TRIARC COMPANIES INC - 10-K Annual Report

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[TRIARC LOGO]

TRIARC COMPANIES, INC.

FORM 10-K

FOR THE FISCAL YEAR ENDED

DECEMBER 29, 2002

================================================================================

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM 10-K

(MARK ONE)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 29, 2002.

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ________________ TO ________________.

COMMISSION FILE NUMBER 1-2207
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TRIARC COMPANIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 38-0471180
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)

280 PARK AVENUE 10017
NEW YORK, NEW YORK (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 451-3000
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SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
None

Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [x] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). Yes [x] No [ ]

The aggregate market value of the outstanding shares of the registrant's
Class A Common Stock (the only outstanding class of the registrant's common
equity) held by non-affiliates of the registrant was approximately $396,516,780
as of June 30, 2002. There were 20,448,722 shares of the registrant's Class A
Common Stock outstanding as of March 15, 2003.

DOCUMENTS INCORPORATED BY REFERENCE

Items 10, 11, 12 and 13 of Part III of this 10-K incorporates information by
reference from an amendment hereto or to the registrant's definitive proxy
statement, in either case which will be filed no later than 120 days after
December 29, 2002.

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PART I
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND PROJECTIONS

Certain statements in this Annual Report on Form 10-K, including statements
under 'Item 1. Business' and 'Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations,' that are not historical facts,
including most importantly, information concerning possible or assumed future
results of operations of Triarc Companies, Inc. and its subsidiaries and those
statements preceded by, followed by, or that include the words 'may,'
'believes,' 'expects,' 'anticipates,' or the negation thereof, or similar
expressions, constitute 'forward-looking statements' within the meaning of the
Private Securities Litigation Reform Act of 1995. All statements which address
operating performance, events or developments that are expected or anticipated
to occur in the future, including statements relating to revenue growth,
earnings per share growth or statements expressing general optimism about future
operating results, are forward-looking statements within the meaning of the
Reform Act. These forward-looking statements are based on our current
expectations, speak only as of the date of this Form 10-K and are susceptible to
a number of risks, uncertainties and other factors. Our actual results,
performance and achievements may differ materially from any future results,
performance or achievements expressed or implied by such forward-looking
statements. For those statements, we claim the protection of the safe-harbor for
forward-looking statements contained in the Reform Act. Many important factors
could affect our future results and could cause those results to differ
materially from those expressed in the forward-looking statements contained
herein. Such factors include, but are not limited to, the following:

Competition, including pricing pressures, the potential impact of
competitors' new units on sales by Arby's'r' restaurants and consumers'
perceptions of the relative quality, variety and value of the food
products offered;

Success of operating initiatives;

Development and operating costs;

Advertising and promotional efforts;

Brand awareness;

The existence or absence of positive or adverse publicity;

Market acceptance of new product offerings;

New product and concept development by competitors;

Changing trends in consumer tastes and preferences (including changes
resulting from health or safety concerns with respect to the
consumption of beef, french fries or other foods or the effects of
food-borne illnesses) and in spending and demographic patterns;

The business and financial viability of key franchisees;

Availability, location and terms of sites for restaurant development by
the Company and its franchisees;

The ability of franchisees to open new restaurants in accordance with
their development commitments, including the ability of franchisees to
finance restaurant development;

Delays in opening new restaurants or completing remodels;

Anticipated and unanticipated restaurant closures by the Company and
its franchisees;

The ability to identify, attract and retain potential franchisees with
sufficient experience and financial resources to develop and operate
Arby's restaurants;

Changes in business strategy or development plans;

Quality of the Company's and franchisees' management;

Availability, terms and deployment of capital;

Business abilities and judgment of the Company's and franchisees'
personnel;

Availability of qualified personnel to the Company and to franchisees;

Labor and employee benefit costs;

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Availability and cost of energy, raw materials, ingredients and
supplies;

The potential impact that interruptions in the distribution of supplies
of food and other products to Arby's restaurants could have on sales at
Company-owned restaurants and the royalties that Arby's receives from
franchisees;

Availability and cost of workers' compensation and general liability
premiums and claims experience;

Changes in national, regional and local economic, business or political
conditions in the countries and other territories in which the Company
and its franchisees operate;

Changes in government regulations, including franchising laws,
accounting standards, environmental laws, minimum wage rates and
taxation requirements;

The costs, uncertainties and other effects of legal, environmental and
administrative proceedings;

The impact of general economic conditions on consumer spending,
including a slower consumer economy and the effects of war or terrorist
activities;

Adverse weather conditions; and

Other risks and uncertainties affecting the Company and its
subsidiaries referred to in this Form 10-K (see especially 'Item 1.
Business -- Risk Factors' and 'Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations') and in our
other current and periodic filings with the Securities and Exchange
Commission, all of which are difficult or impossible to predict
accurately and many of which are beyond our control.

We will not undertake and specifically decline any obligation to publicly
release the result of any revisions which may be made to any forward-looking
statements to reflect events or circumstances after the date of such statements
or to reflect the occurrence of anticipated or unanticipated events. In
addition, it is our policy generally not to make any specific projections as to
future earnings, and we do not endorse any projections regarding future
performance that may be made by third parties.

ITEM 1. BUSINESS.

INTRODUCTION

We are a holding company and, through our subsidiaries, the franchisor of
the Arby's restaurant system and an operator of 239 Arby's restaurants located
in the United States. Our corporate predecessor was incorporated in Ohio in
1929. We reincorporated in Delaware in June 1994. Our principal executive
offices are located at 280 Park Avenue, New York, New York 10017 and our
telephone number is (212) 451-3000. The Company makes its annual report on
Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and
amendments to such reports, available, free of charge, on its website as soon as
reasonably practicable after such reports are electronically filed with, or
furnished to, the Securities and Exchange Commission. Our website address is:
www.triarc.com. Information contained on our website is not part of this Annual
Report on Form 10-K.

BUSINESS STRATEGY

The key elements of our business strategy include (i) using our resources to
grow our restaurant franchising business and our restaurant operations, (ii)
evaluating and making various acquisitions and business combinations, whether in
the restaurant industry or otherwise, (iii) building strong operating management
teams for each of our current and future businesses and (iv) providing strategic
leadership and financial resources to enable these management teams to develop
and implement specific, growth-oriented business plans. The implementation of
this business strategy may result in increases in expenditures for, among other
things, acquisitions and, over time, marketing and advertising. See 'Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations.' It is our policy to publicly announce an acquisition or business
combination only after an agreement with respect to such acquisition or business
combination has been reached.

2

The Company's cash, cash equivalents and investments (including restricted
cash, but excluding investments related to deferred compensation arrangements)
at December 29, 2002 totaled approximately $668 million. At such date, the
Company's consolidated indebtedness was approximately $387 million, including
approximately $255 million of debt issued by a subsidiary of Arby's, Inc. and
$98 million of debt issued by Sybra, Inc. None of the debt of the Arby's
subsidiary or Sybra has been guaranteed by Triarc. The Company's cash, cash
equivalents and investments (other than approximately $30.6 million of
restricted cash) do not secure such debt. The Company is evaluating its options
for the use of this significant cash, cash equivalents and investment position,
including acquisitions, share repurchases and investments.

ACQUISITION OF SYBRA, INC.

On December 27, 2002, the Company completed the acquisition of Sybra, Inc.,
the second largest franchisee of the Arby's'r' brand, pursuant to a plan of
reorganization previously confirmed by the United States Bankruptcy Court for
the Southern District of New York on November 25, 2002.

Sybra, Inc., formerly a subsidiary of I.C.H. Corporation which filed for
reorganization under Chapter 11 of the Bankruptcy Code in February 2002, owned
and operated, as of December 27, 2002, 239 Arby's restaurants in nine states
located primarily in Michigan, Texas, Pennsylvania, Florida and New Jersey. In
fiscal years 2001 and 2002, Sybra had revenues of approximately $200 million and
$209 million, respectively.

In return for 100% of the equity of a reorganized Sybra, the Company paid
approximately $8.3 million to ICH's creditors. In addition, the Company invested
approximately $14.2 million in Sybra and Sybra remains exclusively liable for
its long-term debt and capital lease obligations, which aggregated approximately
$98 million as of December 29, 2002. The Company has also made available to
Sybra a $5.0 million standby financing facility for each of three years (up to
$15.0 million in the aggregate) to fund any operating shortfalls of Sybra.

SALE OF BEVERAGE BUSINESS

As previously reported, on October 25, 2000, we completed the sale of our
beverage business by selling all the outstanding capital stock of Snapple
Beverage Group, Inc. and Royal Crown Company, Inc. to affiliates of Cadbury
Schweppes plc. The purchase and sale agreement for the transaction provided for
a post-closing adjustment, the amount of which is in dispute. Cadbury initially
stated that it believed that it was entitled to receive from us a post-closing
adjustment of approximately $27.6 million, and we initially stated, on the other
hand, that we believed that we were entitled to receive from Cadbury a
post-closing adjustment of approximately $5.6 million, in each case plus
interest from the closing date. An arbitrator was selected by Triarc and Cadbury
for the purpose of determining the amount of the post-closing adjustment. On
September 6, 2002 we filed a submission with the arbitrator in which we stated
that we believed that we are entitled to receive from Cadbury a post-closing
adjustment of approximately $0.8 million, plus interest from the closing date.
On October 21, 2002, Cadbury filed a submission with the arbitrator in which it
stated that it believes that it is entitled to receive from us a post-closing
adjustment of approximately $23.2 million, plus interest from the closing date.
In response to Cadbury's October 21, 2002 submission, on December 3, 2002, we
filed a reply submission with the arbitrator in which we stated that we believed
that neither party was entitled to a post-closing adjustment. Subsequent to the
filing of our reply submission, Cadbury requested the arbitrator to convene a
hearing for the purposes of taking witness testimony. By a letter to the
arbitrator dated December 20, 2002, we opposed such request. A decision on
Cadbury's request for a hearing has been deferred by the arbitrator pending
review of the parties' submissions. We currently expect the post-closing
adjustment process to be completed during 2003.

