Good morning. My name is Crystal and I will beyour conference operator today. At this time, I would like to welcome everyoneto the Wendy's Analyst Conference Call. All lines have been placed on mute toprevent any background noise. After the speakers’ remarks, there will be aquestion-and-answer session. (Operator Instructions) Thank you. Mr. Barker, youmay begin your conference.

Thanks, I appreciate it. Goodmorning everyone. The purpose of our call and our webcast today is to talkabout the third quarter and to provide an update on some of our key businessinitiatives. We did announce our third quarter numbers yesterday after themarket close. We also had a brief news release out this morning about some ofthe initiatives we are undertaking from a strategic planning standpoint. The agenda for today’s call, wewill begin with remarks from Wendy’s CEO and President, Kerrii Anderson, andthen after that Jay Fitzsimmons, our Chief Financial Officer will discuss thequarter and then we will take your questions. Also on the call today, with us,our Chief Marketing Officer, Ian Rowden; our Chief Operations Officer, DaveNear; and other members of our senior management team. I would like to refer you for amoment to the Safe Harbor statement that isattached to the news release. Certain information that we may discuss todayregarding future performance, such as our financial goals, plans, developmentis forward-looking. Various factors could affect the company’s results andcause those results to differ materially from those expressed in ourforward-looking statements. Some of those factors are set forth in the Safe Harborstatement attached to the earnings release. Finally, some of our comments todaywill reference non-GAAP financial measures, such as EBITDA, and you can findreconciliations in our press releases and on our website. Now, let me turn it over toKerrii.

Thanks, John, and good morning,everyone. The financial results we released yesterday are a clear indicationthat we continue the Wendy turnaround. We are focused on exactly, what we couldcontrol, which is improvement and our core business. And improvement in ourcore business quite honestly is the best way that we can create value for ourshareholders, our franchisees, and our employees. We continue to execute ourstrategic plan and we have delivered significantly improved results thisquarter at both the corporate as well at the restaurant level despite a verytough competitive environment and commodity pressures. For the third quarter, wereported improving EBITDA, and income, and EPS result, and we have now producedfive consecutive quarters of positive same-store sales. Our total adjustedEBITDA from continuing operations increased 57% to $95 million for the thirdquarter, and that’s up from $60.3 million a year ago. Now this does include theexpenses that are related to the Board’s Special Committee process, which wereabout $13.4 million, restructuring charges for the quarter of $1.4 million, andfrom pension settlement charges of about $1. Our US Company operatedrestaurant EBITDA margins improved 330 basis points to 12.6% for the thirdquarter of ’07 and that’s compared to a 9.3% in the third quarter of last yearreflects positive same-store sales for the quarter including price increases,menu management, and labor efficiency. Our third quarter US, operatingmargins and EBITDA margins will have improved an additional 140 basis points to14%, if it worked for the commodity cost pressures and headwinds, we faced inthe quarter. These financial highlights are a clear signal that we arerevitalizing Wendy’s. We are doing a better job oftaking care of our customers with improved operations. We are delivering newproducts such as the Baconator, the Frosty Float, and others that we havetested. And our market-based pricing strategy is working and it’s improving ourmargins. And our advertising is breaking…

Thanks, Kerrii. I would like tosummarize the quarter as follows. We had a solid financial performance in thethird quarter in a difficult and competitive environment. I think the headlinesare that if you exclude expenses related to the board’s special committee,restructuring and pension settlement charges, adjusted income from continuingoperations increased 55% to $38.6 million that’s up $24.9 million from a yearago. Adjusted diluted EPS fromcontinuing operations increased 100.10% to $0.44 up from $0.21 in the thirdquarter of 2006. Adjusted EBITDA from continuing operations increased 57% to$95 million up from the $60.3 million a year ago. We take a look at US companyoperated restaurants, EBITDA margins, as Kerrii said they improved 330 basispoints. Total company stores, EBITDAmargins and this includes our Canadian and International operations improved270 basis points to 12.5% in the third quarter of 2007 and that compares to9.7% one year ago. It was our fifth consecutive quarter with positive same-storesales growth with same-store sales up 0.2% at the company-operated restaurantsand up 1.3% at franchise restaurants. Another way of looking at this is thecompany's two years sales trends and they continue to improve and have averagedgot more than 4% in the past 4 months. We are encouraged by the results,but we recognize that further opportunities exist to gross sales and improveoperating margins. As Kerri said, we have a strategic plan in place to generateeven better results in future periods. Now let's look at some of theline items on the P&L. Cost of sales of $334.9 million or 60.4% in thethird quarter of 2007, compared to $345.8 million or 62.1% in the third quarterof 2006. The 170 basis point improvement as a percentage of sales is dueprimarily to our higher menu pricing tied to our market-based pricing strategyand improved menu management. Now as Kerri said, without theimpact of higher commodity costs third…

