Foodservice in Canada

Industry Profile

Reference Code: 0070-2333 Publication date: September 2008

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ABOUT DATAMONITOR

ABOUT DATAMONITOR
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EXECUTIVE SUMMARY

EXECUTIVE SUMMARY
Market Value The Canadian foodservice industry grew by 3.4% in 2007 to reach a value of $17.5 billion. Market Value Forecast In 2012, the Canadian foodservice industry is forecast to have a value of $20.4 billion, an increase of 16.7% since 2007. Market Volume The Canadian foodservice industry grew by 2.1% in 2007 to reach a volume of 6.9 billion transactions. Market Volume Forecast In 2012, the Canadian foodservice industry is forecast to have a volume of 7.6 billion transactions, an increase of 10.2% since 2007. Market Segmentation I Cafs & restaurants is the most lucrative segment, generating 43.3% of the Canadian foodservice industry's value. Market Segmentation II Canada accounts for 6.6% of Americas regional value.

Canada - Foodservice Datamonitor (Published September 2008) Page 3

CONTENTS

TABLE OF CONTENTS

EXECUTIVE SUMMARY CHAPTER 1

1.1 1.2 1.3

3 7
7 8 9

Market Overview

Market Definition Research Highlights Market Analysis

CHAPTER 2 CHAPTER 3 CHAPTER 4 CHAPTER 5 CHAPTER 6 CHAPTER 7

7.1 7.2 7.3 7.4

Market Value Market Volume Market Segmentation I Market Segmentation II Competitive Landscape Leading Companies

10 11 12 13 14 17
17 20 23 25

Darden Restaurants, Inc. McDonald's Corporation Wendy's International, Inc. Cara Operations Limited

CHAPTER 8
8.1 8.2

Market Forecasts

26
26 27

Market Value Forecast Market Volume Forecast

CHAPTER 9
Canada - Foodservice

Demographics

28

Datamonitor (Published September 2008)

Page 4

CONTENTS
CHAPTER 10
10.1 Methodology 10.2 Industry Associations 10.3 Related Datamonitor Research

Appendix

30
30 31 31

Canada - Foodservice Datamonitor (Published September 2008) Page 5

CONTENTS

LIST OF TABLES
Table 1: Table 2: Table 3: Table 4: Table 5: Table 6: Table 7: Table 8: Table 9: Table 10: Table 11: Table 12: Table 13: Canada Foodservice Industry Value: $ billion, 2003-2007 ................................10 Canada Foodservice Industry Volume: Transactions billion, 2003-2007...........11 Canada Foodservice Industry Segmentation I: % Share, by Value, 2007 .........12 Canada Foodservice Industry Segmentation II: % Share, by Value, 2007 ........13 Key Facts: Darden Restaurants, Inc. ................................................................17 Key Financials: Darden Restaurants, Inc. .........................................................19 Key Facts: McDonald's Corporation..................................................................20 Key Financials: McDonald's Corporation ..........................................................22 Key Facts: Wendy's International, Inc. ..............................................................23 Key Financials: Wendy's International, Inc........................................................24 Key Facts: Cara Operations Limited .................................................................25 Canada Foodservice Industry Value Forecast: $ billion, 2007-2012 .................26 Canada Foodservice Industry Volume Forecast: Transactions billion, 2007-2012 ........................................................................................................................27 Table 14: Table 15: Table 16: Table 17: Canada Size of Population (million) , 2003-2007 ..............................................28 Canada GDP (Constant 2000 Prices, $ billion), 2003-2007 ..............................28 Canada Inflation, 2003-2007.............................................................................28 Canada Exchange Rate, 2003..........................................................................29

