Wendy's Brand Attempt To Pick Itself Up

Business Week attempts to capture Wendy's start and fall in its recent article. It also aims to show how new owner Triarc might help turn the company around. Here's the article.

Wendy's has been struggling for several years. It has failed to keep up with trends in the industry, such as boosting growth by focusing on breakfast and value menus. For example, last summer, while McDonald's (MCD) focused on making its franchises a convenient stop on the morning commute with its new and improved coffee, Wendy's served breakfast at only 500 of its 6,000-plus franchises.

In a joint press release, Triarc and Wendy's said that the deal should be completed during the second half of 2008, pending shareholder approval. With Peltz and his partner Peter May owning over 35% of Triarc and their investment company Trian holding 10% of Wendy's, approval appears to be little more than a formality.

Now it's Triarc's turn to see if they can turn Wendy's around. Restoring the luster to Wendy's brand should be first and foremost for Peltz and Triarc, UBS' Palmer said. "[It would be] helpful to them if they made their restaurants as high end as people perceive their food to be."

Changes in how the company is managed may also reduce costs across the board. Operating improvements could lead to $100 million in annual savings; combining operations another $60 million. Profit margins, which have been falling, also need to be brought up to the levels of other fast food restaurants.

"Wendy's may have lost its way a little bit since Dave Thomas died," said Morningstar analyst John Owens. "If Peltz puts a plan that the franchisees can get behind, I think the prospects [for a turnaround] are good."




After Wendy's founder Dave Thomas died in 2002, Wendy's has suffered from an identity crisis. Thomas appeared in over 800 commercials between 1989 and 2002. But without Thomas, Wendy's ad campaigns have been lackluster at best, especially compared to McDonald's and Burger King's (BKC) contemporaneous ads. Yet another campaign fizzled in January when Wendy's replaced "That's Right," which had failed to boost sales, with "Waaaay Better Than Fast Food."

"The company almost had to decide what they wanted to be from scratch," said UBS analyst David Palmer. "They seem to be switching from campaign to campaign."