Wendy's brand transformation boosts earnings, confidence
by Monica Watrous
DUBLIN, OHIO — With a new logo unveiled this week and restaurant revamps under way, the Wendy’s Co. predicts positive momentum from its brand transformation efforts during the coming year.
Bolstered by the January launch of the chain’s “Right price, right size” value menu, the company said Feb. 28 it is “pleased with what we are seeing in our first-quarter performance,” in spite of continued economic challenges for consumers.
“As we step back and look at the big picture, consumers are no doubt feeling the effect of higher gasoline prices, the 2% payroll tax increase and delayed tax refund checks,” said Emil Brolick, president and chief executive officer, in a Feb. 28 call with financial analysts to discuss fourth-quarter earnings. “While we can’t control these forces, we certainly can control how we think about this great Wendy’s brand and how we bring this brand to life. We remain convinced that our cut-above brand position is the natural position for Wendy’s and will serve us well against traditional Q.S.R. competitors as well as against new Q.S.R. competitors.”
New menu boards, packaging graphics and uniforms, plus what the company describes as “bolder” advertising, all figure into Wendy’s system-wide reinvention. This year, the company plans to revamp 100 company-operated restaurants and a targeted 100 franchised restaurants. Contemporized locations benefit from added lounge seating, flat-screen televisions, Wi-Fi and digital menu boards.
“In 2014 and 2015, we expect our image activation efforts to accelerate, and we believe that about 20% of the total system and about 50% of the company restaurants will have completed image activation reimages by the end of 2015,” Mr. Brolick said.
To offset costs, the chain is discontinuing breakfast in some restaurants and closing lower-performing locations.
“These closures will allow franchisees to reallocate capital to image activation instead of maintaining those lower-performing restaurants,” said Steve Hare, senior vice-president and chief financial officer.
Alongside the eponymous redhead’s makeover came an overhaul of the chain’s value menu, which now features six 99c items and eight items that range from $1.19 to $1.70.
“We had been losing share of price-valued customers for some time, and we knew we had to correct this with a compelling consumer offering that could also achieve broad franchisee support,” Mr. Brolick said.
Looking ahead, Wendy’s remains focused on balancing its lower-price offerings with a pipeline of premium products, which last year included the Bacon Portobello Melt, Spicy Chicken Guacamole Club and Flatbread Grilled Chicken.
“We have begun to see signs of this effort paying off in the fourth quarter of 2012, as we successfully built share of large hamburger and large chicken sandwiches and sold more large sandwiches than in the previous year,” Mr. Brolick said.
While net income fell 28% in fiscal 2012, the company reported a sharp increase in the fourth quarter, due in part to a larger tax benefit. For the quarter ended Dec. 30, 2012, income attributable to Wendy’s totaled $26,388,000, up from $3,984,000 in the same period a year ago.