Canada - Foodservice Datamonitor (Published September 2008) Page 6

MARKET OVERVIEW

CHAPTER 1

MARKET OVERVIEW

1.1

Market Definition
Foodservice is defined as the sale of food and drinks for immediate consumption either on the premises from which they were bought, or in designated eating areas shared with other foodservice operators, or in the case of takeaways transactions, freshly prepared food for immediate consumption. Datamonitor's definition excludes sales through vending machines and is restricted to sales in specific foodservice channels (please see channel definitions below). All market values are given in Operator Buying Prices, that is the amount spent by foodservice operators on the food and drink that they serve and not the amount the consumers spend on food and drinks (Operator Selling Prices - OSPs) in these channels. The difference is the mark up the foodservice operator adds in order to cover their other costs and generate a profit. This therefore values the market in terms of the amount of money for which food and drinks manufacturers are competing. The market is broken down in to four segments: Cafes & Restaurants, Fastfood, Cost and Other. Cafes & Restaurants includes Cafes, Pubs & Bars, Full Service Restaurants, Hotels and Retail locations; Fastfood includes Quick Service Restaurants, Takeaways, Street Vendors and Leisure Locations (cinemas, theatres etc.); Other includes Nightclubs and sales On-board boats, planes, trains or coaches; the Cost segment is characterised by the fact that a subsidy is paid (either directly or indirectly) to one of the actors involved in the transaction, or where the final consumer pays for the food at its actual cost (as opposed to a price that adds some margin to its basic cost). The cost sector includes the following channels - workplace locations, education locations, hospitals and welfare & services locations. Market volumes are classed as the total number of visits by individuals to foodservice locations that involve the consumption of either food, or drink, or both. As such, if several people visit one location at once and there is only one bill (e.g. a group dining in a restaurant), the number of transactions is counted as being one for each person in the group. Multiple purchases made during the same visit (e.g. a person buys several drinks bought over a period of time in a bar) are counted as one transaction. The purchase of drink with food in the same location in the same visit is also considered as one transaction, not two. All currency conversions used in this profile were carried out using constant 2007 average annual exchange rates.

Canada - Foodservice Datamonitor (Published September 2008) Page 7

MARKET OVERVIEW
For the purpose of this profile, the Americas consists of Brazil, Canada, Mexico and the United States.

1.2

Research Highlights
The Canadian Foodservice industry generated total revenues of $17.5 billion in 2007, representing a compound annual growth rate (CAGR) of 3.2% for the period spanning 2003-2007. Cafs & Restaurants sales proved the most lucrative for the Canadian Foodservice industry in 2007, generating total revenues of $7.6 billion, equivalent to 43.3% of the industry's overall value. The performance of the industry is forecast to follow a similar pattern, with an anticipated CAGR of 3.1% for the five-year period 2007-2012, which is expected to drive the industry to a value of $20.4 billion by the end of 2012.

Canada - Foodservice Datamonitor (Published September 2008) Page 8

MARKET OVERVIEW
1.3 Market Analysis
Since 2003, the Canadian Foodservice industry has experienced high growth rates, and this trend looks set to continue, although it is expected to experience a slight deceleration. The Canadian Foodservice industry generated total revenues of $17.5 billion in 2007, representing a compound annual growth rate (CAGR) of 3.2% for the period spanning 2003-2007. In comparison, the United States and Mexican industries grew with CAGRs of 3.7% and 4.2%, respectively, over the same period, to reach respective values of $195 billion and $31.7 billion in 2007. Cafs & Restaurants sales proved the most lucrative for the Canadian Foodservice industry in 2007, generating total revenues of $7.6 billion, equivalent to 43.3% of the industry's overall value. In comparison, sales of Cost Foodservice generated revenues of $5.6 billion in 2007, equating to 32.3% of the industry's aggregate revenues. The performance of the industry is forecast to follow a similar pattern, with an anticipated CAGR of 3.1% for the five-year period 2007-2012, which is expected to drive the industry to a value of $20.4 billion by the end of 2012. Comparatively, the United States and Mexican industries will grow with CAGRs of 3.3% and 3.7%, respectively, over the same period, to reach respective values of $228.8 billion and $38.1 billion in 2012.

Canada - Foodservice Datamonitor (Published September 2008) Page 9

MARKET VALUE

CHAPTER 2

MARKET VALUE

The Canadian foodservice industry grew by 3.4% in 2007 to reach a value of $17.5 billion. The compound annual growth rate of the industry in the period 2003-2007 was 3.2%. Table 1: Year 2003 2004 2005 2006 2007 CAGR, 2003-2007:
Source: Datamonitor

Canada Foodservice Industry Value: $ billion, 2003-2007 $ billion 15.4 15.9 16.4 16.9 17.5 C$ billion 16.5 17.0 17.6 18.2 18.8 % Growth

3.00% 3.20% 3.30% 3.40% 3.2%

DATAMONITOR

Figure 1:

Canada Foodservice Industry Value: $ billion, 2003-2007

$ billion 20 18 16 14 12 10 8 6 4 2 0 2003 2004 2005

% Growth 3.5% 3.4% 3.3% % Growth 3.2% 3.1% 3.0% 2.9% 2.8% 2006 2007

Source: Datamonitor

$ billion

DATAMONITOR

Canada - Foodservice Datamonitor (Published September 2008) Page 10

MARKET VOLUME

CHAPTER 3

MARKET VOLUME

The Canadian foodservice industry grew by 2.1% in 2007 to reach a volume of 6.9 billion transactions. The compound annual growth rate of the industry volume in the period 2003-2007 was 2%. Table 2: Canada Foodservice Industry Volume: Transactions billion, 2003-2007 Transactions billion 6.4 6.5 6.6 6.8 6.9

Year 2003 2004 2005 2006 2007 CAGR, 2003-2007:

Source: Datamonitor

% Growth

1.80% 2.00% 2.00% 2.10% 2.0%

DATAMONITOR

Figure 2:

Canada Foodservice Industry Volume: Transactions billion, 2003-2007

Transactions billion 8 Transactions billion 7 6 5 4 3 2 1 0 2003 2004 2005 2006

% Growth 2.10% 2.05% 2.00% 1.95% 1.90% 1.85% 1.80% 1.75% 1.70% 1.65% 1.60% 2007

% Growth

Source: Datamonitor

DATAMONITOR

Canada - Foodservice Datamonitor (Published September 2008) Page 11

MARKET SEGMENTATION I

CHAPTER 4

MARKET SEGMENTATION I

Cafs & restaurants is the most lucrative segment, generating 43.3% of the Canadian foodservice industry's value. The cost segment accounts for a further 32.3% of the industry's revenues. Table 3: Canada Foodservice Industry Segmentation I: % Share, by Value, 2007 % Share 43.30% 32.30% 23.30% 1.00% 100.0%
DATAMONITOR

Category Cafs & Restaurants Cost Fast-food Other Total

Source: Datamonitor

Figure 3:

Canada Foodservice Industry Segmentation I: % Share, by Value, 2007

Fast-food 23.3%

Other 1%

Cafs & Restaurants 43.3%

Cost 32.3%

Source: Datamonitor

DATAMONITOR

Canada - Foodservice Datamonitor (Published September 2008) Page 12

MARKET SEGMENTATION II

CHAPTER 5

MARKET SEGMENTATION II

Canada accounts for 6.6% of Americas regional value. The United States, the most lucrative region, generates 73.1% of the industry's revenues. Table 4: Canada Foodservice Industry Segmentation II: % Share, by Value, 2007 % Share 73.10% 11.90% 8.40% 6.60% 100.0%
DATAMONITOR

Geography United States Mexico Brazil Canada Total

Source: Datamonitor

Figure 4:

Canada Foodservice Industry Segmentation II: % Share, by Value, 2007

Canada 6.6% Brazil 8.4% Mexico 11.9%

United States 73.1%

Source: Datamonitor

DATAMONITOR

Canada - Foodservice Datamonitor (Published September 2008) Page 13

COMPETITIVE LANDSCAPE

CHAPTER 6

COMPETITIVE LANDSCAPE

The profit foodservice segment is the dominant segment within the sector, which will be reflected in this analysis. The profit foodservice sector is characterized by the choice it offers to consumers. The sheer number of players and the ease of switching between them intensifies competition between players; however the whim of one individual does not have a great impact on revenues. The greatest threat to cafes and restaurants is the likelihood of buyers essentially achieving 'backwards integration' by purchasing the raw materials cheaply and cooking the meal themselves in their own kitchen. Consequently, players have a constant battle on their hands to offer a differentiated experience and add entertainment value to the meal besides the food itself; through branding and the environment that they create. Upstream in the sector, the size and independence of suppliers exerts margin pressure on players as they feel no urgency to keep raw material prices low. New entrants are attracted by healthy market growth and face few barriers to entry. The profit foodservice sector includes restaurants, cafes, and fast-food outlets, with individual consumers as the only buyers. The main source of buyer power is the lack of switching costs: within a given price range, a consumer's choice of foodservice provider is purely a matter of personal taste, and can vary from one day to the next. There is also likely to be relatively high price elasticity of demand, because foodservice is not strictly essential to consumers; in fact, they can 'backwards integrate' by foregoing the restaurant and cooking their own food. High transaction volumes mean that the impact of any one consumer on revenues is usually small the exception here can be premium-price, non-chain restaurants, whose business model relies on low-volume, high-margin sales. Furthermore, investment in brand building, especially in the low- and medium-price segments, has driven customer loyalty, while the social functions and sheer convenience of foodservice makes it more important to the consumer than a simple source of food. Overall, buyer power in the profit foodservice sector is moderate. Foodservice is a labor intensive industry, and wages form a significant proportion of operating costs: around 25-30%. The existence of a statutory minimum wage increases the need for players to keep other costs as lean as possible, which in turn increases the importance of suppliers. Foodservice companies are generally lowmargin businesses, and need to source good quality food at low prices. Risks associated with supply chain disruption, or the inability of a competing supplier to offer food of adequate quality, could increase switching costs.