Thanks, Jay. Couple of notesbefore we open up the phone lines for questions. First of all our Board ofDirectors approved our 119th consecutive quarterly dividend that will be paidon November 19th and then it will be to shareholders of record as of Novemberthe 5th. The quarterly payment is $12.5 per share. This is the fourth dividendpayment since the board voted to increase our annual dividend by 47% up to$0.50 per share. As Jay said as we get into theQ&A, we really did not intend to provide further updates today regardingthe special committees action. We will, as we have said in the past, we reporton developments in the future, if circumstances want. We do intend on this callto talk about the results, we just reported year-to-date in quarter as well asoutlook, and our updates on operations and marketing, and we would ask that youfocus your questions on those subjects. Now operator, we would like toopen up the call for Q&A.

(Operator Instructions). Yourfirst question comes from John Glass with CIBC.

Hi, thanks. In the implied fourthquarter EBITDA guidance it looks like margins probably also declinedsequentially, and I know there is a little bit of decline seasonally inrevenue. But is there any other reason why margins would be less -- woulddecline in the fourth quarter, is it a commodity issue is there something thatwas one-time in this quarter that doesn’t occur?

Jay?

I did the seasonality issue inthat as you know and also as we did point out we have continuing commoditypressures and those will be the major items.

Okay and specifically have youcall better much commodities impact the fourth quarter related to the third?

I think, there is a seasonalityissues in that, as you know, and also as we did point out, we’ve continuingcommodity pressures and those have been the major items.

Okay. And specifically, if youcall that how much commodities impact the fourth quarter relative to the third?

I think in the call, we gave yousome clues, as to what it is. My guess is, we talked about $140 million

140 basis points.

140 basis points in the thirdquarter that its going to be, the same maybe even a little bit higher in thefourth quarter.

Okay

Going up with the exceptionsequentially people becoming down, but remember it, we still be up from lastyear’s fourth quarter.

Right.

And breakfast is in above 40% ormaybe a little more of your company stores, I calculated that correctly. Howmuch do you think that’s adding to comps right now?

Yeah, John from your questionperspective, we had to really disclose the element of the comps related tobreakfast. We really just 12 months to the stores in the third quarter, the onething we have indicated is that we do expect breakfast actually create a smallloss at the restaurant operating level, as we in-depth in the day-part and tryto make very positive business take forward.

Gotcha, okay. Thank you.

Thanks, John

Your next question comes from[Louis Parks with EP Management]

I just wanted just to clarify,when you said that the process of the special committee that we will hear fromthem relatively soon. The announcements this morning on the strategic goals for2008, is that in anyway tied into the work of the special committee and inother words is that, something that will, is that a follow-on to their work, inother words they process is that end of the process?

I appreciate the question Louis.From our perspective, we build our strategic plan a year ago and really went toNew York andintroduced to the analyst. What we have the second phase as we call it PhaseII, is really it’s an evolution of our current plan and how do we take ourperformance to the next level much improvement as we have seen. We know we have to do better andthere is tremendous opportunity, which in our core business and certainly inour company's store performance and this Phase II is just now amount of beingable to make sure that the Board does, what the opportunity are, as theyevaluate their options.

Thank you, Kerrii.

John, you got to understand the80% of our system is franchised.

Right.

So regardless of what the specialcommittee is doing. We have to in the strategic plan for both '08 and the nextthree to five years.

Okay. Thank you.

Thank you.

Your next question comes fromSteven Kron with Goldman Sachs.

Hi, good morning guys. A coupleof questions on same store sales, can you talk about the market-based pricingstrategy maybe if won’t give details just to how much prices currently in themenu. Can you talk about, whether there is still opportunity to raise pricesgoing forward and maybe Kerrii you can just comment on the traffic fall of theproceeding as a result of the price increases?

Yes, there is no doubt Steventhat from our perspective, pricing has been very key element to us being ableto gain our margins along with menu management, as well as new productsrollout. I would tell you that, we believe there is still pricing opportunityin certain elements of our menu compare to the competition and add, as David tobe may be give a little more color on that. And your question abouttransaction certainly, given the overall focus we have had on prices as well asmenu management, it’s certainly it had an impact on our transaction in theshort-term that we know the right thing to do, but David you wanted to add alittle color here.

Yeah, I’d agree with what Kerriisaid. And just for context, I don’t see just doing anything materiallydifferent from a pricing perspective than a lot of the competitors that are outtoday. Just for some context there.

