The Homa Files

Excerpted from the Wall Street Journal “Wendy’s Comes Up With a New Strategic Recipe” by Janet Adamy, September 29, 2009

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Wendy’s plans to target older customers, change its value menu and improve items like its french fries as its new owner takes over.

Wendy’s new chief executive, Roland Smith, says the chain plans to market to older customers…Wendy’s has struggled to increase sales and profit since Mr. Thomas died six years ago, and that led directors to put the chain up for sale last year.

In an interview, Roland Smith, president and chief executive of the new Wendy’s/Arby’s Group Inc., said executives plan to reverse the previous’ management team’s strategy of courting 18- to 24-year-olds and will instead aim its marketing at customers ages 24 to 49. A new marketing campaign that focuses on the quality of the chain’s food “is a breath of fresh air from the red-wig campaign,” a more offbeat series of commercials that Wendy’s ran last year featuring young men wearing red wigs, Mr. Smith said.

Mr. Smith said that, like rivals McDonald’s Corp and Burger King Holdings Inc., Wendy’s plans to change its value menu, which includes three items for 99 cents, as it faces higher ingredient and labor costs. He said Wendy’s is considering higher price points for some items and looking at putting different items on the menu…

Mr. Smith acknowledged that Wendy’s hasn’t done a good-enough job of creating products to bolster sales and fend off competitors. After talking to franchisees, he decided that the chain also needs to improve the quality of existing items and emphasize a message of freshness in its marketing. In particular, he wants Wendy’s to offer better french fries, sandwich buns and bacon.

For Wendy’s, one of the keys to increasing its sales and profit will be breaking into the breakfast business…Wendy’s has been serving breakfast at some locations but has yet to hit on a successful strategy. Mr. Smith said the company needs to reformulate some of its breakfast items and improve its coffee, which is made by Procter & Gamble’s Folgers. Wendy’s also is testing espresso drinks in some stores.

Another key to improving sales will be remodeling thousands of Wendy’s restaurants…The credit crunch is likely to make that more difficult for franchisees who need to borrow money to fund the renovations. “It’s going to be tougher to get money to buy stores and rebuild stores”..

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Full article:
http://online.wsj.com/article/SB122270629158386159.html

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