At the recent investor presentation in June, The Wendy’s Co (NASDAQ:WEN) gushed about all the positives of brand reimaging, bringing amazing benefits to updated stores. In fact, some of the initially updated stores saw a 25% increase in revenue that came from higher traffic, as prices haven’t been raised.
The Wendy’s Co (NASDAQ:WEN) is a well-established QSR burger brand with around 6,500 restaurants, of which around 22% are company-owned. Anybody that grew up eating at The Wendy’s Co (NASDAQ:WEN) knows that the brand has become extremely stale, and the restaurants are very outdated and unappealing to dine at. Hence the company recently undertook a brand reimage program that has seen extremely positive benefits in the first year.
Unfortunately, the company competes in an ultra-competitive sector where industry leader McDonald’s Corporation (NYSE:MCD) has already completed a refresh and Burger King Worldwide Inc (NYSE:BKW) is in the refresh process as well. Unfortunately for new investors, the stock has risen sharply to multi-year highs, likely on the back of the store improvements.
The company is calling the brand refresh Image Reactivation. It includes an updated logo, expanded menus, new advertisements, new beverage dispensers, and most importantly an updated store layout and look. As the picture below shows, the company has a much more modern and sleek appearance:
Also worth noting is the focus on three different tiers or levels of updates costing anywhere from a full redesign at $750,000 to a less intrusive and affordable update at $375,000. With 6,500 stores, it will take years for a complete refresh of every location. The company is only targeting 200 locations in 2013, and combined with new stores and updates from 2011 and 2012, The Wendy’s Co (NASDAQ:WEN) will only have 314 stores on the Image Activation design by the end of this year. The plan is to roughly double the updated stores in both 2014 and 2015 though that will leave over 5,000 stores remaining at the end of 2015.
The Wendy’s Co (NASDAQ:WEN) stores already provided a solid $1.5 million in average unit volume, but the Image Activation stores have seen an impressive first year sales lift of $300,000 or roughly 20%. The slide below shows the sustaining lift over the 24-month period:
Naturally the company has limited updated stores to use for analysis, so the market will have to project whether the refresh will impact all stores in a similar manner or if this update will lose momentum over time. Conversely, the refresh could gather steam as consumers become more familiar with the new look and identify that as an updated location and possibly chose it over a Burger King Worldwide Inc (NYSE:BKW) or McDonald’s Corporation (NYSE:MCD).