Okay. I guess just a follow-up staying with thesame-store sales. If I think about it, you’ve obviously been pretty outspokenabout the pricing opportunity that’s currently working through the menu you’vebeen offering some more premium products. You’ve kicked in the advertising moreaggressively in the last few months and you’ve also rolled out breakfast toquite a few stores. So, I guess, with that ascontext, can you just talk a little bit about how the 0.2% same-store salesthat you had in the period, how that’s compares or tracks versus, what you guyshave been anticipating?

I guess the one thing; I’d be veryclear about what you know Steve is that last year in the month of July, Augustand September, we delivered 32, 45, and 42, 93 same-store sales comp. So, itwas the absolute strongest quarterly sales comp that we had to rollover fromlast year. So, in that case, while, weindicate, where sales actually came out at 0.2, as you indicate, we were, I’msorry, actually, I gave you bad numbers that was the US stores franchise. Ourcompany was 36, 47, 43, 41, so we are well in over very, very strong comps and thereis some, in this business the challenge that you face. Having said that, we arevery focused on continuing to drive things, our self confident is the keydriver to this business.

Okay. And as far as the productthat you guys highlight in your phase 2 plan, the beverage platform is notgaining products, are there already new kind of products in test or it’s justkind of the beginning phases?

Steven, this is Ian. There arenew products in test. There is being some test on locally on things like FrostyShakes, which we’ve announced. We’ve done some coffee work. We continue toexpand our beverage platform. We’re deep into our value menu and redefiningthat from a transaction driving point of view. So, we’ve got a lot of news thatwe will bring to the market in the future. But we’re not ready to disclosetoday obviously.

Okay. Thanks.

Your next question comes formLarry Miller with RBC Capital Markets.

Yes. Actually that was myquestion, but I did have a couple of others. At the meeting last spring, Kerriiyou talked about, you gave some parameters on the success of breakfastbusiness. I was wondering, if you can kind of revisit those, as you’re seeingit and specifically, can you talk about how records is mixing, as a percent ofaverage unit volumes?

Okay. With respect to breakfastwhat we laid out is that we would see our fair share of breakfast based onprovider market potential as about $3000 to $3300 per store, if we couldachieve our market share ownership of breakfast. From a breakeven standpoint,what we’ve indicated is and the company stores it’s more in the $1900 to $2000range and in the franchise stores because they pay royalty it’s more in the$2200 to $2300 range in order to really need breakeven. So, you’ve got to that leveldrive your performance and exceed it, so that you build the business case tohave acceptance from a franchise perspective because they are in the businessto make money as we all are. So that’s been our area of focus Larry trying todrive towards best it fits. We learned something from owningcomps for 10 years and that is, this is a difficult had it to break, it isimportant to really market it locally within the market, but we’ve also one ofour next phases is to really roll breakfast out to 4 or 5 DMAs, focus on itfrom a DMA perspective in order to really prove that’s the business case thatbreakfast can work for us. But, it is not as you probablygot a sense from the overall strategic initiatives its [characteristic] on thelist and I mean that in that we have so much opportunity in our core withhamburgers and with value and with beverages and with those elements. That’sreally where our primary focus is and, quite honestly its every sources on.That I know if anybody helps to like improvement.

No, I’d just say we are in about800 to 850 stores right now. Average about 35% to send a franchisee basedstores and the plan is to be just over 1000 by the end of the year. As Kerrisaid, of which about 350 stores will be franchisee. So, we are seeing success ingetting franchisees to come on board with the program. Our next price, as Kerrisaid will be to fully market the great work we've done in building the menu andthe program in some D&A wide activities, so we just on track as we continueto learn and move forward.

Great, thanks. Just a follow-upon that, are you guys giving support to the franchisees of 35% that acceptingfor you?

Yes, we are supporting it from alocal marketing perspective, Larry.

Okay. And then just on EBITDAguidance you read out Jay, is that assume products comps for sales in thefourth quarter. How should we think about that, what's the kind of sales or isit more cost based statement?

We are assuming in the fourthquarter both relative to the cost as well as the sales as pretty much the same.So, we are not looking for an acceleration of sales in the fourth quarter. Andthe forecast we gave you, of course we would like to see acceleration in sales,but we forecast based on the current run rate and the commodity cost pressures,which we were able to identify, we talked about in the call.

Okay. Thank you guys

Thanks, Larry.

Your next question comes fromDavid Palmer with UBS.

Good morning, David.

