Wendy’s Doesn’t Like Decrease in Same-Store Sales
By George Anderson
When you’re used to increasing same-store sales year after year, it comes as something as a shock to the system when you finally experience the opposite. That was the case this past year for Wendy’s International, which experienced its first downturn after 18 years on the plus side.
“None of us really liked that,” said John Schuessler, chairman and CEO of the company at the restaurant chain’s analyst and investor meeting in New York earlier in the week.
Mr. Schuessler said the company had put together a new “3-Tiered, 3-Year Combo Plan” to increase sales, improve margins and reduce costs.
“We are focused on driving Wendy’s same-store sales by more than three percent annually and reducing costs throughout the organization by $40 million to $60 million beginning in 2006,” said Mr. Schuessler. “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.”
The company’s chief marketing officer, Ian Rowden, said the company has developed a new strategy to differentiate its brand from other fast feeders with new products and more compelling advertising.
Mr. Rowden said the company would be developing between 30 and 60 new products, including Wendy’s first move into breakfast. This spring, Wendy’s will roll out its new Frescata deli sandwiches on fresh-baked artisan bread.
Wendy’s intends to significantly improve margins with a three-pronged approach, including a system-wide rollout of a double-sided grill designed to reduce labor costs and accelerate cooking times; a store automation program to reduce administrative costs; and new supply chain management initiatives to reduce controllable costs.
Moderator’s Comment: What caused Wendy’s to experience its first decrease in same-store sales after 18 straight years of increases? Is Wendy’s on the
right track with its new “combo plan” for its business? –
George Anderson – Moderator
We have a series of principles upon which our business is built. One of these Foundation Stones is Growth. However, this includes this: “3. Sometimes decreasing size may be the appropriate avenue of growth.”
I am not indifferent to growth, but strongly believe that you can do serious damage to an organization by insisting on growth at nearly any cost. Sometimes retrenchment is just what is needed to lay the foundation for a better future. In fact, if you don’t know how to do this right, you have a VERY vulnerable company.
To the first question, what caused Wendy’s to have its first decrease in same store sales after 18 years of increases?
“Fewer customers,” he said soundly and profoundly. Not having a breakfast menu was also a contributor. That puts a pointed finger on Wendy’s chilly sales problem.
Wendy’s planned 3-prong efficiency attack plan to improve margins may do just that, but will the existing customers care and will that approach have any appeal to non-Wendy’s customers? People-on-the-go need to feel is a stronger magnet to go to Wendy’s over other burger bastions. That would seem to indicate that Wendy’s shouldn’t be square with just better burgers but to supplement their menu with a society of variety, respectably priced.
Besides the affection the public held for the late great Dave Thomas, Wendy’s real edge was its ability to compete in the value menu wars. Truly, Wendy’s had the best of the 99-cent items and they had them early in the game. While they apparently also did well in the LTO upscale chicken sandwich game, they did terribly with the introduction of some high-priced dinner entrees that were not only over-priced but were quite gastronomically [unappealing]. So who is Wendy’s really? I fear that line extension and multiple price tiers are not going to make the answer much clearer.
2 reasons.
1. McDonalds is firing on all cylinders and is starting to really execute well with great new products
2. Burger King got new owners and woke up!
Great businesses need great leaders. Dave Thomas, the founder of Wendy’s, died 1/8/2002. From the outside, it sure seems like the management has been coasting ever since. The failure to roll out Tim Horton’s to the USA, as well as the menu innovation failure doesn’t point to great leadership. How much talent does it take to test out a coffee shop concept whose profits are the envy of the industry? How much vision does it take to test some new menu items? How many restaurant executives never heard of breakfast?
Hmmm. Let’s try and do the math. Looking for a 3% comp store sales increase and they are adding a whole new meal (breakfast) to the menu? Breakfast has got to be worth more than 3%, no? How confident are they that they can deliver on the most important meal of the day?
Wendy’s needs something fresh and exciting sense we lost Dave. A 4 high pounder burger made fresh, if you dare. I was just thinking I had not been to Wendy’s in a while, but I didn’t know why. Customers need to be reminded why they should choose Wendy’s.