Canada - Foodservice Datamonitor (Published September 2008) Page 14

COMPETITIVE LANDSCAPE
Many of the foodservice suppliers are large companies, and the high number of businesses they serve means that they themselves are under less pressure to keep their prices down. While some players in the higher-priced segments, usually operating only a few restaurants at most, often 'backwards integrate' and purchase their food supplies direct by visiting farmers' markets, more moderately-priced chain restaurants would find such a practice unfeasible in terms of both time and cost. Overall, supplier power is assessed as strong. Entry to the profit foodservice sector generally requires little capital, and independent foodservice outlets can be successful as sole proprietor operations. More ambitious companies that wish to expand beyond a single restaurant can do so through franchising. This reduces the costs of the parent company, and is a key expansion route for many large foodservice firms. Established players have usually established relationships with trusted suppliers and their bargaining power benefits from economies of scale; new entrants may have difficulty emulating this to gain quality produce cost-effectively. Stringent government regulations regarding the handling and preparation of foodstuffs could be a barrier to entry for a sole proprietor who was new to the sector; however players with the capital to obtain trained staff and quality kitchen equipment would not find this burdensome. Additionally, although there are strong brands present in this market, their sheer number means that buyers rarely remain loyal to only one player. Revenue growth in the profit foodservice sector has been healthy in recent years, increasing its attractiveness to new players, and making the likelihood of new entrants strong. Profit foodservice customers are usually in a position to prepare their own food, which constitutes the main threat of substitutes. The main switching cost is the opportunity cost of the time spent in the kitchen, as home-cooked food itself is usually cheaper than a meal in a restaurant. Other substitutes include alternative leisure pursuits such as movie and theatre going, in the sense that consumers could decide on those pursuits as opposed to meeting friends for a meal in a restaurant. Furthermore, a cultural increase in snacking and 'eating on the go' has tended to reduce the number of formal meal occasions in the consumer's week and driven business to retailers instead. The usual strategy adopted to deal with the threat of substitutes in profit foodservice is to sell an experience as well as food and drink. For chains, this may be achieved through investment in brand building; for high-end independent full service restaurants, it may involve the development of a much more individualized identity, perhaps focusing on the influence of a particular style of cooking. The impact of substitutes on profit foodservice is assessed as moderate.

Canada - Foodservice Datamonitor (Published September 2008) Page 15

COMPETITIVE LANDSCAPE
In the profit foodservice sector, there are numerous small competitors; thus, within any segment, there are many companies with similar structures offering similar products, and consumers incur no costs in changing their foodservice providers, which intensifies rivalry between players. Rivalry is somewhat mitigated, however, by the relative ease of expansion and also the absence of high exit costs. Even complete exit from the industry is not unduly expensive: physical assets such as restaurants do not represent significant sunk costs even if owned rather than rented, as they can be sold for a good price, and most of the staff laid off will not be eligible for costly redundancy payments. The healthy revenue performance of the sector in recent years eases rivalry, as it is more possible for a player to increase its own revenues without encroaching on those of its competitors. However, rivalry in the profit sector is assessed as strong overall.

Canada - Foodservice Datamonitor (Published September 2008) Page 16

LEADING COMPANIES

CHAPTER 7

LEADING COMPANIES

7.1

Darden Restaurants, Inc.