Good morning, Kerrii. The firstquestion I’ve is on refranchising, could you perhaps give us an update on yourthinking there obviously this is a major initiative that was talked about inthe past. What’s holding you back from doing that more aggressively now?

Yes, David, I would say two keythings. The first and foremost, we believe, we had significant opportunity togrow improved margins. This quarter, we delivered on our ability to do that 330basis points at US company stores. For us, who have been in an accelerated moodto sell those restaurants really quite honestly with the reduced the value,that we could have captured for our shareholders because generally theserefranchising opportunities are priced on a cash flow basis. So, as we’ve improved to kind ofmargins, we improved the opportunity to gain value for our shareholders. Sothat’s the number one, and most importantly. And then secondly, the questionwas okay, if we’d have gotten very aggressive, I think, the price on balancesheet today we’ve got $220 or $230 million of cash on our balance sheet. Then the other question is whatexactly we will do with the cash at this point of time given the strategicreview and everything else. So, that's the other, we’ve not been in a situationwhere we cold utilize the cash perhaps and return the greatest value to theshareholders given everything that’s circling around us. So, those are the twokey reasons, we’ve really not been more aggressive at this point.

So, I suppose that those thingscould change with the discussion of management pretty much at any point. Imean, obviously your goals on margins are much, much higher than where you arenow, but it’s hard to believe that you would wait the amount of quarters andyears to get to that point before you start refranchising, and obviously thestrategic review is something that's going now. Is there any other sense youcan give us about refranchising and when we might kind of hitting the inflationpoint?

I think David you identified thekey point is that strategic review is underway and that’s obviously going to bea factor in this. But could potentially lead to higher leverage give you evenmore incentive to do the refranchising. We’ve also fairly public about the factthat we believe there is another 450 stores at a minimum that we couldrefranchise. So it would be a reasonable expectation that you would see therefranchise program accelerate in 2008.

And the second question is justrevisiting breakfast. I guess folks might have a hard time believing thatbreakfast is going all that well, obviously we have to be patient with thatday-part, but your company is rolling it out more aggressively, obviously yournew franchisees, your company comps are trailing franchisees by 0.5 or so. You said it’s costing you moneyat this point, but when you want to quantify the lift of sales, but is thereanything you can tell us that could make us believe that is going well oranything you can talk around this?

I think from our perspective,Larry a couple things, in breakfast is absolutely the fastest growing day-partwith industry. We are seeing the impact it’s having on our competitor’s resultsit is going to be faster growing day-part than the dinner day-part within thenext few years. So you look at that, as to whatthe current consumer trends are, what the consumers demanding. That said, wemake it’s important to invest in this from a long-term, it’s not a short-termimpact for us. And quite honestly, the consumeras we have done our research says, gosh, everybody else is open a breakfast. Idon’t understand why you are at Wendy and we’re getting a lot of feedbacks fromconsumer standpoint that what consumers looking for. They want the restaurantavailable, when they want it. So it’s more the consumer demandand we understand it’s an investment we’re not probably got a 1000 stores,we’ve always led by example it's what the company does with every initiativewe’ve we generally do that. And so, as a result, we think it’s the right thingto do for the brand and system long-term, but it's not a short-term, greatshort-term benefit.

David, this is Dave. I think froman operational perspective, we feel like breakfast is going very well. We feellike, we’re executing at a high level in that day part. So, certainly from anoperational perspective, we feel good about it. And we've got markets andstores in different pockets of the country; they are doing very well with it. I think, they were continuing tolearn more and more, as the weeks and months pass as to what exactly makesbreakfast a success in the Wendy’s system. So, I think with the evolution andthe addition of new products, of new menu boards, of new POP that we’recontinuing to and getting traction with the coffee piece is really ailing usand make sure that we know what success means in respect to stay part.

Okay. Thanks, guys.

Thanks, David.

Your next question comes fromPaul Westra with Cowen & Company. Paul Westra - Cowen & Company: Hi, good morning everyone.

Good morning. Paul Westra - Cowen & Company: Hi, good morning, how are you.Just a few questions, just if I can start with the updates that you can give uson the remodel program give us an idea of the numbers that have been remodeledgiven data of the company’s franchise side. May be what you feel, so it’s thebacklog of the franchisee spending up for the program and any changes you’ve madeduring the year to it?

Paul, this is Dave. I think we’relooking for the exact numbers, as we speak. But generally what we’re doing onthe reinvestment piece it is continues to trip along on the company side andthe franchise side. We’re also in the midst of exploring some other designsright now from a reinvestment perspective from an exterior perspective. I guess much more aggressivelythen we’ve in the past. We’ve done quite a few different remodel schemes indifferent stores throughout the country. And we continue to focus on theinterior as well, if they are different things that we need to do from interiorperspective, that we rolled out about seven years ago as well. So, it continuesto go fairly well, I think Jay may have an update on the numbers.

