• It's Here!

    Etf Pro

    Get the big financial market moves right, bullish or bearish with Hedgeye’s ETF Pro.

Conclusion: It has been just over two years since the completion of the merger and management appears to finally be on the right track with Wendy’s.

We have learned recently that WEN is going to be testing some new products and advertising that could bring back the Wendy’s of old.

First, next week Wendy’s will be testing some new advertising creative that focuses on Wendy, the company’s namesake.  Yes, senior management is bringing out the daughter of Dave Thomas, the founder of Wendy’s.  The commercials are folksy but it looks like the company may finally be pursuing an advertising strategy that will resonate with core Wendy’s consumers.

Second, management is about to embark on a massive plan to upgrade the menu to enhance the quality of its offerings.  This new menu strategy focuses on introducing new products that compete with some of the more premium products and brands in the QSR segment.  The company is currently testing new “natural cut” French fries that rival the style you get at Five Guys.  Additionally, the company will be rolling out a new hamburger called the “golden burger” which is expected to compete with the quality offered at In-N-Out Burger.  They will also follow up in the coming months with a new chicken sandwich to compete with Chick-fil-A.

Given that Wendy’s is a more premium-priced brand, this menu upgrade initiative should bode well for incremental business.  In fact, in test market where the new “natural cut” fries are being sold, same-store sales are up 8-9%.

As for the quarter, sales trends improved at both concepts, but a 15% increase in beef costs did not help margins in the quarter.

I imagine we will learn more about the new menu and advertising initiatives on the company’s quarterly conference call (WEN is reporting 3Q10 earnings on November 12), but the franchise system appears very enthusiastic about the direction the company is headed.

Now, if they could only get rid of Arby’s…

Howard Penney

Managing Director