Is a ‘For Sale’ Sign in Wendy’s Future?
By George Anderson
Now that two separate fund management firms that own 10 percent of Wendy’s International Inc.’s stock have convinced the company’s management to spin off Tim Hortons and explore
a sale of Baja Fresh Mexican Grill, what’s next for the restaurant chain?
At least one retail industry expert thinks it’s not outside the realm of possibility that Wendy’s itself will be sold.
Howard Davidowitz, chairman of Davidowitz & Associates, told The Associated Press that he believes Trian Fund Management, which is run by billionaire investor Nelson
Peltz and owns 10 percent of Wendy’s, will push for the chain to close underperforming locations and reduce costs. Trian might eventually seek the sale of the company, as well,
said Mr. Davidowitz.
In addition to his firm’s holdings in Wendy’s, Mr. Peltz is the chairman and chief executive of Triarc Cos., which franchises Arby’s restaurants.
“I know what Nelson Peltz is interested in is making money,” Davidowitz said. “Whatever way makes money for him and the shareholders, that’s what he’s going to do.”
Wendy’s spokesperson Denny Lynch would not speculate on the company’s future.
“We trust our board of directors will make decisions in the best interest of our shareholders,” he said.
Peter Oakes, an analyst with Piper Jaffray, said a sale of Wendy’s is possible but, “In my judgment, no one’s really going to be in a position to do that until Tim Hortons is
sold off. At that juncture, it might be another discussion.”
Moderator’s Comment: Are the moves currently being made at Wendy’s (the Tim Hortons IPO, exploring a sale of Baja Fresh) in the best interests of positioning
the company for long-term growth? What does the chain need to do to turn its business around? –
George Anderson – Moderator
WWDD? The question I guess is to ask “What Would Dave Do?” I think Dave would want the company focused on core operations and giving value to both customers and shareholders. I do think the other chains are a distraction for the management. I love the food at Baja Fresh but find the experience there absolutely maddening.
The other issue here is what is facing so many other boards and management teams; activist shareholders. It clearly works as the stock has gone up over 50% in the past year with a lot of investor optimism that Wendy’s would execute Peltz’s plans. McDonald’s recently had to agree to close some underperforming stores after Hedge-fund manager Bill Ackman put pressure on them. The trick for the management of the company is to balance current shareholder demands with what is best for the company long-term. In this case I would agree that, long-term, Wendy’s needs to cut cost and focus on results from their core chain while profiting from the spinning off the other chains.
With Wendy’s planned Tim Horton IPO and exploring a possible sale of Baja Fresh, one wonders why Wendy’s — as well as many other companies who have bought other companies in the past — now have a desire or a need to unload them.
The marketplace is like a fast-moving river. Photograph it with a high-speed lens and before you develop your print, the river has already changed. Thus, companies such as Wendy’s must keep pace with the changing marketplace to sustain success. That suggests that both adding so exciting menu enhancements and developing a new contemporary marketing plan are in order…otherwise a sale of Wendy’s is fathomable.
There are 2 Wendy’s: one is a holding company for 3 brands (Tim Hortons, Baja Fresh and Wendy’s Old Fashioned Hamburgers). Tim Hortons and Baja Fresh will get sold, so the essential issue is how to turn around the hamburger business. Assuming the 80:20 rule (that 20% of their customers are 80% of the sales), Wendy’s needs to freshen the menu from time to time to keep some novelty for those customers. And a creative breakfast rollout is years overdue.