FISCAL YEAR

We use a 52/53 week fiscal year convention for Triarc and our subsidiaries
whereby our fiscal year ends each year on the Sunday that is closest to December
31 of that year. Each fiscal year generally is comprised of four 13 week fiscal
quarters, although in some years the fourth quarter represents a 14 week period.

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BUSINESS SEGMENT

RESTAURANT FRANCHISING AND OPERATIONS (ARBY'S)

THE ARBY'S RESTAURANT SYSTEM

Through subsidiaries of Arby's, Inc. (which does business as the Triarc
Restaurant Group), which are the franchisors of the Arby's restaurant system, we
participate in the quick service restaurant segment of the domestic restaurant
industry. There are over 3,300 Arby's restaurants in the United States and
Canada and Arby's is the largest restaurant franchising system specializing in
the roast beef sandwich segment of the quick service restaurant industry.
According to Nation's Restaurant News, Arby's is the 9th largest quick service
restaurant chain in the United States. In addition to various slow-roasted roast
beef sandwiches, Arby's also offers an extensive menu of chicken, turkey, ham
and submarine sandwiches, side-dishes and salads. In 2001, Arby's introduced its
Market Fresh'r' line of turkey, ham, chicken and roast beef premium sandwiches
on a nationwide basis. Arby's also owns the T.J. Cinnamons'r' concept, which
consists of gourmet cinnamon rolls, gourmet coffees and other related products,
and the Pasta Connection'r' concept, which includes pasta dishes with a variety
of different sauces. Some Arby's franchisees multi-brand with T.J. Cinnamons or
Pasta Connection within their Arby's restaurants. Prior to the December 27, 2002
acquisition of Sybra (See Item 1. 'Business -- Acquisition of Sybra, Inc.'), all
of the Arby's restaurants were owned and operated by franchisees. As of December
29, 2002, there were 239 company-owned Arby's restaurants and 3,164 Arby's
restaurants were owned by franchisees. As of December 29, 2002, 469 franchisees
operated the 3,164 restaurants, of which 3,011 operated within the United States
and 153 operated outside the United States. Of the domestic restaurants, 264 are
multi-branded locations that sell T.J. Cinnamons products and 42 are
multi-branded locations that sell Pasta Connection products. At December 29,
2002, T.J. Cinnamons gourmet coffees were also sold in approximately 1,182
additional Arby's restaurants. Arby's is not currently offering to sell any
additional Pasta Connection franchises.

From 1998 to 2002, Arby's system-wide sales grew at a compound annual growth
rate of 4.8% to $2.7 billion. Through December 29, 2002, the Arby's system has
experienced six consecutive years of domestic same store sales growth compared
to the prior year. During 2002, our franchisees opened 116 new Arby's
restaurants and closed 64 Arby's restaurants. In addition, Arby's franchisees
opened 16 T.J. Cinnamons units in Arby's units in 2002. As of December 29, 2002,
franchisees have committed to open 553 Arby's restaurants over the next eight
years. You should read the information contained in 'Risk Factors -- Arby's is
dependent on restaurant revenues and openings;' and ' -- The number of Arby's
restaurants that open may not meet current commitments.'

GENERAL

As the franchisor of the Arby's restaurant system, Arby's, through its
subsidiaries, licenses the owners and operators of independent businesses to use
the Arby's brand name and trademarks in the operation of Arby's restaurants.
Arby's provides its franchisees with services designed to increase both the
revenue and profitability of their Arby's restaurants. The more important of
these services are providing strategic leadership for the brand, quality control
services, operational training and counseling regarding, and approval of, site
selection.

Prior to the acquisition of Sybra, the Company and its subsidiaries derived
all their revenues from two principal sources: (i) franchise royalties received
from all Arby's restaurants; and (ii) up-front franchise fees from its
restaurant operators for each new unit opened. As a result of the acquisition of
Sybra, the Company and its subsidiaries will derive a significant portion of
their revenues from sales at company-owned restaurants. Arby's current domestic
franchise royalty rate for new franchises is 4.0%.

On November 21, 2000, our subsidiary Arby's Franchise Trust completed an
offering of $290 million of 7.44% fixed rate insured notes due 2020 pursuant to
Rule 144A of the Securities Act. As a result of the financing and related
restructuring, Arby's continues to service the franchise agreements relating to
U.S. franchises and a subsidiary services the franchise agreements relating to
Canadian franchises with the assistance of Arby's. In connection with the
financing, Arby's engaged in a corporate restructuring pursuant to which it
formed a wholly-owned Delaware statutory business trust, Arby's Franchise Trust,
which became the franchisor of the Arby's restaurant system in the United States
and Canada. Arby's contributed its U.S. and Canadian franchise agreements,
development agreements, license option agreements and the rights to the revenues
from

4

those agreements to Arby's Franchise Trust. Arby's also formed a new
wholly-owned Delaware statutory business trust, Arby's IP Holder Trust, and
contributed to it all of the intellectual property, including the Arby's
trademark, necessary to operate the Arby's franchise system in the United States
and Canada. Arby's IP Holder Trust has granted Arby's Franchise Trust a 99-year
exclusive license to use such intellectual property. Arby's continues to service
the franchise agreements relating to U.S. franchises, and Arby's of Canada,
Inc., a wholly-owned subsidiary of Arby's, services the franchise agreements
relating to Canadian franchises with the assistance of Arby's. The servicing
functions are performed pursuant to separate servicing agreements with Arby's
Franchise Trust pursuant to which the servicers receive servicing fees from
Arby's Franchise Trust equal to their expenses, subject to a specified cap for
any 12-month period. Any residual cash flow received by Arby's Franchise Trust,
after taking into account all required monthly payments under the notes,
including interest and targeted principal repayments, may be distributed by
Arby's Franchise Trust to Arby's. See Note 10 to our Consolidated Financial
Statements.

ARBY'S RESTAURANTS

Arby's opened its first restaurant in Youngstown, Ohio in 1964. As of
December 29, 2002, franchisees operated Arby's restaurants in 49 states and five
foreign countries. As of December 29, 2002, the six leading states by number of
operating units were: Ohio, with 267 restaurants; Michigan, with 174
restaurants; Indiana, with 174 restaurants; Texas, with 160 restaurants;
Georgia, with 158 restaurants; and Florida, with 151 restaurants. The country
outside the United States with the most operating units is Canada with 130
restaurants.

Arby's restaurants in the United States and Canada typically range in size
from 2,500 square feet to 3,000 square feet. Restaurants in other countries
typically are larger than U.S. and Canadian restaurants. At December 29, 2002,
more than 96% of freestanding Arby's restaurants (including more than 96% of the
Company's freestanding Arby's restaurants) feature drive-thru windows.
Restaurants typically have a manager, at least one assistant manager and as many
as 30 full and part-time employees. Staffing levels, which vary during the day,
tend to be heaviest during the lunch hours.

The following table sets forth the number of Arby's restaurants at the
beginning and end of each year from 2000 to 2002:

During the period from January 1, 2000 through December 29, 2002, 403 new
Arby's restaurants were opened and 228 Arby's restaurants (generally,
underperforming restaurants) were closed by franchisees. We believe that closing
underperforming Arby's restaurants has contributed to an increase in the average
annual unit sales volume of the Arby's system, as well as to an improvement of
the overall brand image of Arby's.

As of December 29, 2002, the Company operated 239 domestic Arby's
restaurants. Of such 239 restaurants, 212 were free-standing units, 14 were
located in shopping malls, eight were in food courts and five were in strip
center locations.

FRANCHISE NETWORK

Arby's seeks to identify potential franchisees that have experience in
owning and operating quick-service restaurant units, have a willingness to
develop and operate Arby's restaurants and have sufficient net worth. Arby's
identifies applicants through targeted mailings, maintaining a presence at
industry trade shows and conventions, existing customer and supplier contacts
and regularly placed advertisements in trade and other publications. Prospective
franchisees are contacted by an Arby's sales agent and complete an application
for a franchise. As part of the application process, Arby's requires and reviews
substantial documentation, including financial statements and documents relating
to the corporate or other business organization of the applicant. Franchisees
that already operate one or more Arby's restaurants must satisfy certain
criteria in order to be

5

eligible to enter into additional franchise agreements, including capital
resources commensurate with the proposed development plan submitted by the
franchisee, a commitment by the franchisee to employ trained restaurant
management and to maintain proper staffing levels, compliance by the franchisee
with all of its existing franchise agreements, a record of operation in
compliance with Arby's operating standards, a satisfactory credit rating and the
absence of any existing or threatened legal disputes with Arby's. The initial
term of the typical 'traditional' franchise agreement is 20 years. Arby's does
not offer any financing arrangements to its franchisees.

During 2002, Arby's franchisees opened seven new restaurants in one foreign
country and closed seven restaurants in three foreign countries. Arby's also had
territorial agreements with international franchisees in two countries as of
December 29, 2002. Under the terms of these territorial agreements, these
international franchisees have the exclusive right to open Arby's restaurants in
specific regions or countries.

Arby's offers franchises for the development of both single and multiple
'traditional' restaurant locations. Both new and existing franchisees may enter
into either a master development agreement, which requires the franchisee to
develop two or more Arby's restaurants in a particular geographic area within a
specified time period, or a license option agreement that grants the franchisee
the option, exercisable for a one year period, to build an Arby's restaurant on
a specified site. All franchisees are required to execute standard franchise
agreements. Arby's standard U.S. franchise agreement for new franchises
currently requires an initial $37,500 franchise fee for the first franchised
unit and $25,000 for each subsequent unit and a monthly royalty payment equal to
4.0% of restaurant sales for the term of the franchise agreement. Franchisees
typically pay a $10,000 commitment fee, credited against the franchise fee
during the development process for a new restaurant. Because of lower royalty
rates still in effect under earlier agreements, the average royalty rate paid by
franchisees was approximately 3.3% in 2001 and 3.4% in 2002.

Franchised restaurants are required to be operated under uniform operating
standards and specifications relating to the selection, quality and preparation
of menu items, signage, decor, equipment, uniforms, suppliers, maintenance and
cleanliness of premises and customer service. Arby's monitors franchisee
operations and inspects restaurants periodically to ensure that company
practices and procedures are being followed.

