3/30/2009
http://www.wendys.com/
1
Strategic Management Case Study
Tony Gauvin
© Tony Gauvin, UMFK, 2009
WENDY’S 2007
OVERVIEW
New Mission and Vision
External Assessment
Industry analysis
Opportunities and threats
EFE Matrix
CPM Matrix
Internal Assessment
Strengths and weaknesses
Financial Condition
IFE Matrix
Strategy Formulation
SWOT Matrix
Space Matrix
IE Matrix
Grand Strategy Matrix
Matrix Analysis
QSPM Matrix
Strategic Plan for the Future
Objectives
Strategies
Implementation Issues
© Tony Gauvin, UMFK, 2009
A Brief history of Wendy’s
Existing Mission and Vision
Existing Objectives and
Strategies
Current Issues
3/30/2009
Company Overview
EPS/EBIT
Evaluation
Wendy’s 2008 Update
2
KEY FACTS – 2007
5,936 Stores in the US

1274 company owned
All 50 states and DC (Maine has 4!)
709 International Stores in 20 countries

376 in Canada

140 company owned
3rd largest hamburger fast food chain
 Square ground beef hamburgers (never frozen)
and Frosties
 # 1 brand for taste and quality (especially the
French Fries )

© Tony Gauvin, UMFK, 2009


3/30/2009

3
KEY DATES

1972: Wendy's franchising begins.

1975: First international restaurant opens in Canada.

1976: Wendy's International, Inc. goes public

1977: Company begins national television advertising.

1978: The 1,000th Wendy's opens in Springfield, Tennessee.

1979: Salad bars are added to Wendy's restaurants.

1981: Thomas makes his first appearance as Wendy's advertising spokesperson.

1984: Famous and award-winning "Where's the Beef?" ad campaign is run.

1986: James W. Near becomes president and COO and launches a major reorganization.

1989: Thomas begins another stint as advertising spokesperson; the Super Value Menu debuts.

1995: Wendy's International acquires Tim Horton's, a Canadian coffee and baked goods chain.

1997: The 5,000th Wendy's restaurant opens in Columbus, Ohio.

2002: Dave Thomas dies; Wendy's International acquires a 45 percent stake in Café Express.

2002: Wendy’s Acquires Baja Fresh

2004: 35th Anniversary of Wendy's

2006 : Wendy’s Spins off Tim Horton’ and Sells Baja Fresh
© Tony Gauvin, UMFK, 2009
1969: Dave Thomas opens the first Wendy's restaurant in downtown Columbus, Ohio
3/30/2009

4
EXISTING VISION STATEMENT
3/30/2009
© Tony Gauvin, UMFK, 2009
Our vision is to be the quality leader in
everything we do.
5
COMPANY PERSPECTIVES:
3/30/2009
Our guiding mission is to deliver superior quality products and services for our customers
and communities through leadership, innovation and partnerships.
© Tony Gauvin, UMFK, 2009
Our organization has a strategic vision focused on these core values:
•Quality: Freshly-made products and superior service are our passion; consistent
excellence is our goal.
•Integrity: We keep our promises. All actions are guided by absolute honesty,
fairness and respect for every individual.
•Leadership: We lead by example and encourage leadership qualities at all levels.
Everyone has a role to play.
•People Focus: We believe our people are key to our success. We value all
members of our diverse family for their individual contributions and their team
achievements. Customer Satisfaction: Satisfying internal and external customers is
the focus of everything we do.
•Continuous Improvement: Continuous improvement is how we think; innovative
change provides competitive opportunities.
•Community Involvement: Giving back is our heritage. We actively participate
and invest in the communities where we do business.
•Commitment to Stakeholders: We serve all stakeholders and, through balancing
our responsibilities to all, we maximize value to each of them.
6
WENDY’S REVITALIZATION PAN
3/30/2009
© Tony Gauvin, UMFK, 2009
7
WENDY’S COMMITMENT TO QUALITY
3/30/2009
© Tony Gauvin, UMFK, 2009
8
2007 KEY ISSUES
3/30/2009
Largest institutional shareholder, Pelz,
attempting to force sale of Wendy’s to Trairc, also
owned by Pelz. Pelz also owns Arby’s
 Under shareholder pressure, sold Tim Horton’s,
the number one brand in coffee and doughnuts
business even while it was attempting to
penetrate the breakfast fast food market.
 Continue with revitalization plan and
commitment to quality?

