Wendy's leadership says changes lie ahead in fight to regain sales
Days after Burger King announced plans to go public, Wendy's International Inc. presents a new three-year plan to increase sales, decrease cost and improve restaurant margins.
February 5, 2006
Days after Burger King announced plans to go public, Wendy's International Inc. presents a new three-year plan to increase sales, decrease cost and improve restaurant margins.
In December, Wendy's chain announced the closing of 42 company stores. And for 2005, the company's same-store sales dropped 3.7 percent — the company's first annual decline in 18 years. In the fourth-quarter, total sales dipped to $977 million for the period from last year's $978 million.
Industry analysts point toward ineffective marketing since founder Dave Thomas died in 2002, while McDonald's, Yum! Brands and Burger King continue to build brand recognition.
"We think that a competitive headwind has nearly stopped Wendy's in its tracks," said Morningstar analyst Carl Sibilski in a recent research report.
Last year, a couple attempted to sue Wendy's after placing a finger in a bowl of chili. The couple was sentenced to jail in January, but the damage was done. Despite the poor publicity and sales drop, Wendy's contends the company's future is bright.
"We are focused on driving Wendy's same-store sales by more than 3 percent annually and reducing costs throughout the organization by $40 million to $60 million beginning in 2006," said Jack Schuessler, Wendy's chairman and chief executive officer, in a statement released Feb. 6. "Our goals are to improve restaurant margins 500 total basis points and to generate at least $100-125 million pretax profit improvement by the end of 2008."
According to a news release, Wendy's will differentiate its brand in the QSR industry with innovative products, new product categories and day-parts, and more compelling advertising. Wendy's spokesperson Bob Bertini said the changes have nothing to do with pressure from investors. "We've always been a brand of innovation," Bertini said. "The changes are what we need to do in today's competitive environment."
Following McDonald's and Arby's with premium sandwiches, Wendy's will introduce Frescata deli sandwiches this spring. Bertini said the restaurant decided to go system wide after successful test trials in Minneapolis and Salt Lake City. The lineup consists of four different offerings on artisan bread. Wendy's is also introducing new Garden Sensations salads, a 10-piece Chicken Nugget Combo and two Kids' Meal deli sandwiches.Additional test items include the double-melt cheeseburgers,99-cent chicken sandwich and aVanilla Frosty.
The company plans to test breakfast in 2006 and introduce by 2007. The release said the restaurant will rollout a system-wide double-sided grill, with hopes of reducing labor costs and ensuring food safety. Bertini said the grill has been in development for five years.
"The grill is in 1,500 restaurants now and will be added to another 1,000," he said. 