ADVERTISING AND MARKETING

Arby's advertises primarily through regional television, radio and
newspapers. Payment for advertising time and space is made by local advertising
cooperatives in which owners of local franchised restaurants and the Company, to
the extent that it owns local company owned restaurants, participate. The
Company and Arby's franchisees contribute 0.7% of net sales of their Arby's
restaurants to the AFA Service Corporation, which produces advertising and
promotional materials for the system. The Company and Arby's franchisees are
also required to spend a reasonable amount, but not less than 3% of monthly net
sales of their Arby's restaurants, for local advertising. This amount is divided
between the individual local market advertising expense and the expenses of a
cooperative area advertising program with the Company operated restaurants and
those franchisees who are operating Arby's restaurants in that area.
Contributions to the cooperative area advertising program are determined by the
participants in the program and are generally in the range of 3% to 5% of
monthly net sales. Arby's and AFA Service Corporation have entered into an
agreement pursuant to which the Arby's system had two flights of national
advertising in 2001, three flights of national advertising in 2002 and will have
an additional three flights of national advertising in 2003. Under the
agreement, Arby's is contributing $8.2 million over the three-year period ($3.1
million of which was expensed in 2002 and $3.1 million of which will be expensed
in 2003) for the eight flights. The Company and Arby's franchisees are also
required to contribute incremental dues to AFA Service Corporation equal to 0.5%
of net sales of their Arby's restaurants (bringing their total contribution to
advertising and marketing to 1.2% of net sales) to help fund the program. In
addition, during the first two years of the program, AFA Service Corporation has
contributed $3.8 million to the program and will contribute an additional $1.6
million to the program in 2003.

PROVISIONS AND SUPPLIES

Three independent meat processors provide all of Arby's roast beef in the
United States. Franchise operators are required to obtain roast beef from one of
these three approved suppliers. ARCOP, Inc., a non-profit purchasing
cooperative, negotiates contracts with approved suppliers on behalf of the
Company and

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Arby's franchisees. Arby's believes that satisfactory arrangements could be made
to replace any of the current roast beef suppliers, if necessary, on a timely
basis.

Franchisees may obtain other products, including food, beverage,
ingredients, paper goods, equipment and signs, from any source that meets Arby's
specifications and approval. Suppliers to the Arby's system must comply with
USDA and USFDA regulations governing the manufacture, packaging, storage,
distribution and sale of all food and packaging products. Through ARCOP, the
Company and Arby's franchisees purchase food, proprietary paper and operating
supplies through national contracts employing volume purchasing. You should read
the information contained in 'Item 1 -- Risk Factors -- Arby's is dependent on
restaurant revenues and openings.'

QUALITY ASSURANCE

Arby's has developed a quality assurance program designed to maintain
standards and uniformity of the menu selections at each of its franchised
restaurants. Arby's assigns a full-time quality assurance employee to each of
the five independent processing facilities that processes roast beef for Arby's
domestic restaurants. The quality assurance employee inspects the roast beef for
quality and uniformity and to assure compliance with quality and safety
specifications of the United States Department of Agriculture and the United
States Food and Drug Administration. In addition, a laboratory at Arby's
headquarters periodically tests samples of roast beef from franchisees. Each
year, Arby's representatives conduct unannounced inspections of operations of a
number of franchisees to ensure that Arby's policies, practices and procedures
are being followed. Arby's field representatives also provide a variety of
on-site consulting services to franchisees. Arby's has the right to terminate
franchise agreements if franchisees fail to comply with quality standards.

GENERAL

TRADEMARKS

We own several trademarks that are considered material to our business,
including Arby's'r', T.J. Cinnamons'r', Pasta Connection'r', Arby's Market
Fresh'TM', Market Fresh'r' and Sidekickers'r'.

Our material trademarks are registered or pending trademarks in the U.S.
Patent and Trademark Office and various foreign jurisdictions. Registrations for
such trademarks in the United States will last indefinitely as long as the
trademark owners continue to use and police the trademarks and renew filings
with the applicable governmental offices. There are no pending challenges to our
right to use any of our material trademarks in the United States.

COMPETITION

Arby's faces direct and indirect competition from numerous well-established
competitors, including national and regional quick service restaurant chains,
such as McDonald's, Burger King and Wendy's, and quick casual restaurant chains.
In addition, Arby's competes with locally owned restaurants, drive-ins, diners
and other similar establishments. Key competitive factors in the quick service
restaurant industry are price, quality of products, quality and speed of
service, advertising, name identification, restaurant location and
attractiveness of facilities.

Many of the leading restaurant chains have focused on new unit development
as one strategy to increase market share through increased consumer awareness
and convenience. This has led to increased competition for available development
sites and higher development costs for those sites. This has also led some
competitors to employ other strategies, including frequent use of price
promotions and heavy advertising expenditures. In 2002, there was increased
price competition among national fast food hamburger chains. Although Arby's
experienced an increase in sales in 2002, continued price discounting in the QSR
industry could have an adverse impact on Arby's and the Company.

Additional competitive pressures for prepared food purchases have come more
recently from operators outside the restaurant industry. Several major grocery
chains have begun offering fully prepared food and meals to go as part of their
deli sections. Some of these chains also have added in-store cafes with service
counters and tables where consumers can order and consume a full menu of items
prepared especially for that portion of the operation.
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Many of our competitors have substantially greater financial, marketing,
personnel and other resources than we do.

GOVERNMENTAL REGULATIONS

Various state laws and the Federal Trade Commission regulate Arby's
franchising activities. The Federal Trade Commission requires that franchisors
make extensive disclosure to prospective franchisees before the execution of a
franchise agreement. Several states require registration and disclosure in
connection with franchise offers and sales and have 'franchise relationship
laws' that limit the ability of franchisors to terminate franchise agreements or
to withhold consent to the renewal or transfer of these agreements. Furthermore,
the United States Congress has also considered, and there is currently pending,
legislation governing various aspects of the franchise relationship. In
addition, the Company and Arby's franchisees must comply with the Fair Labor
Standards Act and the Americans with Disabilities Act (the 'ADA'), which
requires that all public accommodations and commercial facilities meet federal
requirements related to access and use by disabled persons, and various state
and local laws governing matters that include, for example, the handling,
preparation and sale of food and beverages, minimum wages, overtime and other
working and safety conditions. Compliance with the ADA requirements could
require removal of access barriers and non-compliance could result in imposition
of fines by the U.S. government or an award of damages to private litigants.
Although we believe that our facilities are substantially in compliance with all
applicable government rules and regulations, including requirements under the
ADA, the Company may incur additional costs to comply with the ADA. However, we
do not believe that any such costs would have a material adverse effect on the
Company's consolidated financial position or results of operations. We cannot
predict the effect on our operations, particularly on our relationship with
franchisees, of any pending or future legislation.

ENVIRONMENTAL MATTERS

Our past and present operations are governed by federal, state and local
environmental laws and regulations concerning the discharge, storage, handling
and disposal of hazardous or toxic substances. These laws and regulations
provide for significant fines, penalties and liabilities, sometimes without
regard to whether the owner or operator of the property knew of, or was
responsible for, the release or presence of the hazardous or toxic substances.
In addition, third parties may make claims against owners or operators of
properties for personal injuries and property damage associated with releases of
hazardous or toxic substances. We cannot predict what environmental legislation
or regulations will be enacted in the future or how existing or future laws or
regulations will be administered or interpreted. We similarly cannot predict the
amount of future expenditures which may be required to comply with any
environmental laws or regulations or to satisfy any claims relating to
environmental laws or regulations. We believe that our operations comply
substantially with all applicable environmental laws and regulations.
Accordingly, the environmental matters in which we are involved generally relate
either to properties that our subsidiaries own, but on which they no longer have
any operations, or properties that we or our subsidiaries have sold to third
parties, but for which we or our subsidiaries remain liable or contingently
liable for any related environmental costs. Our company-owned Arby's restaurants
have not been the subject of any material environmental matters. Based on
currently available information, including defenses available to us and/or our
subsidiaries, and our current reserve levels, we do not believe that the
ultimate outcome of the environmental matter discussed below or in which we are
otherwise involved will have a material adverse effect on our consolidated
financial position or results of operations. See 'Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations' below.

In 2001, a vacant property owned by our indirect subsidiary, Adams Packing
Association, Inc., was listed by the U.S. Environmental Protection Agency on the
Comprehensive Environmental Response, Compensation and Liability Information
System ('CERCLIS') list of known or suspected contaminated sites. The CERCLIS
listing appears to have been based on an allegation that a former tenant of
Adams Packing conducted drum recycling operations at the site from some time
prior to 1971 until the late 1970s. The business operations of Adams Packing
were sold in December 1992. Adams Packing engaged an environmental consultant
that, under the supervision of the Florida Department of Environmental
Protection (the 'FDEP'), conducted an investigation of the site that was
intended to develop additional information on the extent and nature of the soil
and groundwater contamination and the appropriate remediation for that
contamination. Adams Packing's

8

environmental consultant has submitted to the FDEP a summary of the results of
this investigation and Adams Packing and the FDEP have negotiated a work plan
for further investigation of the site and limited remediation of the identified
contamination. The work plan is embodied in a consent order between Adams
Packing and the FDEP. The consent order has been executed by Adams Packing and
the FDEP and is effective, subject to a petition for administrative hearing
being filed during the statutory public comment period. Based on a preliminary
cost estimate of approximately $1.0 million for completion of the work plan,
developed by Adams Packing's environmental consultant, and Adams Packing's
current reserve levels, and after taking into consideration various legal
defenses available to us and/or Adams Packing, the cost of further
investigation and remediation at the site is not expected to have a material
adverse effect on our consolidated financial position or results of operations.
See 'Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources.'

SEASONALITY

Our consolidated results are not significantly impacted by seasonality,
however, our restaurant franchising royalty revenues and our restaurant sales
are somewhat lower in our first quarter.