© Tony Gauvin, UMFK, 2009
9
NEW VISION STATEMENT
3/30/2009
© Tony Gauvin, UMFK, 2009
Our vision is to become the number one fast food
restaurant in the world.
10
MISSION STATEMENT
Customer
Products or services
Markets
Technology
Concern for survival, profitability, growth
Philosophy
Self-concept
Concern for public image
Concern for employees
© Tony Gauvin, UMFK, 2009
1.
2.
3.
4.
5.
6.
7.
8.
9.
3/30/2009
Wendy’s believes the most important issue in the restaurant
business is to take care of our customers. (1) As a global
company, our goal is to provide our customers with the most
enjoyable dining experience possible and be the quality leader in
everything we do. (3, 7) Wendy’s has a long tradition of meeting
ever-changing consumer tastes and items. As we look ahead, we
will build on this tradition by bringing even greater variety,
higher quality, more nutritious foods along with fresher menu
choices into our restaurants. (2) Wendy’s strives to continuously
produce quality foods through food science technology and
research. (4) Our company is committed to expanding and
growing profits in order to sustain recognition while protecting
the environment. (5, 8) Our philosophy is to provide for the needs
of all our customers while creating a safe workplace for all
employees. (6,9)
11
3/30/2009
© Tony Gauvin, UMFK, 2009
EXTERNAL ASSESSMENT
12
GLOBAL INDUSTRY GROWTH
3/30/2009
© Tony Gauvin, UMFK, 2009
13
US INDUSTRY GROWTH
3/30/2009
© Tony Gauvin, UMFK, 2009
14
GLOBAL INDUSTRY VOLUME
3/30/2009
© Tony Gauvin, UMFK, 2009
15
US INDUSTRY VOLUME
3/30/2009
© Tony Gauvin, UMFK, 2009
16
GLOBAL SEGMENTATION BY TYPE
3/30/2009
© Tony Gauvin, UMFK, 2009
17
US SEGMENTATION BY TYPE
3/30/2009
© Tony Gauvin, UMFK, 2009
18
GLOBAL SEGMENTATION BY LOCATION
3/30/2009
© Tony Gauvin, UMFK, 2009
19
COMPETITIVE LANDSCAPE (US & GLOBAL)
3/30/2009
© Tony Gauvin, UMFK, 2009
20
Trademarks are property of respective brands
EXTERNAL AUDIT - OPPORTUNITIES
3/30/2009
© Tony Gauvin, UMFK, 2009
1. Burger King is closing more than 180 stores in 2006.
2. 53 percent of household income is spent eating outside of
the home.
3. The Canadian dollar is getting a stronger exchange rate
resulting in higher EPS from 0.11 in 2004 to 0.15 in 2005
4. Quick Service Restaurants sales have increased by 5
percent in 2006 according to the National Restaurant
Association.
5. Burger King's market share dropped from 15.03% in 2000
to 10.95% in 2006.
6. The US Department of Agriculture states that
consumption of eating out has risen 3.6 percent from 1990
to 2005
7. The breakfast food industry is a $77.6 billion industry.
8. McDonald’s suffered an $8.5 million lawsuit and a
decrease in sales due to not informing customers of transfats in their cooking oils.
21
EXTERNAL AUDIT - THREATS
2.
McDonald's new management team is returning them to a sales growth
trend.
3.
60 percent of McDonald’s are open 24 hours, worldwide.
4.
McDonald's menu is expanding to offer more upscale coffee, and better
quality chicken sandwiches
5.
Natural disasters are causing vegetables to be in short supply for
restaurant industry. When hurricanes Katrina and Rita hit the
southeast USA in August and September Wendy’s lost approximately
$25 million in sales.
6.
Burger King has invested $12 million in their United Kingdom
restaurants.
7.
Wendy’s has restaurants in only 20 international countries compared to
McDonald’s and Burger King who have restaurants in 120 and 65
international countries respectively.
8.
Burger King plans to implement a dollar menu for breakfast items.
© Tony Gauvin, UMFK, 2009
Where's the beef? A 12 percent increase in beef costs over 2005 reduced