Yes, the only thing I would sayfrom our franchise’s perspective is, as you might guess Paul, without theuncertainty around what’s happening from a strategic standpoint, there is somehesitancy on behalf of the franchisees as well quite honestly, we are focusedon improving margins and cash flows certainly have been, the focus of quitehonestly most of the franchisees less improved cash flows, wait and see whathappen strategically, but with that and Jay you’ve got some specific numbers,as what’s the remodels have been.

Yeah, Kerrii, you’re right. Wehaven’t had to take up on the incentive that we provided that we originallyexpected our budget is impart because of the insecurity around the system. Butwe’ve had so far this year 186 franchise stores remodeled, another 50 companystores of 236 stores have been remodeled year-to-date. Paul Westra - Cowen & Company: I know you had a five year goal.It’s obviously giving uncertainty, that’s a little less clear at the moment,now the entire system?

Yeah, that is exactly correctPaul. I will tell you we are still very committed. We know reinvestment as youheard me say and the strategic initiative is key to us. One of the things thatthe customer ends up, rating you owned in their overall experiences, what werethe facilities and the facilities each for working 65% of our gas or whateverthey see from the standpoint of their car, through the parking lot anddrive-through. And so, as a result it is important for us to continue to updateour facility to the new menu board, as well as to maintain the presence of ouroutside and inside facilities. Paul Westra - Cowen & Company: Yeah. And there is a follow-up tothat I know some of the remodeling was tide to the beverage station moving outand perhaps [clients] of your whole beverage strategy. So, but they still linkpretty heavily or is that going to put a governor on what you can do on thebeverage, as the definition objective?

What you will see Paul, with allnew stores that are being build that we’ll certainly have the beverage stationout in the dining room. And then, as we remodel stores you will also see thebeverage station moved out there in the dining rooms as well because that’sreally from a cost perspective that’s when it makes more sense to do to makethat transition is when we’re remodeling the restaurant, the dining room, weare tearing up the floor, we can put in the floor and all that kind of goodstuff. So, that’s still on track, and that is still where we would like to be. Paul Westra - Cowen & Company: Okay. Last two questions, one isthat your supply contract and now potatoes losing out the wheat and corn andsoybeans. Can you give us an update what it sound like you signed, you find anew one for up some of the numbers off the top of my head, which is only about10% or so? How long is the contract and it’s just about to kick in? Then lastquestion on the value combos you’ve some new strategy, I assume you’re not talkingabout price points, talking about strategies like value combos and stuff?

Paul, Jay is going to take yourquestion with respect to potatoes contracts. And Ian is going to talk about thevalue combo strategy.

Yeah. We don’t have all of ourfried contracts expiring at the exact same time. But we’ve just our newcontracts that will take us through 2008. So, that’s what we’re pretty wellwalked in through then. Paul Westra - Cowen & Company: They just begun this quarter ornext quarter that new higher rate?

Yes, this quarter. Paul Westra - Cowen & Company: Last quarter?

Fourth quarter.

And Paul just on the valuecomposition, you’re right. We understand and we’re looking at without gettingthe specifics of mixture of maybe dialogue [price shows] you combined the comboand at various products at various price points. Paul Westra - Cowen & Company: Okay.

Your next question comes from Mr.Glen Petraglia with Citigroup.

It's Petraglia. Good morning.

Good morning, Glen.

Good morning, Glen.

It’s nothing new there. In termsof reimaging several maybe it was several quarters ago, but I think youprovided an updated in terms of what sales that you are getting from reimagedrestaurants. And it was fairly significant and I would think that if thefranchisee could capture those sorts of economics they would be happy. Do you think that the incentivesthat you offered it was 25,000 per restaurant, is it sufficient. And how do youthink about that going forward with nearly $250 million of cash on our balancesheet that clearly you are struggling to find useful.

Glen, just kind a tag on Kerrii'scomments earlier. I don’t think the $25,000 is initiate at all. I think itsgood incentive. The big thing that is holding up more reinvestment at thispoint is simply the process that we are going through right now. And I think that is maybe herefrom a franchise’s perspective that I want to make sure that we have claritycoming out of this process before they commit to the dollars that are necessaryto grow the business. So that’s the biggest reason and that’s obviously being goneon now for full well over year.