EMPLOYEES

As of December 29, 2002, we had 5,030 employees, including 422 salaried
employees and 4,608 hourly employees. As of December 29, 2002, none of our
employees were covered by a collective bargaining agreement. We believe that
employee relations are satisfactory.

RISK FACTORS

We wish to caution readers that in addition to the important factors
described elsewhere in this Form 10-K, the following important factors, among
others, sometimes have affected, or in the future could affect, our actual
results and could cause our actual consolidated results during 2003, and beyond,
to differ materially from those expressed in any forward-looking statements made
by us or on our behalf.

HOLDING COMPANY STRUCTURE.

Because we are a holding company, our ability to service debt and pay
dividends, including dividends on our common stock, is primarily dependent upon,
in addition to our cash, cash equivalents and short-term investments on hand,
cash flows from our subsidiaries, including loans, cash dividends and
reimbursement by subsidiaries to us in connection with providing certain
management services and payments by subsidiaries under certain tax sharing
agreements.

Under the terms of the indenture relating to the notes issued in the Arby's
securitization and the agreements relating to debt issued by Sybra, there are
restrictions on the ability of certain of our subsidiaries to pay dividends
and/or make loans or advances to us. The ability of any of our subsidiaries to
pay cash dividends and/or make loans or advances to us is also dependent upon
the respective abilities of such entities to achieve sufficient cash flows after
satisfying their respective cash requirements, including debt service, to enable
the payment of such dividends or the making of such loans or advances. In
addition, in connection with the December 2002 acquisition of Sybra, Triarc
agreed that Sybra would not pay dividends to it for a period of two years from
the closing.

In addition, our equity interests in our subsidiaries rank junior to all of
the respective indebtedness, whenever incurred, of such entities in the event of
their respective liquidation or dissolution. As of December 29, 2002, our
subsidiaries had aggregate indebtedness of approximately $387 million excluding
intercompany indebtedness.

WE HAVE BROAD DISCRETION IN THE USE OF OUR SIGNIFICANT CASH, CASH
EQUIVALENTS AND INVESTMENT POSITION.

We have not designated any specific use for our significant cash, cash
equivalents and investment position. We are evaluating options for the use of
these funds, including acquisitions, share repurchases and investments.

9

We have significant flexibility in selecting the opportunities that we will
pursue. See 'Item 1. Business -- Business Strategy.'

ACQUISITIONS ARE A KEY ELEMENT OF OUR BUSINESS STRATEGY, BUT WE CANNOT
ASSURE YOU THAT WE WILL BE ABLE TO IDENTIFY APPROPRIATE ACQUISITION TARGETS
IN THE FUTURE AND THAT WE WILL BE ABLE TO SUCCESSFULLY INTEGRATE ANY FUTURE
ACQUISITIONS INTO OUR EXISTING OPERATIONS.

Acquisitions involve numerous risks, including difficulties assimilating new
operations and products. In addition, acquisitions may require significant
management time and capital resources. We cannot assure you that we will have
access to the capital required to finance potential acquisitions on satisfactory
terms, that any acquisition would result in long-term benefits to us or that
management would be able to manage effectively the resulting business. Future
acquisitions are likely to result in the incurrence of additional indebtedness
or the issuance of additional equity securities.

WE MAY HAVE TO TAKE ACTIONS THAT WE WOULD NOT OTHERWISE TAKE SO AS NOT TO BE
DEEMED AN 'INVESTMENT COMPANY.'

The Investment Company Act of 1940, as amended (the '1940 Act'), requires
the registration of, and imposes various restrictions on, companies that do not
meet certain financial tests regarding the composition of their assets and
source of income. A company may be deemed to be an investment company if it owns
'investment securities' with a value exceeding 40% of its total assets
(excluding government securities and cash items) on an unconsolidated basis or
if more than 45% of the value of its total assets consists of, or more than 45%
of its net after-tax income/loss is derived from, securities of companies it
does not control. Our acquisition strategy may require us to take actions that
we would not otherwise take so as not to be deemed an 'investment company' under
the 1940 Act. Investment companies are subject to registration under, and
compliance with, the 1940 Act unless a particular exclusion or safe harbor
provision applies. Presently, the total amount of investment securities that we
hold is substantially less than 40% of our total assets and substantially less
than 45% of our total assets consist of, and substantially less than 45% of our
net after-tax income/loss is derived from, securities of companies we do not
control. If in the future we were to be deemed an investment company, we would
become subject to the requirements of the 1940 Act. We intend to make
acquisitions and other investments in a manner so as not to be deemed an
investment company. As a result, we may forego investments that we might
otherwise make or retain or dispose of investments or assets that we might
otherwise sell or hold.

IN THE FUTURE WE MAY HAVE TO TAKE ACTIONS THAT WE WOULD NOT OTHERWISE TAKE
SO AS NOT TO BE SUBJECT TO TAX AS A 'PERSONAL HOLDING COMPANY.'

If at any time during the last half of our taxable year, five or fewer
individuals own or are deemed to own more than 50% of the total value of our
shares and if during such taxable year we receive 60% or more of our gross
income from specified passive sources, we would be classified as a 'personal
holding company' for the U.S. federal income tax purposes. If this were the
case, we would be subject to additional taxes at the rate of 38.6% on a portion
of our income, to the extent this income is not distributed to shareholders. We
do not currently expect to have any liability for tax under the personal holding
company rules in 2003. However, we cannot assure you that we will not become
liable for such tax in the future. Because we do not wish to be classified as a
personal holding company or to incur any personal holding company tax, we may be
required in the future to take actions that we would not otherwise take. These
actions may influence our strategic and business decisions, including causing us
to conduct our business and acquire or dispose of investments differently than
we otherwise would.

OUR SUBSIDIARIES ARE SUBJECT TO VARIOUS RESTRICTIONS, AND SUBSTANTIALLY ALL
OF THEIR ASSETS ARE PLEDGED, UNDER CERTAIN DEBT AGREEMENTS.

Under our subsidiaries' debt agreements, substantially all of our
subsidiaries' assets, other than cash, cash equivalents and short-term
investments, are pledged as collateral security. The indenture relating to the
notes issued in the Arby's securitization and the agreements relating to debt
issued by Sybra contain financial covenants that, among other things, require
Arby's Franchise Trust and Sybra, as applicable, to maintain certain

10

financial ratios and restrict their ability to incur debt, enter into certain
fundamental transactions (including sales of all or substantially all of their
assets and certain mergers and consolidations) and create or permit liens. If
either Arby's Franchise Trust or Sybra is unable to generate sufficient cash
flow or otherwise obtain the funds necessary to make required payments of
interest or principal under, or is unable to comply with covenants of, its
respective debt agreements, it would be in default under the terms of such
agreements which would, under certain circumstances, permit the insurer of the
notes issued in the Arby's securitization or the lenders to Sybra, as
applicable, to accelerate the maturity of the balance of its indebtedness. You
should read the information in Note 10 to the Consolidated Financial Statements.

ARBY'S IS DEPENDENT ON RESTAURANT REVENUES AND OPENINGS.

Prior to the acquisition of Sybra, the principal source of revenues for our
restaurant business was royalty fees received from franchisees. Following the
acquisition, such royalties and fees will continue to comprise a significant
portion of our revenues and earnings. Our future revenues and earnings will be
highly dependent on the gross revenues of company-owned Arby's restaurants and
of Arby's franchisees' restaurants and the number of Arby's restaurants that we
and Arby's franchisees operate. In addition, it is possible that interruptions
in the distribution of supplies to Arby's restaurants could adversely affect
sales at Company-owned restaurants and result in a decline in royalty fees that
we receive from Arby's franchisees.

THE LEVEL OF GROSS REVENUES OF ARBY'S RESTAURANTS MAY NOT CONTINUE.

Competition is intense among national brand franchisors and smaller chains
in the restaurant industry to grow their franchise systems. Arby's restaurants
are generally in competition for customers with franchisees of other national
and regional quick service and quick casual restaurant chains and with locally
owned restaurants. We cannot assure you that the level of gross revenues of
Company-owned restaurants and of restaurants owned by Arby's franchisees, upon
which our royalty fees are dependent, will continue.

THE NUMBER OF ARBY'S RESTAURANTS THAT OPEN MAY NOT MEET CURRENT COMMITMENTS.

Numerous factors beyond our control affect restaurant openings. These
factors include the ability of potential restaurant owners to obtain financing,
locate appropriate sites for restaurants and obtain all necessary state and
local construction, occupancy and other permits and approvals. Although as of
December 29, 2002 franchisees had signed commitments to open 553 Arby's
restaurants and have made or are required to make non-refundable deposits of
$10,000 per restaurant, we cannot assure you that these commitments will result
in open restaurants. See 'Item 1. Business -- Business Segment -- Restaurant
Franchising and Operations (Arby's) -- Franchise Network.' In addition, we
cannot assure you that our franchisees will successfully develop and operate
their restaurants in a manner consistent with our standards.

ARBY'S FRANCHISE REVENUES DEPEND, TO A SIGNIFICANT EXTENT, ON ITS LARGEST
FRANCHISEE AND A DECLINE IN ITS REVENUE MAY INDIRECTLY ADVERSELY AFFECT US.

During 2002, Arby's received approximately 27% of its royalties and
franchise and related fees from RTM Restaurant Group, Inc. ('RTM') (which as of
December 29, 2002, operated 783 Arby's restaurants). Arby's revenues could
decline from their present levels if RTM suffered a significant decline in its
business.

COMPETITION FROM RESTAURANT COMPANIES COULD ADVERSELY AFFECT US.

A significant portion of our revenues and earnings comes from restaurant
franchising and operations. The business sectors in which we and Arby's
franchisees compete are highly competitive (e.g., with respect to price, food
quality and presentation, service, location, and the nature and condition of the
financed business unit/location), and are affected by changes in tastes and
eating habits, local, regional and national economic conditions and population
and traffic patterns. Arby's restaurants compete with a variety of locally-owned
restaurants, as well as competitive regional and national chains and franchises.
Moreover, new companies may enter the Company's or a franchisee's respective
market area and target sales audience. Such competition may have, among other
things, lower operating costs, lower debt service requirements, better
locations, better facilities, better management, more effective marketing and
more efficient operations. All such competition

11

may adversely affect our revenues and profits or those of Arby's franchisees and
could adversely affect the ability of franchisees to make required payments to
Arby's. Furthermore, we and Arby's franchisees face competition for competent
employees and high levels of employee turnover, which also can have an adverse
effect on our operations and revenues and those of Arby's franchisees and on
franchisees' abilities to make required payments to Arby's. Many of Arby's
competitors have substantially greater financial, marketing, personnel and other
resources than Arby's.