Table 5: Key Facts: Darden Restaurants, Inc. 5900 Lake Ellenor Drive, Orlando, Florida 32809, USA 1 407 245 4000 1 407 245 5114 www.darden.com May DRI New York
DATAMONITOR

Address: Telephone: Fax: Website: Financial Year-End: Ticker: Stock Exchange:

Source: Company Website

Darden Restaurants (Darden) is one of the leading casual dining restaurant companies in the world. It is the parent company of GMRI, a Florida corporation. GMRI and other Darden subsidiaries own the operating assets of the restaurants. The company's restaurants operate under following brands: Red Lobster, Olive Garden, Bahama Breeze, Smokey Bones Barbeque & Grill and Seasons 52. The company offers no franchising opportunities domestically, but does have a licensing agreement to operate over 32 Red Lobster restaurants in Japan. The company serves over 350 million meals annually through its 1, 700 restaurants in the US and Canada. In the US, it operates 1,362 restaurants in 49 states, including 651 Red Lobster, 608 Olive Garden, 23 Bahama Breeze, 73 Smokey Bones Barbeque & Grill and seven Seasons 52 restaurants. In Canada, the company operates 35 restaurants, including 29 Red Lobster and six Olive Garden restaurants. In Japan, the company has licensed 32 Red Lobster restaurants to an unaffiliated Japanese company. Red Lobster is a casual dining, seafood-specialty restaurant operator in the US. It has 651 restaurants in US and 29 restaurants in Canada. Red Lobster's menu includes fish, shrimp, crab, lobster, scallops and other seafood. The menu also includes a variety of specialty seafood and non-seafood entrees, appetizers and desserts. Olive Garden is a full-service Italian restaurant company, with 608 restaurants in the US and six in Canada. Its menu includes Italian food and wines, such as antipasti, soups, salad and garlic breadsticks, pastas, specialties with chicken, seafood and fresh vegetables, grilled meats and a variety of desserts. Olive Garden also uses coffee imported from Italy for its espresso and cappuccino.

Canada - Foodservice Datamonitor (Published September 2008) Page 17

LEADING COMPANIES
Bahama Breeze is Caribbean-themed restaurant that offers food and drinks found on islands. The menu features Caribbean-inspired seafood, chicken and steaks, as well as signature specialty drinks. Bahama Breeze maintains 11 different lunch and dinner menus, as well as a children's menu. Smokey Bones is an internally developed concept, which features barbequed pork, beef and chicken, as well as other grilled favorites, all served in a mountain-lodge setting that features televised sports. The company also operates Seasons 52 chain of restaurants, a fresh grill and wine bar with seasonally inspired menus offering fresh ingredients to create great tasting meals that are lower in calories than comparable restaurant meals. It offers an international wine list of more than 140 wines, with 70 available by the glass.

Canada - Foodservice Datamonitor (Published September 2008) Page 18

LEADING COMPANIES
Key Metrics Table 6: Metric Revenues Net Income Profit Margin Total Assets Total Liabilities Employees
Source: Company Filings

Key Financials: Darden Restaurants, Inc. 2003 4,654.9 226.0 4.9% 2,664.6 1,534.6 140,700 2004 5,003.4 227.2 4.5% 2,780.3 1,605.1 141,300 2005 5,278.1 290.6 5.5% 2,937.7 1,664.7 150,100 2006 5,353.6 338.2 6.3% 3,010.1 1,780.4 157,300 2007 5,567.1 201.4 3.6% 2,880.8 1,786.3 156,500

DATAMONITOR

Figure 5:

Revenues & Profitability: Darden Restaurants, Inc.

Revenues 6,000 5,000 US$ Millions 4,000 3,000 2,000 1,000 0 2003

Net Income

Profit Margin 7.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% Profit Margin (%)
Page 19

6.0%

2004

2005 Year

2006

2007

Source: Company Filings

DATAMONITOR

Canada - Foodservice Datamonitor (Published September 2008)

LEADING COMPANIES
7.2 McDonald's Corporation
Table 7: Key Facts: McDonald's Corporation McDonald's Plaza, Oak Brook, Illinois 60523, USA 1 630 623 3000 1 630 623 5004 www.mcdonalds.com December MCD New York
DATAMONITOR

Address: Telephone: Fax: Website: Financial Year-End: Ticker: Stock Exchange:

Source: Company Website

McDonald's Corporation (McDonald's) operates fast food restaurants all over the world. The company is the world's largest food service retailing chain, preparing and serving a range of foods. All McDonald's restaurants offer a standard menu, which comprise food items such as hamburgers, cheeseburgers, chicken sandwiches, French fries, salads, milk shakes, desserts and ice cream sundaes. Some McDonald's restaurants offer additional food items to suit local taste and preferences. The company also operates restaurants under the brand name 'Boston Market'. The company's business is divided into four geographic segments: Europe, the US, APMEA (Asia, Pacific, Middle East and Africa), and other countries and corporate. Other countries and corporate includes Canada and Latin America, as well as Corporate activities and certain investments. In FY2007, the company operated 31,370 fast food restaurants in over 118 countries in the following geographic segments: the US; Europe; Asia Pacific, Middle East and Africa (APMEA); Latin America and Canada. McDonald's restaurants offer a substantially uniform menu, although there may be geographic variations. McDonald's menu includes hamburgers and cheeseburgers, Big Mac, Quarter Pounder with Cheese, Filet-O-Fish, several chicken sandwiches, Chicken McNuggets, Chicken Selects, french fries, premium salads, shakes, McFlurry desserts, sundaes, soft serve cones, pies, cookies, soft drinks, coffee and other beverages. In addition, the restaurants sell a variety of other products during limited-time promotions. McDonald's generates revenues through company operated restaurants and franchisee restaurants. Of total 31,370 McDonald's restaurants, over 6,900 are operated by the company and over 20,500 are operated by franchisees. The remaining, around 3,960 restaurants are operated by affiliates. The company's revenue comprises sales from company operated restaurants and fees as well as rent from franchisees and affiliates.

Canada - Foodservice Datamonitor (Published September 2008) Page 20

LEADING COMPANIES
Under the franchise arrangement, the franchisees invest in the equipment, signage, seating and decor, while the company owns or leases the land and building. Franchisees pay the company service fees and rent for premises. A Service fee is set as a percentage of sales, while rent and other terms of occupancy are stipulated in the franchise agreement, which is drawn for a period of 20 years. The company and its franchisees as well as affiliates source purchase food, packaging, equipment and other goods from approved suppliers. The company maintains quality standards through assurance labs around the world. A quality assurance board, including the company's technical, safety and supply chain specialists, provide guidance on all aspects of food quality and safety.

Canada - Foodservice Datamonitor (Published September 2008) Page 21

LEADING COMPANIES
Key Metrics Table 8: Metric Revenues Net Income Profit Margin Total Assets Total Liabilities Employees
Source: Company Filings

Key Financials: McDonald's Corporation 2003 2004 2005 2006 2007

17,140.5 18,594.0 19,117.3 20,895.2 22,786.6 1,471.4 2,278.5 2,602.2 3,544.2 2,395.1 8.6% 12.3% 13.6% 17.0% 10.5% 25,838.0 27,837.5 29,988.8 28,974.5 29,391.7 13,856.1 13,636.0 14,842.7 13,516.2 14,111.9 418,000 438,000 447,000 465,000 390,000
DATAMONITOR

Figure 6:

Revenues & Profitability: McDonald's Corporation

Revenues 25,000 US$ Millions 20,000 15,000 10,000 5,000 0 2003

Net Income

Profit Margin 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0%

2004

2005 Year

2006

2007

Source: Company Filings

DATAMONITOR

Canada - Foodservice Datamonitor (Published September 2008) Page 22

Profit Margin (%)

LEADING COMPANIES
7.3 Wendy's International, Inc.
Table 9: Key Facts: Wendy's International, Inc. 4288 West Dublin-Granville Road, Dublin, Ohio 43017 0256, USA 1 614 764 3100 1 614 764 3330 www.wendys.com December WEN New York
DATAMONITOR

Address: Telephone: Fax: Website: Financial Year-End: Ticker: Stock Exchange:

Source: Company Website

Wendy's International is engaged in the operation, development, and franchising of restaurants. As of December 2007, the company operated 6,645 Wendy's restaurants in the US and 19 other countries and territories. Of these restaurants, 1,414 are company operated and 5,231 by the company's franchisees. Each Wendy's restaurant offers a relatively standard menu featuring hamburgers and chicken sandwiches, which are prepared to order with the customer's choice of condiments. Wendy's menu also includes chicken nuggets, chili, baked and French fried potatoes, freshly prepared salads, soft drinks, milk, frosty dessert, floats and kids meals. In addition, the restaurants sell a variety of promotional products on a limited basis. The company sells sandwich buns and kids' meal toys to its franchisees. The New Bakery (Bakery) Co., a wholly owned subsidiary, supplies buns to the Wendy's restaurants. As of December 2007, the Bakery supplied 637 restaurants operated by the company and 2,366 restaurants operated by franchisees. The Bakery operates two facilities in Zanesville, Ohio that produce hamburger buns for Wendy's restaurants. The hamburger buns are distributed to both company operated and franchisee restaurants using primarily the Bakery's fleet of trucks.