And then just lastly in terms ofvalue Ian, if you could maybe helps us think about are you moving away from$0.99. Is it different items at $0.99 that maybe have lower margin and if youput them together in a combo similar what you did, I think earlier this yearwith the Double Junior Cheeseburger, I don’t remember exactly what you calledthis, but, as you could think about that?

Just a couple of things Glen andagain, I don’t want to get ahead about sell through, as we’re completingtesting. But McDonald’s and Burger King are very aggressive at the dollar pricepoints with products that we noted from a definition of price tag you’re veryimportant. So, we are going to be very competitive in that regard with them. So, when come a loser thatemphasis. But yes, you’re right we’ve learned very, very positively earlierthis year and work with you without, you like to serve your meal offerings andsome other menu development work that we’ve been doing for products thatfulfill both price points and usage occasion. So, there is an opportunity forus to expand the value proposition in that regard. So, you can expect a numberof initiatives that we’ll all work together to offer, I mean, more blendedstrengthening of the profitability and drive transactions that's the point. Andagain, I don’t want to get into specifics but, we’re very close to agreement toour business.

Okay. And just one more question,Jay the $6.4 million in lower insurance cost, as part of G&A. Is thatsomething you are thinking, is sustainable I know, you mentioned better claimsexperiences is there, anything in particular that you’ve done to drive that orwas it luck?

Glen, there is a number offactors in that. First of all last years, we’ve mentioned that they were higherto D&O cost, and that’s the onetime item that actually related to TimHortons. So, that was in the amount of about $2 million, little over $2 million,so. Obviously that won’t recur. Obviously, when you’re trying to predictemployee related claims and workers comp related claims, we’ve a number ofmoving factors. One of the factors that we hadwas the next chapter and the impact that had which maybe a little bit harder toforecast what should be in that account. I would not expect those numbers toreoccur, that we have control over the claims, but we probably have a goodidea, what your accrual should be. And what we are seeing now, as weare seeing flat healthcare cost based upon one of our benefit plans for nextyear. And so we should be able to hold the line, where we are, but in terms ofhaving future benefits in the quarters always hard to predict, but I won’taccount on it.

Okay. Thank you.

Your next question comes fromJennifer Preller with Barclays Capital.

Yeah, it’s actually Tom O'Neillfrom Barclays Capital. The capital markets as you alluded to in your statementearlier suddenly have changed since your last call, yeah I know you can talkabout the strategic review. But can you update us really on your overallphilosophy on your capital structure, maybe in terms of your willingness tooperate with higher debt loads, what things are you doing given some companiesdon’t have a access of CP etcetera?

Well, obviously, we do not havethat this to CP because of our credit rating. What we talked about relative tothe special committee, which we did make public, is that it was our intentionto offer staple financing package, which would give them the option to put theleverage on. But it also we would give the company to put the leverage on, andas you know in today's environment investors are demanding higher leverage onthe balance sheet and likely outcome of the special committee process is thatwe will have more leverage next year than we have this year, Tom.

Okay. This is a follow-upquestion again I know you can talk about the strategic review, but we talked inthe last call about hypothetical situation if you remember, if you were tosecuritize your stream of franchise fees. You’re taking to look at your bondindenture based on your understanding of the language in your bond indenture.Would you’ve to takeout your bonds, if you were to engage in such a franchisefees securitization transaction?

I think we would do obviouslywhat we’re required to do. And it is likely that if you entered into stake holdfinancing that we would address those existing bonds.

I think, we are very aware of ourobligations to our public note orders and but certainly be our commitment tobuy, and the requirements.

Sure. So, that means that forsecuritization in all likelihood, would you have to take out the bonds?

It may be an outcome ofsecuritization.

Okay. But obviously everythingit's still open in terms of what you may actually do?

That’s correct, Tom.

Okay. Thank you.

Your next question comes fromRachael Rothman with Merrill Lynch.

Guys, a question for Dave sincemaybe he is the only one that’s been around long enough to remember. But canyou think back to a time when QSRs in general as taken as much prices, theyseem to be taking these days. And can you talk about may be what the near termand longer-term and the implications of that were from obviously traffic andfrom a shift perspective.

Rachel, I think pricing isslippery slope. There is no doubt about it. We all need to be very carefulabout raising our prices. Because I think, we’ve certainly been viewedhistorically and I think we’re still viewed today as a great value generallyour industry is. In terms of historically, I’venot seen the industry take as much prices, I think that the industry has takenover the past three years, I’ll say. I think it is certainly a response towhat's happening from a commodity perspective and normally we are seeing thatin QSR; we are seeing it in fast-casual and mid-scale and all the way up anddown the chain. So, from a historical perspectiveit is at high level for sure and again something that we’ve implemented a muchmore disciplined process than we’ve ever had at Wendy’s in terms of how we lookat price. In terms of how we look at products, in term of how we look atmarkets and that we’re doing is right thing, but again it is high in ourpriority list to make sure that, we don’t go too far with pricing item.