CHANGES IN CONSUMER TASTES AND PREFERENCES AND IN SPENDING AND DEMOGRAPHIC
PATTERNS, AS WELL AS HEALTH AND SAFETY CONCERNS ABOUT FOOD QUALITY, COULD
RESULT IN A LOSS OF CUSTOMERS AND REDUCE THE ROYALTIES THAT WE RECEIVE.

The quick service restaurant industry is often affected by changes in
consumer tastes, national, regional and local economic conditions, discretionary
spending priorities, demographic trends, traffic patterns and the type, number
and location of competing restaurants. Consumer preferences could also be
affected by health or safety concerns with respect to the consumption of beef,
french fries or other foods or with respect to the effects of food borne
illnesses. As is generally the case in the restaurant franchise business, we and
our franchisees may, from time to time, be the subject of complaints or
litigation from customers alleging illness, injury or other food quality, health
or operational concerns. Adverse publicity resulting from these allegations may
harm the reputation of Arby's restaurants, even if the allegations are not
valid, we are not found liable or those concerns relate only to a single
restaurant or a limited number of restaurants. Moreover, complaints, litigation
or adverse publicity experienced by one or more of our franchisees could also
adversely affect our business as a whole. If Arby's is unable to adapt to
changes in consumer preferences and trends, or we have adverse publicity due to
any of these concerns, we and our franchisees may lose customers and the
resulting revenues from company-owned restaurants and the royalties that Arby's
receives from its franchisees may decline.

WE MAY NOT BE ABLE TO ADEQUATELY PROTECT OUR INTELLECTUAL PROPERTY, WHICH
COULD HARM THE VALUE OF OUR BRANDS AND ADVERSELY AFFECT OUR BUSINESS.

Our intellectual property is material to the conduct of our business. We
rely on a combination of trademarks, copyrights, service marks, trade secrets
and similar intellectual property rights to protect our brands and other
intellectual property. The success of our business strategy depends, in part, on
our continued ability to use our existing trademarks and service marks in order
to increase brand awareness and further develop our branded products in both
domestic and international markets. If our efforts to protect our intellectual
property are not adequate, or if any third party misappropriates or infringes on
our intellectual property, either in print or on the Internet, the value of our
brands may be harmed, which could have a material adverse effect on our
business, including the failure of our brands to achieve and maintain market
acceptance.

We franchise our restaurant brands to various franchisees. While we try to
ensure that the quality of our brands is maintained by all of our franchisees,
we cannot assure you that these franchisees will not take actions that adversely
affect the value of our intellectual property or the reputation of the Arby's
restaurant system.

We have registered certain trademarks and have other trademark registrations
pending in the U.S. and certain foreign jurisdictions. The trademarks that we
currently use have not been registered in all of the countries outside of the
United States in which we do business and may never be registered in all of
these countries.

We cannot assure you that all of the steps we have taken to protect our
intellectual property in the U.S. and foreign countries will be adequate. In
addition, the laws of some foreign countries do not protect intellectual
property rights to the same extent as the laws of the U.S.

WE REMAIN CONTINGENTLY LIABLE WITH RESPECT TO CERTAIN OBLIGATIONS RELATING
TO BUSINESSES THAT WE HAVE SOLD.

As previously reported, in 1997 we sold all of our then company-owned Arby's
restaurants to subsidiaries of RTM, Arby's largest franchisee. In connection
with the sale, an aggregate of approximately $54.7 million of mortgage and
equipment notes were assumed by subsidiaries of RTM, of which approximately
$42.0 million was outstanding at December 29, 2002. RTM has guaranteed the
payment of these notes by its subsidiaries. Notwithstanding the assumption of
this debt and guaranty, we remain contingently liable as a guarantor of the
notes. In addition, the subsidiaries of RTM also assumed substantially all of
the lease obligations relating to the

12

purchased restaurants (which aggregate a maximum of approximately $66.0 million
at December 29, 2002) and RTM has indemnified us for any losses we might incur
with respect to such leases. Notwithstanding such assumption, we remain
contingently liable if RTM's subsidiaries fail to make the required payments
under those leases.

In addition, in July 1999, the Company sold 41.7% of its remaining 42.7%
interest in National Propane Partners, L.P. and a sub-partnership, National
Propane, L.P. to Columbia Energy Group, and retains less than a 1% special
limited partner interest in AmeriGas Eagle Propane, L.P. (formerly known as
National Propane, L.P. and as Columbia Propane, L.P.). As part of the
transaction, our subsidiary, National Propane Corporation, agreed that while it
remains a special limited partner of AmeriGas, it would indemnify the owner of
AmeriGas for any payments the owner makes under certain debt of AmeriGas
(aggregating approximately $138.0 million as of December 29, 2002), if AmeriGas
is unable to repay or refinance such debt, but only after recourse to the assets
of AmeriGas. Either National Propane Corporation or AmeriGas Propane, L.P., the
owner of AmeriGas, may require AmeriGas to repurchase the special limited
partner interest. However, we believe it is unlikely that either party would
require repurchase prior to 2009 as either AmeriGas Propane, L.P. would owe us
tax indemnification payments or we would accelerate payment of deferred taxes
associated with our sale of the propane business.

Although the Company believes that it is unlikely that it will be called
upon to make any payments under the guaranty, leases or indemnification
described above, if the Company were required to make such payments it could
have a material adverse effect on the financial position or results of
operations of the Company. You should read the information in 'Item. 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources' and in Note 22 to the
Consolidated Financial Statements.

CHANGES IN GOVERNMENTAL REGULATION MAY ADVERSELY AFFECT OUR ABILITY TO OPEN
NEW RESTAURANTS OR OTHERWISE ADVERSELY AFFECT OUR EXISTING AND FUTURE
OPERATIONS AND RESULTS.

Each of our restaurants is subject to licensing and regulation by health,
sanitation, safety and other agencies in the state and/or municipality in which
the restaurant is located. There can be no assurance that we will not experience
material difficulties or failures in obtaining the necessary licenses or
approvals for our restaurants which could delay the opening of such restaurants
in the future. In addition, more stringent and varied requirements of local and
tax governmental bodies with respect to zoning, land use and environmental
factors could delay or prevent development of new restaurants in particular
locations. We are also subject to the Fair Labor Standards Act which governs
such matters as minimum wages, overtime and other working conditions, along with
the Americans with Disabilities Act, family leave mandates and a variety of
other laws enacted by the states that govern these and other employment law
matters. We cannot predict the amount of future expenditures which may be
required in order to comply with any changes in existing regulations or to
comply with any future regulations that may become applicable to our business.

Certain of our current and past operations are or have been subject to
federal, state and local environmental laws and regulations concerning the
discharge, storage, handling and disposal of hazardous or toxic substances. Such
laws and regulations provide for significant fines, penalties and liabilities,
in certain cases without regard to whether the owner or operator of the property
knew of, or was responsible for, the release or presence of such hazardous or
toxic substances. In addition, third parties may make claims against owners or
operators of properties for personal injuries and property damage associated
with releases of hazardous or toxic substances. Although we believe that our
operations comply in all material respects with all applicable environmental
laws and regulations, we cannot predict what environmental legislation or
regulations will be enacted in the future or how existing or future laws or
regulations will be administered or interpreted. We cannot predict the amount of
future expenditures which may be required in order to comply with any
environmental laws or regulations or to satisfy any such claims. See 'Item 1.
Business -- General -- Environmental Matters.'

ITEM 2. PROPERTIES.

We believe that our properties, taken as a whole, are generally well
maintained and are adequate for our current and foreseeable business needs. We
lease each of our material properties.

13

The following table contains information about our material facilities as of
December 29, 2002:

- ---------

* We are currently seeking to sublet approximately 4,600 square feet of this
space.

** Approximately 1,140 square feet of this space is subleased from Arby's by a
third party.

Arby's also owns two and leases five properties which are leased or sublet
principally to franchisees and has a lease for one inactive property. Our other
subsidiaries also own or lease a few inactive facilities and undeveloped
properties, none of which are material to our financial condition or results of
operations.

At December 29, 2002, Sybra's 239 restaurants were located in the following
states: 75 were in Michigan, 67 in Texas, 39 in Pennsylvania, 21 in Florida, 14
in New Jersey, 10 in Maryland, 8 in Connecticut, 4 in Virginia and 1 in West
Virginia. In addition to its Arby's restaurant locations, Sybra also leases
office space in San Diego, California and New York, New York for its corporate
and executive offices and in Flint, Michigan, Sinking Spring, Pennsylvania,
Plano, Texas and Temple Terrace, Florida for its regional operations centers.

ITEM 3. LEGAL PROCEEDINGS.

On March 23, 1999, Norman Salsitz, a stockholder of Triarc, filed a
complaint in the United States District Court for the Southern District of New
York against Triarc, Nelson Peltz and Peter May. In an amended complaint filed
in April 2000, Mr. Salsitz purported to assert a claim for alleged violation of
Section 14(e) of the Securities Exchange Act of 1934, as amended, on behalf of
all persons who held our stock as of March 10, 1999. The amended complaint
alleged that our tender offer statement in connection with the 1999 'Dutch
Auction' self-tender offer was materially false and misleading in that, among
other things, it failed to disclose alleged recent valuations of Triarc. The
amended complaint sought damages in an amount to be determined, together with
prejudgment interest, the costs of suit, including attorneys' fees, an order
permitting all shareholders who tendered their shares in the Dutch Auction
Tender Offer to rescind the transaction, and unspecified other relief. On
November 16, 2001, the defendants moved for summary judgment dismissing the
action in its entirety, and the plaintiff moved to certify a class consisting of
all persons or entities who held stock in Triarc as of March 10, 1999 and
allegedly suffered damages thereby. On October 17, 2002, the court denied the
plaintiff's motion for class certification and granted the defendants' motion
for summary judgment, and subsequently entered judgment dismissing the case. On
November 21, 2002, plaintiff filed a notice of appeal to the United States Court
of Appeals for the Second Circuit. On February 28, 2003, the plaintiff withdrew
his appeal.