Wendy's EPS by 0.07 cents
3/30/2009
1.
22
COMPETITIVE PROFILE MATRIX
McDonald’s
Burger King
Weight
Rating
Weighted
Score
Rating
Weighted
Score
Rating
Market Share
Advertising
Global Expansion
Product Variety
Product Quality
Company Image
Price Competition
Management Experience
Customer Service
Philanthropy
Customer Loyalty
Financial Position
0.15
0.13
0.12
0.10
0.08
0.07
0.04
0.06
0.07
0.05
0.08
0.05
2
2
1
4
1
2
3
2
3
2
2
3
0.30
0.26
0.12
0.40
0.08
0.14
0.12
0.12
0.21
0.10
0.16
0.15
4
3
4
3
3
3
3
3
2
4
3
3
0.60
0.39
0.48
0.30
0.24
0.21
0.12
0.18
0.14
0.20
0.24
0.15
2
3
2
3
2
2
3
2
2
1
2
2
TOTAL
1.00
2.16
3.25
Weighted
Score
0.30
0.39
0.24
0.30
0.16
0.14
0.12
0.12
0.14
0.05
0.16
0.10
© Tony Gauvin, UMFK, 2009
Critical Success Factors
3/30/2009
Wendy’s
2.22
23
EFE MATRIX
Key External Factors
Weighted Score
Opportunities
Burger King is closing more than 180 stores in 2006.
0.04
2
0.08
53 percent of household income is spent eating outside of the home.
0.1
3
0.3
0.08
3
0.24
0.04
3
0.12
0.03
2
0.06
0.02
2
0.04
0.11
3
0.33
0.05
4
0.20
0.04
3
0.12
0.05
1
0.05
0.06
3
0.18
0.07
1
0.07
0.09
2
0.18
0.05
1
0.05
0.07
4
0.28
0.10
1.00
3
0.30
2.60
The Canadian dollar is getting a stronger exchange rate resulting in higher EPS from 2004
to 2005
Quick Service Restaurants sales have increased by 5 percent in 2006 according to the
National Restaurant Association.
Burger King's market share dropped from 15.03% in 2000 to 10.95% in 2006.
The US Department of Agriculture states that consumption of eating out has risen 3.6
percent from 1990 to 2005
The breakfast food industry is a $77.6 billion industry.
McDonald’s suffered an $8.5 million lawsuit and a decrease in sales due to not informing
customers of trans-fats in their cooking oils.
Threats
Where's the beef? A 12 percent increase in beef costs over 2005 reduced Wendy's EPS by
0.07 cents
McDonald's new management team is returning them to a sales growth trend.
60 percent of McDonald’s are open 24 hours, worldwide.
McDonald's menu is expanding to offer more upscale coffee, and better quality chicken
sandwiches
Natural disasters are causing vegetables to be in short supply for restaurant industry.
When hurricanes Katrina and Rita hit the south-east in August and September Wendy’s
lost approximately $25 million in sales.
Burger King has invested $12 million in their restaurants.
© Tony Gauvin, UMFK, 2009
Rating
3/30/2009
Weight
Wendy’s has restaurants in only 20 international countries compared to McDonald’s and
Burger King who have restaurants in 120 and 65 international countries respectively.
Burger King plans to implement a dollar menu for breakfast items.
TOTAL
24
3/30/2009
© Tony Gauvin, UMFK, 2009
INTERNAL ASSESSMENT
25
STOCK PERFORMANCE
3/30/2009
© Tony Gauvin, UMFK, 2009
http://moneycentral.msn.com/investor/charts/chartdl.aspx?iax=1&Symbol=WEN
26
INCOME STATEMENT
3/30/2009
© Tony Gauvin, UMFK, 2009
27
BALANCE SHEET
3/30/2009
© Tony Gauvin, UMFK, 2009
28
SELECTED FINANCIAL RATIOS
Industry
7.50
-9.10
42.50
8.89
13.16
26.63
SP-500
8.30
16.00
6.60
13.34
20.14
10.00
23.9
126.3
15.4
0.83
2.52
10.10
24.8
30.4
13.0
2.10
3.02
5.40
21.9
25.9
7.4
2.38
3.39
10.60
20.7
5.1
3.5
20.7
5.5
31.0
12.1
8.1
30.5
12.3
33.8
17.5
12.4
33.5
16.8
3.6
8.5
11.7
© Tony Gauvin, UMFK, 2009
5Yr Net Profit Margin (5-Year Avg.)
Wendy’s
-0.10
133.80
41.40
3.53
-5.90
13.90
3/30/2009
Growth Rates %
Sales (Qtr vs. year ago qtr)
Net Income (YTD vs. YTD)
Net Income (Qtr vs. year ago qtr)
Sales (5-Year Annual Avg.)
Net Income (5-Year Annual Avg.)
Dividends (5-Year Annual Avg.)
Price Ratios
Current P/E Ratio
P/E Ratio 5-Year High
P/E Ratio 5-Year Low
Price/Sales Ratio