Great and then a follow-up on theremodel for Jay, could you say that the uptick on the incentive has been lower.Can you quantify for us actually how much you’ve given in incentives and whatthe average cost for the remodel has been year-to-date?

Rachael, it’s very difficult tosay what the average cost of the remodel is, because you go anywhere from justan interior to, an interior or exterior to what we call a scrape and rebuild torelocation. So, that's the question that is individualized based upon what theopportunities are. We never gave you what the actualbudget was this year. So, I’m not going to give you what the actualexpenditures we are against that, but I will tell you that it’s less than weexpected. We’ve also opened up that, so that the new menu board, which is usedin conjunction with the breakfast comes from that and everybody is putting inthe breakfast is taking advantage of that. And what we’ll do, after thisprocess, we’re probably reassess the program and decide what we need to do.

Into the point someone questionedearlier, is it the right incentive 25,000 of north. We believe that why it issubstantial, there maybe opportunities to further expand that to encouragepeople, who invest in different ways within their restaurant. And as we getthrough this process I think that’s going to open up the opportunity to do exactlywhat Jay said, which is consider other modifications for franchisees to utilizethat incentive. And how would you think aboutbeginning that you’re in and in terms of the remodel, as the other chains havebeen remodeling now for three and four years and have already committed thatcapital to both franchising company operated assistance. To what extent doesthat putting you at a competitive disadvantage and are you just in thebeginning of your remodel program or you further along then it may appear fromthe outside. Do you feel like this is disadvantaging you or your franchisees atall?

Rachael, this is Dave. I think incertain respects, I don’t know, this is a disadvantage. But it’s certainly anopportunity for us to reinvest at more aggressive rates. And I think the bigthing that we all know, I mean, we see exactly what the dollars is doing outthere in the marketplace right now they are doing a lot of reinvestment, a lotof scraped rebuilds. And I certainly think, when youlook at their sales comps that is one of the big reasons for that because Ithink on a from a facilities perspective they have certainly improved a lot ofthe stores in their system and that’s something, but again we need to befocused on as we move forward. And I wouldn’t say that we’re at the beginning,but we are probably, we’re certainly closer to the beginning then the end.

And I’d just also remind you thatMcDonald's really quick building stores back in the last ‘90s as they focusedon our 2000, as they are focused on improving the results from their core. Wewere still building stores as many company and franchise at 250 or 300 almost300 stores a year for the five years of 2000 to 2005 at least. And so, from that perspectivesome of our system is newer but maybe that 20% of the system versus the 80%that’s been around. I know that half of our buildings were build prior to 1990,company and franchise. So, from that perspective it is an opportunity for us toimprove the facilities which is key and critical to our customer.

Great, thank you so much.

Thanks, Rachel.

Your next question comes from JoeBuckley with Bear Stearns.

Thank you. I just have couple ofquestions on margins and cost again. Can you quantify the impact of breakfastis add on the margins obviously negative from your comments? But have youcalculated that?

It's negligible, Joe.

Okay and then.

The food is actually, if youthink food cost is actually slightly lower, but given the penetration breakfastit’s not really having a significant impact on the margin.

Okay. And I know its fourthquarter the beef costs been down sequentially, how much of that upyear-over-year?

For the full year they will bebasically about flat.

But in the fourth quarter theywill be higher than they were in the fourth quarter of last year.

That’s correct.

Do you know how much?

Somewhere around [north] I don’tuse that.

A north down.

Yeah.

Okay. And then just question onFrosty costs, yeah particularly what's going on in California. Historically, wind has been verysensitive to Frosty markets any feel for whether the outfield where you see aspike there in the fourth quarter?

Yeah, we are seeing a little bit,but I wouldn’t call the fight. We’ve got some contracts in place that arehelping protectives on some of that as well. So, we are certainly feeling a bitof it, but not the full [advantage] that you may expect.

Okay. Alright, thank you.

Thanks, Joe.

Your next comes from [JasonBoucher] with Wachovia

Hi, it's Jason for JeffOmohundro. Just wondering if you all could provide little more commentary onyour commodity outlook for ’08 maybe for some of the key categories in additionto the French Fries. And then also, whether you’re seeing any regional salestrends across the system particularly the stores related to located in Southern California?

