary holding company Wendy’s/Arby’s Restaurants, LLC (“Wendy’s/Arby’s Restaurants”). Wendy’s/Arby’s Restaurants is the parent company of Wendy’s International, Inc. (“Wendy’s”) and Arby’s Restaurant Group, Inc. (“ARG”Arby’s” or “Arby’s”“ARG”), which are the owners and franchisors of the Wendy’s® and Arby’s® restaurant systems, respectively. We currently manage and internally report our operations as two business segments: the operation and franchising of Wendy’s restaurants, including its wholesale bakery operations, and the operation and franchising of Arby’s restaurants.  References in this Form 10-Q to restaurants that w e “own” or that are “company-owned” include owned and leased restaurants.restaurants that we operate through our subsidiaries.  As of AprilJuly 4, 2010, the Wendy’s restaurant system was comprised of 6,5406,546 restaurants, of which 1,3901,391 were owned and operated by the Company. As of AprilJuly 4, 2010, the Arby’s restaurant system was comprised of 3,6993,685 restaurants, of which 1,1551,152 were owned and operated by the Company. The 2,5452,543 Wendy’s and Arby’s Company-owned restaurants are located principally in the United States and to a lesser extent in Canada (the “North America Restaurants”).

Restaurant business revenues for 2010 first quarterhalf include: (1) $720.8$1,480.9 million of sales from Company-owned restaurants, (2) $26.5$50.0 million from the sale of bakery items and kids’ meal promotion items to our franchisees, and others, (3) $83.0$170.8 million of royalty income from franchisees and (4) $7.1$12.8 million of other franchise relatedfranchise-related revenue and other revenues. All of our Wendy’s and most of our Arby’s royalty agreements provided for royalties of 4.0% of franchise revenues for the threesix months ended AprilJuly 4, 2010.