Price/Book Value
Price/Cash Flow Ratio
Profit Margins
Gross Margin
Pre-Tax Margin
Net Profit Margin
5Yr Gross Margin (5-Year Avg.)
5Yr Pretax Margin (5-Year Avg.)
29
SELECTED FINANCIAL RATIOS
0.71
1.1
1.0
5.0
2.2
9.20
0.69
0.4
0.4
13.9
1.7
3.58
1.19
0.9
0.7
43.3
4.0
16.25
9.5
4.5
5.5
5.6
3.1
3.7
15.1
4.0
5.4
11.1
3.1
4.3
20.8
5.8
7.7
14.5
5.1
6.8
NA
NA
31.2
59.0
1.3
3,150
48,925
29.9
34.5
0.7
37,696
343,930
9.5
5.6
0.6
© Tony Gauvin, UMFK, 2009
Debt/Equity Ratio
Current Ratio
Quick Ratio
Interest Coverage
Leverage Ratio
Book Value/Share
Investment Returns %
Return On Equity
Return On Assets
Return On Capital
Return On Equity (5-Year Avg.)
Return On Assets (5-Year Avg.)
Return On Capital (5-Year Avg.)
3/30/2009
Financial Condition
Management Efficiency
Income/Employee
Revenue/Employee
Receivable Turnover
Inventory Turnover
Asset Turnover
Adapted from www.moneycentral.msn.com
30
TREND ANALYSIS
12/07
12/06
01/06
01/05
12/03
Price/Sales
0.96
1.56
1.25
0.86
0.92
Book Value/
Share
$9.20
$10.57
$17.47
$15.26
$15.33
Price/Book
2.83
3.13
1.50
1.22
1.18
Debt/Equity
0.71
0.64
0.26
0.42
0.42
ROE
(%)
10.8
3.7
4.1
6.2
6.6
Net Profit Margin (%)
3.5
1.5
3.5
4.2
5.2
ROA
(%)
4.8
1.8
2.5
3.3
3.7
Interest
Coverage
3.5
1.1
4.1
5.1
5.3
© Tony Gauvin, UMFK, 2009
Date
Avg. P/E
34.90
93.80
29.40
19.20
14.50
3/30/2009
Date
12/07
12/06
01/06
01/05
12/03
31
NET WORTH ANALYSIS
3/30/2009
Net Worth Analysis (February 2007 in millions)
$1,096
$ 470
$ 2,162
$ 2,001
$1,432
© Tony Gauvin, UMFK, 2009
1. Stockholders’ Equity + Goodwill = 1,011 + 85
2. Net income x 5 = $94 x 5=
3. Share price = $23/EPS 1.00 =$23 x Net Income $94=
4. Number of Shares Outstanding x Share Price = 87 x $23 =
Method Average
32
INTERNAL AUDIT -STRENGTHS
3/30/2009
© Tony Gauvin, UMFK, 2009
1. First to introduce non-trans-fat French fries.
2. Improved goodwill from $19 million to $36 million.
3. Owns and operates 2 bakeries as apart of their vertical
integration strategy.
4. Maintains industry-leading customer satisfaction scores.
5. World's #3 fast food chain controlling 14% of the fast-food
market share.
6. 417 new restaurants in the US & Canada.
7. With healthier food selections such as salads, Wendy’s
same-store sales rose 4.7%.
8. 1st to offer the 99 cent value menu.
9. Wendy’s Frescata product line increased sales by 3.2%.
10. The acquisition of Tim Horton’s restaurants increased
Wendy’s revenue 31%.
33
INTERNAL AUDIT - WEAKNESS
3/30/2009
© Tony Gauvin, UMFK, 2009
1. Failed marketing strategy led to sales dip in 2005.
2. Last to accommodate changing customer preferences
by introducing new products.
3. "The Chili Finger" incident drops sales by 2.5% in
2005.
4. Last food-chain to offer a breakfast menu.
5. Wendy's current strategy only focuses on US &
Canada.
6. Tim Horton's 50/50 joint venture causes 50% drop in
income from Tim Horton's.
7. Since the passing of Dave Thomas in 2002, Wendy's
lost their opinion leader who helped to create
"TOMA."
34
IFE MATRIX
Rating
Weighted
Score
0.08
0.07
4
3
0.32
0.21
0.09
4
0.36
0.05
4
0.20
0.02
0.01
3
3
0.06
0.03
0.1
0.05
4
4
0.40
0.20
0.02
3
0.06
0.03
4
0.12
0.08
1
0.08
0.05
2
0.10
0.1
0.04
0.06
1
2
1
0.10
0.08
0.06
0.07
2
0.14
0.08
1.00
1
0.08
2.60
Strengths
First to introduce non-trans-fat French fries.
Improved goodwill from $19 million to $36 million.
Owns and operates 2 bakeries as apart of their vertical integration strategy.
Maintained industry-leading customer satisfaction scores.
World's #3 fast food chain controlling 14 percent of the fast-food market
share.
417 new restaurants in the & .
With healthier food selections such as salads, Wendy’s same-store sales