Broadly speaking for ‘08, I thinkthat the big pressure that we’re forecasting is really going to be on theprotein side. Obviously it’s hard to tell right now. But I think the proteinside in the beef and the chicken, it’s where, we’re expecting most of thepressure to be. Those markets have been tough. After that it just rolling overthat the French Fries would be the other piece because of the new contracts.

And Dave maybe from a regionalsales perspective.

Yeah, I mean, regarding the firesin Southern California because we are not aspenetrated in that part of the country as a lot of our competitors are. We arereally not seeing a big impact from the fires. I mean, just a couple of stores,a handful of stores are being impacted right now. But just as an aisle to,we’re doing a lot in terms of providing free meals for the firefighters andthose that have been kind of driven from their homes and things like that. So,we’re doing a lot from a community standpoint with our stores in that area.

Great. Thanks very much.

Your next question comes fromDavid Palmer with UBS

Hi, question on McDonaldsinnovation pipeline. How scary is that for Wendy’s in each of the next twoyears it looks like they are going to be aggressively pushing a big premiumsandwich that’s southern style chicken and then perhaps the third pound or[hangus]. Both would seem to be really something that would hit Wendy’s core.How are you thinking about this, is that something that you can convince uswouldn’t be a hit to your business? Thanks.

David, first and foremost thereis no question that the competition has stepped up generally over the lastcouple of years. And as a result of that, well we really have to take our initiativeto next levels. We continue to focus on our fresh never frozen beef and in factthat we are made order, which is something while McDonald's has rolled out likethe third the youngest burger you got to it, keep saying to yourselves go tofreezer and buy a burger or do you go to the fresh section and buy your burger. So from that perspective, ourcompetitive difference and the quality positioning of Wendy’s is critical to uscommunicating from a customer standpoint to be able to really improve the resultsof Wendy’s going forward. So, it does mean we have to step up our game hereWendy, they are the 100 pound grow out there. With that, I have Ian to makesome comments about some of the R&D in our thought process.

John, just to build on Kerrii’spoint there, that obviously the work that the major competitors in themarketplace is doing is going to have effect on everyone. But, we’ve gotenormous upside and our core business as it currently stands and our ability tocompete at a premium level, we’ve got great upside from a value point of viewfrom a beverage point of view. So we’ve got a lot of things inour armory not to mention. Frosty is a desert and of course the work we will doas part of the breakfast program. That gives us confident that we can deliverstrategy Kerrii said. So, we are going to continue to be aware, be responsivewhich we have to be, but to be aggressive on our own platform of what make usthe brand we are and the business we are.

Okay. Thanks very much.

Thanks, David.

Operator, one more questionplease?

Thank you. Your next questioncomes from Jeff Bernstein with Lehman Brothers.

That’s worse than Glen Petragliaprobably, it’s Jeff Bernstein.

Your voice is changing Jennifer.

Getting old deeper. Couple ofquestions. First I know where we are now pushing the end of October here youput out an initial strategic plan for '08, I know, you’ve withdrawn your '09guidance, but was there anything official. I’m just wondering, if you could putout some initial thoughts in terms of sales trends perhaps, some preliminarycomp type guidance that’s just based on you’re seeing right now. And then from a cost perspective,I know, you’ve made some comments on commodities. But just wondering from acommodity and labor standpoint, where do you see significant further offset themargins or whether a lot of the cost saving benefits have already been achievedin '07?

That’s the tough question. Yourcrystal ball is probably as good as our crystal ball. If we look to 2008 theprocess could give us different leverage ratio that’s clearly would effect theP&L. We know food costs are going up and you can probably make as good asan estimate, but you are probably talking about something in the 4%. To the question as to whetherthere is further opportunity, we believe there is further opportunity. And Ithink, we've indicated that we've made a lot of progress this year. There arestill a lot of things that we can do. Some of the optimization we did thisyear, some of the labor initiatives that we had this year will continue intonext year. We’ll then get a full year ofcredit root for those. So, I’m not going to give you the number. But I’mtelling that we’re obviously expecting next year on the same basis with thesame relative amount of leverage to be up from this year.

And I think Jay makes a very goodpoint. I mean some of the initiatives, we talk about our labor initiativesthat's fully got implemented from 3.6 managers to 3.3 in the company storesthat took place really finally in May to June. We’re going to see a rollover ofthat in the first half of next year that we didn’t experienced this year. So, and I think there are someopportunities for us and that’s what shareholders demand that you improveresults, how do you improve result and that's what makes the high performanceteam and we know, we’re expected to deliver.

Operator and everybody thank youfor joining our call today. If you have any follow-ups, please give me a calllater today or Marsha Gordon or Kim Messner. Thanks a lot.

This concludes today’s conferencecall. You may now disconnect.