Canada - Foodservice Datamonitor (Published September 2008) Page 23

LEADING COMPANIES
Key Metrics Table 10: Metric Revenues Net Income Profit Margin Total Assets Total Liabilities
Source: Company Filings

Key Financials: Wendy's International, Inc. 2003 2,251.9 236.0 10.5% 3,133.0 1,374.4 2004 2,502.2 52.0 2.1% 3,197.5 1,481.9 2005 2,455.4 224.1 9.1% 3,440.3 1,381.7 2006 2,439.3 94.3 3.9% 2,060.3 1,048.7 2007 2,450.2 87.9 3.6% 1,789.4 985.3

DATAMONITOR

Figure 7:

Revenues & Profitability: Wendy's International, Inc.

Revenues 3,000 2,500 US$ Millions 2,000 1,500 1,000 500 0 2003

Net Income

Profit Margin 12.0% Profit Margin (%)

Page 24

10.0% 8.0% 6.0% 4.0% 2.0% 0.0% 2004 2005 Year 2006 2007

Source: Company Filings

DATAMONITOR

Canada - Foodservice Datamonitor (Published September 2008)

LEADING COMPANIES
7.4 Cara Operations Limited
Table 11: Key Facts: Cara Operations Limited 6303 Airport Road, Mississauga, L4V 1R8 Ontario, CAN 1 905 405 6500 1 905 405 6777 www.cara.com March N/A N/A
DATAMONITOR

Address: Telephone: Fax: Website: Financial Year-End: Ticker: Stock Exchange:

Source: Company Website

Cara Operations is an integrated foodservice company. The company operates in Canada. The brand portfolio of the group comprises of Swiss Chalet, Kelsey's, Harvey's, Milestone's Grill & Bar and Montana's Cookhouse. The company also provides airline solutions. The company's Swiss Chalet restaurant provides roasted chicken. The Harvey's restaurant provides burgers. The Montana's Cookhouse provides steak and chicken. The company's Airline Solutions operate ten air kitchens in Canada. The group operates full service family restaurants, airport dining services, airline catering and integrated food distribution operations for institutional clients in the business and industry, education and remote resource camp segments. Key Metrics Cara Operations Ltd. generated revenues of $1,024.7 million in the financial year ended March 2007, a decrease of 15.3% compared to the previous year.

Canada - Foodservice Datamonitor (Published September 2008) Page 25

MARKET FORECASTS

CHAPTER 8

MARKET FORECASTS

8.1

Market Value Forecast

In 2012, the Canadian foodservice industry is forecast to have a value of $20.4 billion, an increase of 16.7% since 2007. The compound annual growth rate of the industry in the period 2007-2012 is predicted to be 3.1%. Table 12: Canada Foodservice Industry Value Forecast: $ billion, 20072012 Year 2007 2008 2009 2010 2011 2012 CAGR, 2007-2012:
Source: Datamonitor

$ billion 17.5 18.1 18.6 19.2 19.8 20.4

C$ billion 18.8 19.4 20.0 20.7 21.3 21.9

% Growth 3.40% 3.30% 3.20% 3.20% 3.10% 2.90% 3.1%

DATAMONITOR

Figure 8:

Canada Foodservice Industry Value Forecast: $ billion, 20072012

$ billion 21.0 20.5 20.0 19.5 19.0 18.5 18.0 17.5 17.0 16.5 16.0 2007 2008 2009 2010

% Growth 3.5% 3.4% 3.3% % Growth 3.2% 3.1% 3.0% 2.9% 2.8% 2.7% 2011 2012

Source: Datamonitor

$ billion

DATAMONITOR

Canada - Foodservice Datamonitor (Published September 2008) Page 26

MARKET FORECASTS
8.2 Market Volume Forecast
In 2012, the Canadian foodservice industry is forecast to have a volume of 7.6 billion transactions, an increase of 10.2% since 2007. The compound annual growth rate of the industry volume in the period 2007-2012 is predicted to be 2%. Table 13: Canada Foodservice Industry Volume Forecast: Transactions billion, 2007-2012 Transactions billion 6.9 7.0 7.2 7.3 7.5 7.6