In October 1998, various class actions were brought on behalf of our
stockholders in the Court of Chancery of the State of Delaware. These class
actions name Triarc, Messrs. Peltz and May and directors of Triarc as
defendants. On March 26, 1999, four of the plaintiffs in these actions filed an
amended complaint making allegations substantially similar to those asserted in
the Salsitz case described above. In October 2000, the plaintiffs agreed to stay
these actions pending determination of the Salsitz action.

We believe that the outcome of any of the matters described above or any of
the other matters that have arisen in the ordinary course of our business
(including those arising in the ordinary course of the operation of our
company-owned restaurants) will not have a material adverse effect on our
consolidated financial condition or results of operations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

We held an Annual Meeting of Stockholders on June 4, 2002. The matters acted
upon by the stockholders at that meeting were reported in our Quarterly Report
on Form 10-Q for the quarter ended June 30, 2002.

14

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

The principal market for our Class A Common Stock is the New York Stock
Exchange ('NYSE') (symbol: TRY). The high and low market prices for our Class A
Common Stock, as reported in the consolidated transaction reporting system, are
set forth below:

We did not pay any dividends on our common stock in 2001, 2002 or in 2003 to
date and do not presently anticipate the declaration of cash dividends on our
Class A Common Stock in the near future. However, the declaration of future
dividends is subject to the discretion of our Board of Directors, which may from
time to time review whether to declare dividends in light of all of the then
existing relevant facts and circumstances. We have no class of equity securities
currently issued and outstanding except for the Class A Common Stock. However,
we are currently authorized to issue up to 100 million shares of Class B Common
Stock and up to 100 million shares of preferred stock.

Because we are a holding company, our ability to meet our cash requirements,
including required interest and principal payments on our indebtedness, is
primarily dependent upon, in addition to our cash, cash equivalents and
short-term investments on hand, cash flows from our subsidiaries. Under the
terms of the indenture relating to the notes issued in the Arby's securitization
and the agreements related to debt issued by Sybra (see 'Item 1. Business --
Business Segment -- Restaurant Franchising and Operations (Arby's) -- General'
and 'Item 1. Business -- Acquisition of Sybra, Inc.'), the ability of Arby's
and Sybra to pay any dividends or make any loans or advances to us is limited
by the debt service requirements of its subsidiaries. In addition, in connection
with the acquisition of Sybra, Triarc agreed that Sybra would not pay dividends
to it for a period of two years from the closing. You should read the
information in 'Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources' and
Note 10 to our Consolidated Financial Statements.

On January 18, 2001, our management was authorized, when and if market
conditions warrant, to purchase from time to time up to an aggregate of $50
million worth of our Class A Common Stock pursuant to a $50 million stock
repurchase program that ended on January 18, 2003. During the period from
January 18, 2001 through January 18, 2003, we repurchased 438,500 shares, at an
average cost of approximately $23.89 per share (including commissions), for an
aggregate cost of approximately $10.5 million, pursuant to the stock repurchase
program.

On January 17, 2003, the stock repurchase program was extended until January
18, 2004 and the amount available under the stock repurchase program was
replenished to permit the Company to repurchase up to a total of $50 million
worth of our Class A Common Stock on or after January 18, 2003 (in addition to
the $10.5 million previously spent under the program). We cannot assure you that
we will repurchase any additional shares pursuant to this stock repurchase
program.

As of March 15, 2003, there were approximately 3,569 holders of record of
our Class A Common Stock.

15

ITEM 6. SELECTED FINANCIAL DATA (1)

- ---------

(1) Selected Financial Data for the years ended on or prior to the fiscal year
ended December 31, 2000 reflect the discontinuance of the Company's
beverage businesses sold in October 2000 and for the years ended on or
prior to the fiscal year ended January 2, 2000 reflect the discontinuance
of the Company's propane business sold in July 1999.

(2) The Company reports on a fiscal year basis consisting of 52 or 53 weeks
ending on the Sunday closest to December 31. In accordance with this
method, the Company's 1998 fiscal year contained 53 weeks and each of the
Company's 1999, 2000, 2001 and 2002 fiscal years contained 52 weeks.

(3) Basic and diluted income (loss) per share are the same for the fiscal years
2000 and 2002 since all potentially dilutive securities would have had an
antidilutive effect based on the loss from continuing operations for each
of those years. The shares used in the calculation of diluted income (loss)
per share for the fiscal years 1998 (31,527,000), 1999 (26,943,000) and
2001 (22,692,000) consist of the weighted average common shares outstanding
and potential common shares reflecting the effect of dilutive stock options
of 1,221,000, 818,000 and 1,160,000, respectively, and for the fiscal year
1999 the effect of a dilutive forward purchase obligation for common stock
of 110,000 shares.

(4) The Company has not paid any dividends on its common shares during any of
the years presented.
(footnotes continued on next page)

16

(footnotes continued from previous page)

(5) Reflects certain significant credits recorded during fiscal 1998 as
follows: $7,074,000 credited to net income representing (1) $3,067,000
included in the income from operations of the discontinued businesses
consisting of $5,016,000 of gain on sale of businesses less $1,949,000 of
related income taxes and (2) $4,007,000 of gain on disposal of discontinued
operations.

(6) Reflects certain significant charges and credits recorded during fiscal
1999 as follows: $926,000 credited to income from continuing operations
before income taxes and minority interests representing $3,052,000 of
reversal of excess interest expense accruals for interest due the Internal
Revenue Service (the 'IRS') in connection with the completion of their
examinations of the Company's Federal income tax returns for prior years
less a $2,126,000 charge for a capital structure reorganization related
charge related to equitable adjustments made to the terms of outstanding
stock options for stock of a former subsidiary held by corporate employees;
$5,789,000 credited to income from continuing operations representing (1)
the aforementioned $926,000 credited to income from continuing operations
before income taxes and minority interests less $264,000 of related income
taxes and (2) $5,127,000 of release of excess reserves for income taxes in
connection with the completion of IRS examinations of the Company's Federal
income tax returns; and $3,897,000 credited to net income representing (1)
the aforementioned $5,789,000 credited to income from continuing
operations, (2) $15,102,000 of gain on disposal of discontinued operations,
less (i) $4,897,000 of charges reported in income from operations of the
discontinued businesses consisting of (a) a $3,348,000 charge for a capital
structure reorganization related charge, similar to the charge in
continuing operations, relating to option holders who were employees of the
sold businesses, (b) $411,000 of provision for interest due the IRS in
connection with the completion of their examination of the Company's
Federal income tax returns, both less $1,464,000 of related income taxes
and (c) $2,602,000 of provision for income taxes in connection with the
completion of IRS examinations of the Company's Federal income tax returns
and (ii) a $12,097,000 extraordinary charge from the early extinguishment
of debt.

(7) In fiscal 1999 the Company repurchased for treasury 3,805,015 shares of its
class A common stock and 1,999,208 shares of class B common stock for an
aggregate $117,160,000 and recorded a forward purchase obligation for two
future purchases of class B common stock that occurred on August 10, 2000
and on August 10, 2001 for $42,343,000 and $43,843,000, respectively. These
transactions resulted in an aggregate $203,346,000 reduction to
stockholders' equity in fiscal 1999 resulting in a stockholders' deficit as
of January 2, 2000 and a reduction of 3,376,000 shares in the
weighted-average common shares outstanding.

(8) Reflects certain significant charges and credits recorded during fiscal
2000 as follows: $36,432,000 charged to income from continuing operations
before income taxes and minority interests representing (1) a $26,010,000
charge for capital market transaction related compensation and (2) a
$10,422,000 charge resulting from the Company's repurchase of 1,045,834
shares of its class A common stock from certain of the Company's officers
and a director within six months after exercise of the related stock
options by the officers and director; $32,914,000 charged to loss from
continuing operations representing the aforementioned $36,432,000 less
$3,518,000 of related income tax benefit; and $427,352,000 credited to net
income representing $480,946,000 of the then estimated gain on disposal of
the Company's former beverage business credited to income from discontinued
operations less (1) the aforementioned $32,914,000 charged to loss from
continuing operations and (2) a $20,680,000 extraordinary charge from the
early extinguishment of debt.

(9) The increase in stockholders' equity during fiscal 2000 principally
reflects net income of $441,241,000 which includes a gain on disposal of
discontinued operations of $480,946,000.

(10) Reflects certain significant credits recorded during fiscal 2001 as
follows: $5,000,000 credited to income from continuing operations before
income taxes and minority interests representing the receipt of a
$5,000,000 note receivable from the Chairman and Chief Executive Officer
and the President and Chief Operating Officer (the 'Executives') of the
Company received in connection with the settlement of a class action
lawsuit involving certain awards of compensation to the Executives;
$3,200,000 credited to income from continuing operations representing the
aforementioned $5,000,000 less $1,800,000 of related income tax expense;
and $46,650,000 credited to net income representing the aforementioned
$3,200,000 credited
(footnotes continued on next page)

17

(footnotes continued from previous page)

to income from continuing operations and $43,450,000 of additional gain on
disposal of the Company's beverage businesses.

(11) Reflects a decline in investment income of $32,781,000 in fiscal 2002
compared with fiscal 2001.

(12) Reflects a significant credit recorded during fiscal 2002 as follows:
$11,100,000 credited to net income representing adjustments to the
previously recognized gain on disposal of the Company's beverage business
due to the release of reserves for income taxes associated with the
discontinued beverage operations in connection with the receipt of related
income tax refunds.

18

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

INTRODUCTION

We currently operate in one business, franchising and operating Arby's
restaurants.

