When it comes to the quick-service restaurant industry, or QSR, two of the big players that come to my mind are McDonald’s Corporation (NYSE:MCD) and Burger King Worldwide Inc (NYSE:BKW). However, there is one more company that deserves attention: The Wendy’s Company (NASDAQ:WEN). Wendy’s is well known for its great-tasting burgers, salads, and sandwiches.
Reimaging program continues
In order to improve its market share, The Wendy’s Company (NASDAQ:WEN) came up with its Image Activation Program and introduced new menu items.
The Image Activation Program is a part of The Wendy’s Company (NASDAQ:WEN) rebranding process and “Recipe to Win” strategy, which is comprised of a new logo, stylish staff uniforms, updated menu boards, restaurant signage, new innovative products, packaging, and renovation of both interiors and exteriors.
In 2012, it reimaged 60 stores and by the end of 2013, the number of reimaged stores will be around 100. Wendy’s expects to reimage 50% of company-operated stores by 2015. So far, reimaged stores have achieved first-year sales gains of around 25% and sustained increased sales (after year-one) of about 20%.
The Wendy’s Company (NASDAQ:WEN) will invest around $470 million in this program. The reimaging has also led to the closure of some Wendy’s stores. To offset the revenue loss from store closures, Wendy’s is luring franchisees with a $100,000 incentive for the remodeling initiative.
Its competitors Burger King Worldwide Inc (NYSE:BKW) and McDonald’s Corporation (NYSE:MCD) are also motivating their franchisees to undergo low-cost remodeling projects. Burger King Worldwide Inc (NYSE:BKW) is aiming for 100% franchise stores by the end of 2013 to achieve a better operating margin in the future. It is taking global opportunities by entering into Joint Ventures, or JVs. In 2012, it signed JVs in Central America, Russia, South Africa, Mexico, and China.
McDonald’s Corporation (NYSE:MCD) is pushing its value offerings in the slow European market by introducing value products like Mc-Deal and combo offers with a Casse croute, or snack and value meal, menu. In the APMEA market, it is targeting store growth with tailored local offerings to boost its presence in the region. In the U.S., new product launches such as Chicken Wings, Fish Mcbites, and the Filet-O-fish sandwich are expected to drive sales for it in the second half of 2013.
More emphasis on franchising
To further accelerate its remodeling program, Wendy’s plans to sell 425 of its 1,427 North American company-operated restaurants to franchisees by June 2014. This refranchising program would drive the franchise mix at Wendy’s from 78% to 85%. The refranchising will increase The Wendy’s Company (NASDAQ:WEN) 4% of sales royalties, and it aims for rent of 7% of sales, representing a predictable flow of revenue and earnings.
It has already sold 24 Wendy’s restaurants to NPC International in the Kansas City market for $9.3 million. The restaurants generated $33 million in annual sales. It sold these restaurants for five times the franchisee’s EBITDA. NPC recently signed an agreement to acquire another 13 Wendy’s restaurants in the same market from another franchisee.
The Wendy’s Company (NASDAQ:WEN) also sold five restaurants in the Kansas market to Kirk Williams of Legacy Restaurant Group. The remaining restaurants it plans to sell are anticipated to generate roughly $160 million in proceeds.
