| BUSINESSWEEK ONLINE : NOVEMBER 1, 1999 ISSUE | ||||||||
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| MARKETING
Can Wendy's Sizzle Again? It's targeting adults with new entrees and fast turnaround It's lunchtime at a busy Wendy's restaurant in Grandview Heights, Ohio, a Columbus suburb, and police officer Mark Beeba moves his squad car slowly up to the drive-through speaker. As he does so, a computer inside the restaurant tracks his progress. When managers scan the data later that day, they'll learn that Beeba and the rest of the day's customers waited an average 82 seconds from order to pickup. Though 10 seconds shy of the corporate goal, it's quick enough to get Officer Beeba's attention. ''This is a very fast line,'' he says. That's just what Gordon F. Teter, chairman and chief executive of Wendy's International Inc. (WEN), wants to hear. While McDonald's (MCD) and Burger King (DEO) use hot kiddie giveaways like Teenie Beenie Babies and Pokemon toys to bring in kids and their families, Wendy's has a different recipe. It's building on its reputation of having a healthier and more diverse menu to attract grownups and teens willing to spend a little more for a sandwich. And it's making the kinds of improvements they'll notice, like cutting drive-through times by 25%. Most of all, it's making sure that Wall Street sees the changes. ''Translating superior performance to shareholder value is our goal,'' says Teter. After years of lagging behind, that's helped Wendy's outperform its much bigger archrival. Wendy's stock has climbed 14% since Jan.1, compared with 13% for McDonald's. Timothy M. Ghriskey, a senior portfolio manager at Dreyfus Corp., expects net income to grow 26% this year, to $155 million, on 3% higher sales of $2 billion. ''There has been a real change in management attitude toward shareholders and the bottom line,'' says Ghriskey, whose funds hold 775,000 Wendy's shares. Indeed, Wendy's has had to learn some hard lessons in the last few years. In the mid-'90s, the chain got caught up in a price war started by McDonald's and Burger King. Wendy's refused to discount--and saw same-store sales growth slump from 5.3% in 1993 to 1% in 1995. Meanwhile, an ill-conceived overseas expansion was turning into a cash drain. As the No. 3 burger chain, Wendy's simply couldn't achieve the critical mass to make those stores pay. That helped drop operating income by 6% in 1997 to $335 million. The pressure to crank up profits began building four years ago, after Wendy's bought Tim Hortons, a chain of Canadian donut shops, for $288 million. Ronald V. Joyce, Hortons' co-founder, became Wendy's largest shareholder and a director. Like other investors, he was unhappy with Wendy's performance and analysts say he made it clear to management he expected change. Joyce plays down his role, saying only that he's pleased with recent improvements. Teter responded with a plan to close low-yielding restaurants. Last year, he shut 62 locations and sold 200 others to franchisees, bringing total U.S. company stores to 950 and franchise units to 3,910. In early October, Wendy's closed all seven of its money-losing company-owned units in Britain. Those efforts helped push Wendy's operating margins up to 15.8% in the second quarter. That's well above its five-year average of 12.5%, but a far cry from McDonald's 25.5% in the second quarter. LISTENING HARDER. Now Wendy's is focusing on its core market back home. The chain is experimenting with new menu items such as the French Onion Burger and the Bacon Mushroom Melt. And to make sure the word gets out, it upped its ad budget by 20% this year, to $151 million, with a campaign featuring founder and ceremonial Chairman R. David Thomas. Wendy's is also listening harder to what its franchisees have to say. The plan to speed up drive-in lines came from Wendy's owners in Houston. Back in 1995, they started experimenting with timers, monitors, and prizes such as cash or movie tickets for extra-speedy workers. Those efforts slashed drive-through times by a quarter. Exporting the improvements to the rest of Wendy's locations should add $275 million to the bottom line, says John T. Schuessler, president of U.S. operations. Wendy's is betting that fixing the little things will pay off big over the long term. By Peter Galuszka in Grandview Heights, Ohio _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP |
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