On December 27, 2002, we completed the acquisition of all of the voting
equity interests of Sybra, Inc. from I.C.H. Corporation in a transaction we
refer to as the Sybra Acquisition. The acquisition was under a plan of
reorganization confirmed by a United States Bankruptcy Court for I.C.H. and
Sybra following their filing in February 2002 for protection under Chapter 11 of
the United States Bankruptcy Code in order to restructure their financial
obligations. Sybra owns and operates 239 Arby's restaurants in nine states and,
prior to the Sybra Acquisition, was the second largest franchisee of Arby's
restaurants. We acquired Sybra with the expectation of strengthening and
increasing the value of our Arby's brand. Sybra's results of operations
following the December 27, 2002 date of the Sybra Acquisition through December
29, 2002 have been included in the accompanying consolidated income statement
for the year ended December 29, 2002. The results of operations before income
taxes for that two-day period have been reported in 'Other income, net' for
convenience since the results were not material to our consolidated income
before income taxes.

As discussed below under 'Liquidity and Capital Resources,' we are presently
evaluating our options for the use of our significant cash, cash equivalent and
investment position, including additional business acquisitions, repurchases of
our common shares and investments.

Throughout the years presented in this discussion, we derived our revenues
in the form of royalties and franchise and related fees but, as a result of the
Sybra Acquisition, we have also begun deriving revenues from the sales by the
restaurants we now operate which, commencing with fiscal 2003, will be reported
as sales. While the majority of our existing royalty agreements and all of our
new domestic royalty agreements provide for royalties of 4% of franchise
revenues, our average rate was 3.4% in fiscal 2002. We also derive investment
income from our investments.

We incur general and administrative expenses, depreciation and amortization
and interest expense, but no cost of sales, in our restaurant franchising
operations. In addition, we incur general corporate expenses, including
investment activity related expenses, in those same expense categories. As a
result of the Sybra Acquisition we will also report cost of sales and
advertising and selling expenses commencing with fiscal 2003. Recently we have
not had significant capital expenditures; however, as a result of the Sybra
Acquisition, we will increase capital expenditures to support our recently
acquired company-owned restaurants.

We previously operated in the premium beverage and soft drink concentrate
businesses. On October 25, 2000 we completed the sale of these businesses, which
we refer to as the Snapple Beverage Sale, of Snapple Beverage Group, Inc., the
parent company of Snapple Beverage Corp., Mistic Brands, Inc. and Stewart's
Beverages, Inc., and Royal Crown Company, Inc. to affiliates of Cadbury
Schweppes plc, which we refer to as Cadbury. The premium beverage and soft drink
concentrate businesses, formerly reported as business segments, have been
accounted for as discontinued operations in 2000 through the date of sale.

In recent years our restaurant business has experienced the following
trends:

Continued growth of food consumed away from home as a percentage of
total food-related spending;

Increases in the cost and overall difficulty of developing new units in
many areas of the country, primarily as a result of increased
competition among quick service restaurant competitors for available
development sites, higher development costs associated with those sites
and continued tightening in the lending markets typically used to
finance new unit development;

Increased price competition in the quick service restaurant industry,
particularly as evidenced by the value menu concept which offers
comparatively lower prices on some menu items, the combination meals
concept which offers a combination meal at an aggregate price lower
than the individual food and beverage items, couponing and other price
discounting;

The continuing proliferation of competitors in the higher end of the
sandwich category, many of whom are competing with Arby's by offering
higher priced sandwiches with perceived higher levels of freshness,
quality and customization;
19

Additional competitive pressures for prepared food purchases from
operators outside the quick service restaurant industry such as deli
sections and in-store cafes of several major grocery store chains,
convenience stores and casual dining outlets; and

The addition of selected higher-priced quality items to menus, which
appeal more to adult tastes and offer an opportunity to recover some of
the dollar margins lost in the discounting of other menu items.

We have experienced the effects of these trends to the extent they affect
sales by our franchisees and, accordingly, impact the royalties and franchise
fees we receive from them. Effective December 27, 2002 we also experienced these
effects directly to the extent they affect the operations of our recently
acquired restaurants.

PRESENTATION OF FINANCIAL INFORMATION

This 'Management's Discussion and Analysis of Financial Condition and
Results of Operations' of Triarc Companies, Inc., which we refer to as Triarc,
and its subsidiaries should be read in conjunction with our consolidated
financial statements included elsewhere herein. Certain statements we make under
this Item 7 constitute 'forward-looking statements' under the Private Securities
Litigation Reform Act of 1995. See 'Special Note Regarding Forward-Looking
Statements and Projections' in 'Part I' preceding 'Item 1.'

We report on a fiscal year consisting of 52 or 53 weeks ending on the Sunday
closest to December 31. Each of our 2000, 2001 and 2002 fiscal years contained
52 weeks. Our 2000 fiscal year commenced on January 3, 2000 and ended on
December 31, 2000, our 2001 fiscal year commenced on January 1, 2001 and ended
on December 30, 2001, and our 2002 fiscal year commenced on December 31, 2001
and ended on December 29, 2002. When we refer to '2000' we mean the period from
January 3, 2000 to December 31, 2000; when we refer to '2001' we mean the period
from January 1, 2001 to December 30, 2001; and when we refer to '2002' we mean
the period from December 31, 2001 to December 29, 2002.

Certain amounts presented in this 'Management's Discussion and Analysis of
Financial Condition and Results of Operations' for 2000 and 2001 have been
reclassified to conform with the current year's presentation.

20

RESULTS OF OPERATIONS

Set forth below is a table that summarizes our results of operations and
compares the amount and percent of the change between (1) 2000 and 2001, which
we refer to as the 2001 Change, and (2) 2001 and 2002, which we refer to as the
2002 Change. We consider certain percentage changes between years to be not
measurable or not meaningful, and we refer to these as 'n/m.' The percentage
changes used in the following discussion have been rounded to the nearest whole
percentage.

2002 COMPARED WITH 2001

Royalties and Franchise and Related Fees

Our royalties and franchise and related fees, which were generated entirely
from our restaurant business, increased $5.0 million, or 5%, to $97.8 million in
2002 from $92.8 million in 2001 reflecting a $5.7 million, or 6%, increase in
royalties partially offset by a $0.7 million, or 17%, decrease in franchise and
related fees. The increase in royalties consisted of (1) a $3.3 million
improvement resulting from the royalties from the 116

21

restaurants opened in 2002, with generally higher than average sales volumes,
replacing the royalties from the 64 generally underperforming restaurants closed
in 2002, (2) a $1.7 million improvement due to a 2% increase in same-store sales
of franchised restaurants and (3) a $0.7 million improvement due to an increase
in the average royalty rate to 3.4% in 2002 from 3.3% in 2001. The decrease in
franchise and related fees was principally due to a decrease in the amount of
revenues recognized from forfeited deposits upon the termination of commitments
to open new franchised restaurants and the opening of 15 fewer franchised
restaurants in 2002 compared with 2001, partially offset by an increase in
franchise license renewal fees and a decrease in franchise fee credits earned by
franchisees under our remodeling incentive program.

During the fourth quarter of 2002, we experienced a 3% decline in the
same-store sales of franchised restaurants and, based on early results, this
trend appears to be continuing into the first quarter of 2003. We believe this
decline is affected by the adverse effects of worse weather conditions, price
discounting in the quick service restaurant industry, the generally sluggish
economy and for the fourth quarter of 2002, strong same-store sales comparisons.
During the balance of 2003, we intend to continue Arby's national cable
television advertising with a new campaign and introduce new operational,
product and marketing initiatives which we expect will favorably impact the
trend of same-store sales.

Our royalties and franchise fees have no associated cost of sales. However,
commencing in 2003 we will report net sales and related cost of sales due to the
Sybra Acquisition. Included in royalties and franchise and related fees in 2002
and 2001 are $7.5 million and $7.4 million, respectively, of franchise revenues
from Sybra prior to the Sybra Acquisition. Franchise revenues from Sybra will no
longer be included in our consolidated results of operations in future periods
but instead Sybra's results of operations will be included in our future
consolidated operating results.

Investment Income, Net

The following table summarizes and compares the major components of
investment income, net:

The decrease in interest income is due to lower average interest rates and,
to a lesser extent, lower average amounts of cash equivalents and
interest-bearing short-term investments during 2002 compared with 2001. Average
rates on our interest-bearing investments declined from 4.8% in 2001 to 1.8% in
2002 principally due to the general decline in the money market and short-term
interest rate environment which has continued into 2003. The average amount of
our interest-bearing investments declined principally due to our payment in
mid-March 2001 of $239.3 million of estimated income taxes related to the
Snapple Beverage Sale in October 2000. Our recognized net gains and other than
temporary unrealized losses are dependent upon the underlying economics and/or
volatility in the value of our investments in available-for-sale securities and
cost basis investments and/or the timing of the sales of those investments.
Accordingly, our recognized net gains and our other than temporary unrealized
losses presented in the above table may not recur in future periods.

As of December 29, 2002, we had pretax unrealized holding gains and (losses)
on available-for-sale marketable securities of $1.2 million and $(1.0) million,
respectively, included in accumulated other comprehensive deficit. Should either
(1) we decide to sell any of these investments or (2) any of the unrealized
losses continue such that we believe they have become other than temporary, we
would recognize the gains or losses on the related investments at that time. In
addition, through 280 BT Holdings LLC, a 57.4%-owned consolidated subsidiary, we
hold a $1.7 million cost basis investment in Scientia Health Group Limited, an
entity which we refer to as Scientia, representing original cost less
adjustments for unrealized losses in investments made by Scientia that were
deemed to be other than temporary of $3.3 million during 2002. Such

22

amounts have been effectively reduced by minority interests of $0.7 million and
$1.4 million, respectively. In addition, as of December 29, 2002 we have $0.8
million of non-recourse notes receivable from management officers and employees
relating to a portion of their investments in 280 BT Holdings, less an allowance
of $0.4 million for uncollectible amounts. If the value of the investments of
280 BT Holdings decline further and, accordingly, we recognize additional other
than temporary losses, we would also provide additional allowances relating to
the non-recourse notes receivable in 'General and administrative' expenses.