rose 4.7 percent.
1st to offer the 99 cent value menu.
Wendy’s Frescata product line increased sales by 3.2%.
The acquisition of Tim Horton’s restaurants increased Wendy’s revenue
by 31 percent.
Weaknesses
Failed marketing strategy led to sales dip in 2005.
Last to accommodate changing customer preferences by introducing new
products.
"The Chili Finger" incident drops sales by 2.5 percent in 2005.
Last food-chain to offer a breakfast menu.
Wendy's current strategy only focuses on US & .
Tim Horton's 50/50 joint venture causes 50 percent drop in income from
Tim Horton's.
Since the passing of Dave Thomas in 2002, Wendy's lost their opinion
leader who helped to create "TOMA."
TOTAL
© Tony Gauvin, UMFK, 2009
Weight
3/30/2009
Key Internal Factors
35
3/30/2009
© Tony Gauvin, UMFK, 2009
STRATEGIC
FORMULATION
36
SWOT MATRIX
Expand research and development
function, strategic insights, and
operations innovation by 25 percent
(S1, O4).
Introduce a full menu and a 99 cent
super value menu for breakfast in all
restaurants in order to capitalize on
$77 billion breakfast industry (W4,O7).
Open 200 new Wendy’s franchises
stores in the US and Canada to gain
market share in the fast food industry
(S6, O5).
Wendy Thomas will become the new
opinion leader for Wendy’s and create
TOMA and help generate sales in the
breakfast industry (W7, O7).
Display on all food packaging and in
all restaurants that we use non-trans
fat oils to cook our foods (S1, O8).
Wendy’s will take advantage of the fact
that 53 percent of household income is
spent eating outside the home to
increase sales of their foods (W1, O2).
Launch a direct marketing campaign
for Wendy’s new breakfast menu (W1,
O8).
© Tony Gauvin, UMFK, 2009
WO Strategies
3/30/2009
SO Strategies
37
SWOT MATRIX
Continue to focus on providing
customers healthier food options
and not just expanding the menu
(S7, T4).
Expand the research and
development function, strategic
insights, and operations innovation
(W1, W2, T2).
Implement a full breakfast menu
and a 99 cents breakfast menu in
all their restaurants (S8, T8).
Backward integrate: Acquire a farm
that main crop is vegetables
specifically lettuce, onion, and
tomato
By implementing longer operating
hours such as 24 hour
restaurants, Wendy’s will improve
customer convenience and
satisfaction (S4, T3).
© Tony Gauvin, UMFK, 2009
WT Strategies
3/30/2009
ST Strategies
Expand global operations by 40
percent over next three years (W5,
T7).
38
FS
Conservative
Aggressive
6
5
4
SPACE MATRIX
3
2
CA
-6
-5
-4
-3
-2
-1
1
2
3
4
-1
-2
5
6
IS
3/30/2009
1
-3
-5
-6
Defensive
Competitive Advantage (CA)
Market Share
Product Quality
Customer Loyalty
Technological know-how
Control over Suppliers and Distributors
Competitive Advantage (CA) Average
Financial Strength (FS)
Return on Assets (ROA)
Leverage
Net Income
Income/Employee
Inventory Turnover
Financial Strength (FS) Average
-2
-2
-2
-3
-2
Industry Strength (IS)
Growth Potential
Financial Stability
Ease of Entry into Market
Resource Utilization
Profit Potential
-2.2 Industry Strength (IS) Average
4
3
3
3
6
3.8
Environmental Stability (ES)
Rate of Inflation
Technological Changes
Price Elasticity of Demand
Competitive Pressure
Barriers to Entry into Market
Environmental Stability (ES) Average
x-axis: -2.2 + 4.6 = 2.4
y-axis: 3.8 + -2.8 = 1.0
ES
5
5
3
5
5
4.6
Competitive
© Tony Gauvin, UMFK, 2009
-4
-2
-1
-2
-6
-3
-2.8
39
GRAND STRATEGY MATRIX
3/30/2009
Rapid Market Growth
Quadrant II
Quadrant I
Strong
Competitive
Position
Quadrant III
© Tony Gauvin, UMFK, 2009
Weak
Competitive
Position
Quadrant IV
Slow Market Growth
40
BCG MATRIX
Two Possible Divisional Analysis Vectors

