Wendy's turned in a 3.2 percent same-store sales increase for its third quarter. This is on top of a 2.7 percent jump last year, generating the company's best two-year performance since 2005.
During this morning's earnings call, CEO Emil Brolick attributed these numbers to the brand's "A Cut Above" initiative, which aims to provide consumers with a fast casual-type experience at a QSR-level check.
"The Cut Above strategy proved to be effective against our QSR competitors. We feel it strengthens an emotional bond with consumers," he said.
As part of the strategy, Wendy's has rolled out premium products to "regain its heritage of innovation," Brolick said. These include the Pretzel Bacon Cheeseburger, which was one of the company's strongest product launches in its history, as well as the new Pretzel Pub Chicken Sandwich. However, a return appearance of the grilled chicken flatbread sandwich fell flat of expectations.
Wendy's hopes to recover momentum into Q4 with the Nov. 11 rollout of the Bacon Portabello Melt on brioche. The company will also continue to focus on a barbell menu to appeal to price-sensitive consumers, including the $1.99 kid's meal after 4 p.m. and the "Right Price, Right Size" menu, introduced earlier this year.
"There's a meaningful group of consumers whose personal economic situation involves frequent usages of quick-service restaurants and a high degree of price sensitivity. Wendy's went through a time when we lost share of this consumer segment. But we're now seeing encouraging trends and regaining our historical position with economically sensitive consumers," Brolick said. "We believe this rhythm of a high-low strategy is the way to think about the business."
Two other notable drivers during Q3 were the marketing platforms and the restaurant reimaging efforts, which were first introduced in 2011
Brolick said the brand's "young consumer advocate" Red, who has appeared in national TV ads, has been the longest running campaign since Dave Thomas appeared in ads in 2002.
"This endearing Red campaign is yielding significant impact and providing strong improvement in advertising awareness that is outpacing major QSR competitors who spend two to three times more on media than we do," he said. "Our total communication awareness is at a level we haven't seen in years."
The company will continue to take an integrated marketing approach that combines broadcast, PR, social and digital channels. The focus has increased on digital since 2010 and this year, for the Pretzel Bacon Cheeseburger launch, Wendy's campaign included fans' Facebook comments and tweets. This channel in particular helps the brand reach the "all important Millennials at a fraction of the cost," Brolick said.
Finally, the company's restaurant reimaging efforts have shown early double-digit returns. Currently, there are more than 180 reimaged restaurants opened today and about 300 are expected to be open by year-end.
The new design, Brolick said, elevates all elements of the customer experience: "It finds the sweet spot between consumers' appeal, sales growth, margin enhancement, operational effectiveness and economic return."
Since the makeover effort began, Wendy's has been working with franchisees to lower the investment costs. Todd Penegor, CFO, said the new "ultramodern" standard design has yielded 10 to 20-percent sales lifts.
"This confirms that Image Activation is elevating our brand," he said.
Brolick confirmed that the company will accelerate this effort in 2014. He also said Wendy's will heighten its national media expenditures next year.
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