Gain (Loss) on Sale of Businesses

The loss on sale of businesses of $1.2 million in 2002 represents a
reduction of a gain related to a business previously sold due to a charge for
estimated environmental clean-up and related costs. The gain on sale of
businesses of $0.5 million in 2001 reflects the release of sales tax accruals no
longer necessary due to the expiration of statutory audit periods. These
accruals were originally provided as a component of the loss on sale of all the
355 then company-owned restaurants in 1997.

Other Income, Net

The following table summarizes and compares the major components of other
income, net:

Other income, net decreased $8.8 million principally due to $8.3 million of
interest income recorded in 2001 which did not recur in 2002 related to our
election in June 2001 to treat certain portions of the Snapple Beverage Sale as
an asset sale for income tax purposes, as explained in more detail under
'Discontinued Operations.' The written call option on our common stock relates
to the right of Cadbury to have caused us to issue our common stock upon
conversion of our zero coupon convertible debentures that had been assumed by
Cadbury. Cadbury called the debentures for redemption in full with a redemption
date of February 9, 2003, and the written call option terminated without any of
our common stock being called under the option. The $0.5 million increase in
equity in (losses) earnings of investees, other than investment limited
partnerships and similar investment entities, was primarily attributable to the
$0.3 million of equity in earnings of Encore Capital Group, Inc., formerly MCM
Capital Group, Inc., which we refer to as Encore, in 2002 compared with equity
in losses of Encore of less than $0.1 million in 2001 as Encore returned to
profitability in 2002. We own 7.2% of the issued and outstanding common stock of
Encore and 17.5% of convertible preferred stock of Encore. If all of the
convertible preferred stock were converted, the Company's ownership in Encore
common stock would increase to 13.1%.

General and Administrative

Our general and administrative expenses decreased $1.5 million, or 2%,
principally reflecting (1) a $5.3 million decrease in incentive compensation
costs, (2) a $0.7 million decrease in legal fees, (3) a $0.6 million decrease in
the provision for doubtful accounts due to the realization in 2002 of
collections on two fully-reserved notes from franchisees and (4) a $0.5 million
decrease in deferred compensation expense. The $5.3 million decrease in
incentive compensation was principally due to lower executive bonuses relating
to 2002 as compared with 2001. Deferred compensation expense of $1.4 million in
2002 and $1.9 million in 2001 represents the increase in the fair value of
investments in two deferred compensation trusts, which we refer to as the
Trusts, for the benefit of our Chairman and Chief Executive Officer and
President and Chief Operating Officer, whom we refer to as the Executives, as
explained in more detail below under 'Income (Loss) From

23

Continuing Operations Before Income Taxes and Minority Interests.' These
decreases were partially offset by (1) a $5.0 million reduction in compensation
expense in 2001 which did not recur in 2002 related to a note that we received
from the Executives in partial settlement of a class action shareholder lawsuit
which effectively represented an adjustment of prior period compensation expense
and (2) an increase of $1.1 million in insurance costs principally reflecting
higher premiums.

Depreciation and Amortization, Excluding Amortization of Deferred Financing
Costs

Our depreciation and amortization, excluding amortization of deferred
financing costs, in total was relatively unchanged at $6.6 million in 2002
compared with $6.5 million in 2001.

Interest Expense

Interest expense decreased $4.2 million, or 14%, principally reflecting
(1) interest of $3.1 million recorded in 2001 which did not recur in 2002 on the
estimated income tax liability paid with the filing of our election in June 2001
to treat certain portions of the Snapple Beverage Sale as an asset sale for
income tax purposes, as explained below under 'Discontinued Operations,' and (2)
a $1.4 million decrease in interest expense due to lower outstanding balances of
our 7.44% insured non-recourse securitization notes, which we refer to as the
Securitization Notes. These decreases were partially offset by a $0.6 million
increase in interest expense due to the full period effect in 2002 of a term
loan and related interest rate swap agreement used to finance the purchase of an
airplane in July 2001.

Insurance Expense Related to Long-Term Debt

Insurance expense related to long-term debt decreased $0.3 million, or 6%,
to $4.5 million in 2002 from $4.8 million in 2001 due to lower outstanding
balances of the Securitization Notes.

Costs of Proposed Business Acquisitions Not Consummated

The $2.2 million of costs of proposed business acquisitions not consummated
in 2002 were primarily for a business acquisition proposal which was not
accepted. The $0.6 million of costs in 2001 were for other proposed business
acquisitions not consummated.

Income (Loss) From Continuing Operations Before Income Taxes and Minority
Interests

Our income (loss) from continuing operations before income taxes and
minority interests decreased $34.0 million to a loss of $16.6 million in 2002
from income of $17.4 million in 2001 due to the effect of the variances
explained in the captions above.

As disclosed above, we recognized $1.9 million in 2001 and $1.4 million in
2002 of deferred compensation expense for the increase in the fair value of the
investments in the Trusts. Under accounting principles generally accepted in the
United States of America, we recognized investment income of $0.2 million on the
investments in the Trusts in 2001, but were not permitted to recognize any
investment income on the investments in the Trusts in 2002. This disparity
between compensation expense and investment income recognized will reverse in
the future periods as either (1) the investments in the Trusts are sold and
previously unrealized gains are recognized without any offsetting increase in
compensation expense or (2) the fair values of the investments in the Trusts
decrease resulting in the recognition of a reduction of deferred compensation
expense without any offsetting losses recognized in investment income.

Income Taxes

The benefit from and provision for income taxes represented effective rates
of 20% in 2002 and 50% in 2001 on the respective loss or income from continuing
operations before income taxes and minority interests. The effective benefit
rate in 2002 is lower than the United States Federal statutory rate of 35%
principally due to (1) the tax provision related to minority interests in loss
of a consolidated subsidiary, which is not included in income or loss from
continuing operations before income taxes and minority interests, (2) the state
income taxes, net of Federal income tax benefit, of the consolidated entities
due to the differing mix of pretax income
24

or loss among the consolidated entities which file state tax returns on an
individual company basis and (3) the effect of non-deductible compensation
costs. The effective provision rate in 2001 was higher than the 35% rate
principally due to (1) the effect of non-deductible compensation costs and
(2) state income taxes, both of which had a greater effect in 2001 compared with
2002.

Minority Interests in Loss of a Consolidated Subsidiary

The minority interests in loss of a consolidated subsidiary of $3.5 million
in 2002 and $0.3 million in 2001 principally reflect provisions for unrealized
losses by 280 BT Holdings on its cost basis investments deemed to be other than
temporary.

Discontinued Operations

Income from discontinued operations, which resulted entirely from
adjustments to the previously recognized gain on the Snapple Beverage Sale, was
$11.1 million in 2002 compared with $43.4 million in 2001. The adjustment to the
gain in 2002 was due to the release of reserves for income taxes associated with
the discontinued beverage operations in connection with the receipt of related
income tax refunds. The adjustment to the gain in 2001 resulted from the
realization of $200.0 million of proceeds from Cadbury for our electing in June
2001 to treat certain portions of the Snapple Beverage Sale as an asset sale in
lieu of a stock sale under the provisions of Section 338(h)(10) of the United
States Internal Revenue Code, net of estimated income taxes, partially offset by
additional accruals relating to the Snapple Beverage Sale.

2001 COMPARED WITH 2000

Royalties and Franchise and Related Fees

Our royalties and franchise and related fees, which were generated entirely
from our restaurant business, increased $5.4 million, or 6%, to $92.8 million in
2001 from $87.4 million in 2000 reflecting a $5.3 million, or 6%, increase in
royalties and a $0.1 million, or 2%, increase in franchise and related fees. The
increase in royalties consisted of (1) a $3.9 million improvement resulting from
the royalties from the 131 restaurants opened in 2001, with generally higher
than average sales volume, replacing the royalties from the 99 generally
underperforming restaurants closed in 2001, (2) a $1.2 million improvement due
to a 2% increase in same-store sales of franchised restaurants and (3) a $0.2
million improvement due to a higher average royalty rate. The slight increase in
franchise and related fee revenue was principally due to (1) an increase in fees
from franchise license transfers and franchisee training and (2) an increase in
revenues recognized from forfeited deposits upon the termination of commitments
to open new franchised restaurants, both substantially offset by a decrease in
franchise fee revenue principally due to the opening of 25 fewer franchised
restaurants in 2001 compared with 2000.

Our royalties and franchise fees have no associated cost of sales.

Investment Income, Net

The following table summarizes and compares the major components of
investment income, net:

The increase in interest income was due to higher average amounts of cash
equivalents and short-term investments in 2001 compared with 2000 as a result of
the full year effect in 2001 of the cash provided from
25

the Snapple Beverage Sale and $277.0 million of proceeds, net of $13.0 million
of expenses, from the issuance of the Securitization Notes on November 21, 2000.
The decrease in recognized net gains on our investments includes $10.3 million
which was attributable to our gain on the sale of one particular common stock
investment in 2000 which did not recur in 2001.

Gain on Sale of Businesses

The gain on sale of businesses of $0.5 million in 2001 reflects the release
of sales tax accruals no longer necessary as previously discussed in more detail
in the comparison of 2002 and 2001. There was no gain on sale of businesses
included in continuing operations in 2000.

Other Income, Net

The following table summarizes and compares the major components of other
income, net:

Other income, net, increased $8.9 million principally due to (1) $8.3
million of interest income recorded in 2001, which did not occur in 2000,
related to our election to treat certain portions of the Snapple Beverage Sale
as an asset sale for income tax purposes, as previously discussed in more detail
in the comparison of 2002 and 2001 and (2) a $2.1 million decrease in our equity
in the losses of investees other than investment limited partnerships and
similar investment entities accounted for under the equity method, principally
due to $1.8 million of equity in the write-down of certain assets by an investee
in 2000 which did not recur in 2001. These increases were partially offset by
the non-recurring collection in 2000 of $0.9 million of a receivable from a
former affiliate which was written off in years prior to 2000 due to the former
affiliate filing for bankruptcy protection.

General and Administrative

Our general and administrative expenses decreased $3.1 million, or 4%,
reflecting (1) an $11.4 millio