The restaurant industry in the United States is comprised of five major segments: quick service restaurants, quick casual restaurants, family/mid-scale restaurants, casual dining restaurants and fine dining restaurants. Total restaurant industry sales in the United States for 2002 were approximately $279.0 billion, an increase of 3.5% over total sales for this industry in 2001.

quick service restaurant market is the largest segment of the United States restaurant industry. Sales at quick service restaurants in the United States were approximately $136.3 billion in 2002, representing approximately 49.0% of total restaurant industry sales. Sales in this segment grew at a compound annual growth rate of 4.6% between 1997 and 2002, and are projected to increase at a compound annual growth rate of 4.5% between 2002 and 2007. Technomic identifies eight major types of quick service restaurants in the United States: hamburger, pizza, chicken, other sandwich, Mexican, ice cream/yogurt, donut and cafeteria/buffet. The hamburger segment of the U.S. quick service restaurant market generated sales of approximately $47.5 billion in 2002, representing approximately 35% of the total sales of quick service restaurants in this period, making it the largest segment of the U.S. quick service restaurant market. Sales in this segment grew at a compound annual growth rate of 3.3% between 1997 and 2002, and are projected to increase at a compound annual growth rate of 3.0% between 2002 and 2007.

The quick service restaurant market is dominated by large chains of branded franchise restaurants. The hamburger segment of the quick service restaurant market is highly concentrated and sales by the top five quick service restaurant chains account for 84% of the total sales in the hamburger segment of the U.S. quick service restaurant market.

The Company operates 153 Wendy's restaurants of which 152 are located within its exclusive franchise territory and one is located in Tappahannock, Virginia, just outside its franchise territory. The Company’s restaurants are built to Wendy's International's specifications as to exterior style and interior décor. All but five of the Company’s restaurants are free-standing, one-story buildings, substantially uniform in design and appearance, constructed on sites of approximately 16,000 to 40,000 square feet, with parking for approximately 20 to 80 cars. The typical free standing restaurant contains approximately 2,910 square feet and has a food preparation area, a dining room capacity for 94 guests and a double pick-up window for drive-thru. All of the Company’s free standing restaurants

feature drive-thru windows which are serviced by a separate grill and food preparation station. Typically, the Company’s restaurants are open from 10:30 a.m. to 10:00 p.m., although many restaurants close their premises at 10:00 p.m. but remain open for extended evening hours until 1:00 a.m., servicing customers through the drive-thru window. In addition to its free standing restaurants, the Company also operates one store-front type restaurant and three restaurants in combination gas station/convenience stores.

Sixty-three of the Company’s restaurants incorporate Wendy's International's high-capacity central grill/multiple register design. High capacity restaurants are typically larger in size than traditional Wendy's restaurants and are built in locations where high guest volumes can support a larger restaurant. High-capacity restaurants feature a central grilling area and computerized ordering system designed to relay customer orders to the grilling area more efficiently, multiple cash registers, instead of the earlier one register Wendy's design, and a second drive-thru window.

The Company’s restaurants are owned or leased as follows: 87 restaurants are leased and located on leased land; 45 restaurants are owned by the Company and located on leased land; and 21 restaurants are owned by the Company and located on land that is also owned by the Company.

Cost of restaurant sales increased by $4.9 million, or 5.4% to $95.0 million or 61.0% of sales in the nine months ended June 27, 2004 from $90.1 million or 60.3% of sales for the nine months ended June 29, 2003.

Restaurant operating expenses decreased by $1.2 million, or 3.9% to $29.9 million or 19.2% of sales for the nine months ended June 27, 2004 from $31.1 million or 20.8% of sales for the nine months ended June 29, 2003.

Interest expense decreased by $778.0 thousand, or 6.8% to $10.7 million for the nine months ended June 27, 2004 from $11.5 million for the nine months ended June 29, 2003.

Net loss was $3.3 million for the nine months ended June 27, 2004 compared with a net income of $719.0 thousand for the June 29, 2003 representing a decrease of $4.0 million.