Year 2007 2008 2009 2010 2011 2012 CAGR, 2007-2012:

Source: Datamonitor

% Growth 2.10% 2.00% 2.00% 2.00% 1.90% 1.90% 2.0%

DATAMONITOR

Figure 9:

Canada Foodservice Industry Volume Forecast: Transactions billion, 2007-2012

Transactions billion 7.8 Transactions billion 7.6 7.4 7.2 7.0 6.8 6.6 6.4 2007 2008 2009 2010

% Growth 2.10% 2.05% 2.00% % Growth 1.95% 1.90% 1.85% 1.80% 1.75% 2011 2012

Source: Datamonitor

DATAMONITOR

Canada - Foodservice Datamonitor (Published September 2008) Page 27

DEMOGRAPHICS

CHAPTER 9
Table 14: Year 2003 2004 2005 2006 2007

DEMOGRAPHICS
Canada Size of Population (million) , 2003-2007 Population (million) 32.2 32.5 32.8 33.1 33.4 % Growth

0.90% 0.90% 0.90% 0.90%

Source: Datamonitor

DATAMONITOR

Table 15:

Canada GDP (Constant 2000 Prices, $ billion), 2003-2007 Constant 2000 Prices, $ billion 764.4 786.7 822.6 854.3 888.2

Year 2003 2004 2005 2006 2007

% Growth

2.90% 4.60% 3.90% 4.00%

Source: Datamonitor

DATAMONITOR

Table 16: Year 2003 2004 2005 2006 2007

Canada Inflation, 2003-2007 Inflation Rate (%) 2.8 1.9 2.2 2.2 2.0 % Growth

-32.20% 15.20% 3.00% -10.40%

Source: Datamonitor

DATAMONITOR

Canada - Foodservice Datamonitor (Published September 2008) Page 28

DEMOGRAPHICS
Table 17: Canada Exchange Rate, 2003 Exchange Rate ($/C$) 0.71379 0.76834 0.82527 0.88136 0.93075

Year 2003 2004 2005 2006 2007

Source: Datamonitor

DATAMONITOR

Canada - Foodservice Datamonitor (Published September 2008) Page 29

APPENDIX

CHAPTER 10

APPENDIX

10.1 Methodology
Datamonitor Industry Profiles draw on extensive primary and secondary research, all aggregated, analyzed, cross-checked and presented in a consistent and accessible style. Review of in-house databases Created using 250,000+ industry interviews and consumer surveys and supported by analysis from industry experts using highly complex modeling & forecasting tools, Datamonitors in-house databases provide the foundation for all related industry profiles Preparatory research We also maintain extensive in-house databases of news, analyst commentary, company profiles and macroeconomic & demographic information, which enable our researchers to build an accurate market overview Definitions Market definitions are standardized to allow comparison from country to country. The parameters of each definition are carefully reviewed at the start of the research process to ensure they match the requirements of both the market and our clients Extensive secondary research activities ensure we are always fully up-to-date with the latest industry events and trends Datamonitor aggregates and analyzes a number of secondary information sources, including: National/Governmental statistics International data (official international sources) National and International trade associations Broker and analyst reports Company Annual Reports Business information libraries and databases Modeling & forecasting tools Datamonitor has developed powerful tools that allow quantitative and qualitative data to be combined with related macroeconomic and demographic drivers to create market models and forecasts, which can then be refined according to specific competitive, regulatory and demand-related factors Continuous quality control ensures that our processes and profiles remain focused, accurate and up-to-date

Canada - Foodservice Datamonitor (Published September 2008) Page 30

APPENDIX
10.2 Industry Associations
Canadian Restaurant and Foodservices Association 316 Bloor Street West, Toronto, Ontario M5S 1W5, Canada Tel :1 416 923 8416 Fax :1 416 923 1450 http://www.crfa.ca

10.3 Related Datamonitor Research

Datamonitor Industry Profiles Global Foodservice Foodservice in Germany Foodservice in the United Kingdom Foodservice in France Foodservice in the United States Foodservice in Italy Foodservice in Mexico Foodservice in Taiwan Foodservice in Norway Foodservice in Denmark Foodservice in Hungary

Canada - Foodservice Datamonitor (Published September 2008) Page 31