News
New product offerings help Wendy's, Arby's comps
August 5, 2009
Wendy's and Arby's are holding their own as restaurants weather the recession thanks to new product offerings, as seen in Wendy's/Arby's Group Inc.'s release of company results for the second quarter ended June 28. The results include the effect of the Sept. 29, 2008, merger between Triarc Cos. Inc. and Wendy's International Inc. The results for the 2008 second quarter and year-to-date periods only include results for Triarc, except where presented on a pro-forma basis.
Systemwide same-store sales at Wendy's North America were nearly flat with a decrease of 0.4 percent, with stores somewhat impacted by fewer company-owned stores offering breakfast. Wendy's North America company-operated same-store sales were down 1.2 percent, including the effect of approximately 300 fewer Wendy's restaurants serving breakfast compared to a year ago. Excluding the impact of fewer restaurants serving breakfast, company-operated same-store sales would have increased approximately 0.6 percent in the second quarter of 2009. Wendy's North America franchise same-store sales decreased 0.1 percent. Franchise sales were less impacted by changes in the number of restaurants serving breakfast.
Arby's North America systemwide same-store sales decreased 6.9 percent and reflected an improved trend from the first quarter of 2009, which saw a decline of 8.7 percent over last year. Arby's North America company-operated same-store sales were down 5.8 percent and North America franchise same-store sales were down 7.4 percent.
Consolidated revenues were $913 million for the quarter, compared to $313 million for Triarc only in the same period last year. Year to date, revenues were $1.8 billion compared to $616 million for Triarc only last year.
Net income for the quarter was $14.9 million, including after-tax special charges of $12.4 million, compared to a loss of $6.9 million for Triarc only in the same period last year. Year-to-date, net income was $4 million, including after-tax special charges of $27.4 million, compared to a loss of $74.4 million for Triarc only last year.
Wendy's brand highlights
For the second quarter, Wendy's sales were $539.1 million from company-operated restaurants, and franchise revenues were $76.1 million. Total revenue was down 2.7 percent to $615.2 million, compared to pro-forma revenue of $632.2 million in the same period a year ago, due to the effect of foreign exchange rates, lower same-store sales due to the reduction in the number of company-operated restaurants serving breakfast and fewer restaurants.
Wendy's ended the second quarter of 2009 with 6,608 restaurants, a net decrease of 17 units from the end of the same period last year.
The company expects to exceed its goal of improving its margin, said Roland Smith, president and CEO of Wendy's/Arby's Group in a news release. It also expects lower commodity costs in the next two quarters compared to a last year and the first half of 2009.
Last month, a Burger Business blog reported that Wendy's is testing a Bacon & Blue Burger in selected markets. Topped with applewood-smoked bacon and a blue-cheese spread, the burger is priced at $4.29 alone or $5.99 as part of a combo.
The company expects recently announced new lead creative agency The Kaplan Thaler Group's initial campaign to launch in the fourth quarter.
Arby's brand highlights
For the second quarter, Arby's sales were $277.1 million from company-operated restaurants, and franchise revenues were $20.4 million. Total revenue was down 5 percent to $297.5 million, compared to $313 million in the same period last year, a decline of $15.5 million, primarily due to decreases in same-store sales.
Arby's ended the quarter with 3,745 restaurants, a net increase of 26 units from the end of the same period last year.
"Arby's continued to be impacted by competitive value promotions and aggressive discounting in the sandwich category," Smith said. "While still negative during the second quarter, Arby's same-store sales continued to improve from the fourth quarter of 2008 and early 2009 due in part to the promotion of our new line of Roastburger sandwiches. Restaurant margins also improved in the second quarter compared to the first quarter of 2009. We have continued to see sequential improvement in quarterly same-store sales at Arby's company operated restaurants and our July same-store sales decreased approximately 4.7 percent."
In July, Arby's featured its new BBQ Bacon Cheddar Roastburger as a $5 combo meal, which includes a sandwich, small fries and a beverage. In October, Arby's will introduce a new everyday value offering, which includes a choice of one of five full-size sandwiches with small fries and a beverage for $5. Smith said he expects the combination of the brand's premium products and more affordable options will further improve Arby's sales trends in the next two quarters.
Notes offering, stock repurchase
On June 23, Wendy's/Arby's Restaurants LLC completed its offering of $565 million in 10 percent senior unsecured notes due 2016 with gross proceeds of $551.1 million. Wendy's/Arby's Restaurants used a portion of the proceeds to prepay approximately $132.5 million in borrowings outstanding under its existing senior secured term loan and to pay accrued interest with respect to such borrowings. The company plans to use the remaining net proceeds to fund key strategic growth initiatives and stock repurchases as market conditions warrant, as well as to provide enhanced financial flexibility.
The board authorized a $50 million common stock repurchase program to remain in effect through Jan. 2, 2011, and will allow the company to make repurchases as market conditions warrant. At the close of business on July 31, 2009, the company had approximately 470.9 billion shares of common stock outstanding.
Restaurant development
The company anticipates that Wendy's and Arby's system restaurants at the end of 2009 will decline by approximately 15 to 20 units, and 50 to 60 units, respectively. The unit decline is primarily a result of fewer franchise openings than anticipated and more franchise closings due to weak economic conditions and difficult credit markets.
Following an announcement of international dual-branded frachise restaurant openings, the company is developing dual-branded Wendy's and Arby's restaurants in the United States with three company-operated locations planned for the metro Atlanta market. The dual-branded units will include retrofitting one Wendy's and one Arby's restaurant, along with building a new dual-branded restaurant.
"We continue to see future growth opportunities at both brands including international development and dual- branded restaurants," Smith said. "We believe dual-branded units can generate higher sales volumes and better return on investment, making this development alternative particularly compelling to international franchisees as well as providing a development opportunity in high cost real estate markets in the U.S."
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