Geographic

Store ownership



No difference in Growth rates or Market share by location
All stores whether they are owned by the company or by
franchisees compete in the same market
No value in producing a BCG matrix
Wendy’s is somewhere between a Question Mark
and a Star
© Tony Gauvin, UMFK, 2009

3/30/2009

41
IE MATRIX
EFE
Scores
Weak
1-1.99
I
II
III
IV
V
VI
VII
VIII
IX
Medium
2-2.99
Low
1-1.99
© Tony Gauvin, UMFK, 2009
High
3-4
Strong
3-4
3/30/2009
Hold and Maintain
IFE Scores
Average
2-2.99
42
MATRIX ANALYSIS
IE
SPACE
GRAND
COUNT
x
1
Backward Integration
x
1
Horizontal Integration
x
1
x
2
x
1
x
2
Market Penetration
x
Market Development
Product Development
x
Concentric Diversification
x
x
2
Conglomerate Diversification
x
x
2
Horizontal Diversification
x
x
2
x
1
Joint Venture
® 2008, Tony Gauvin, UMFK
Forward Integration
7-Apr-08
Alternative Strategies
Retrenchment
Divestiture
Liquidation
43
POSSIBLE STRATEGIES
Promote a healthier menu for Breakfast, Meals
and late night snacks

Market penetration, product development & related
diversification
Expand the research and development functions,
strategic insights and operation innovation

Product development & diversification
® 2008, Tony Gauvin, UMFK

7-Apr-08

44
QSPM
Strategic Alternatives
Promote a
healthier menu.
Weight
Expand the research and
development function, strategic
insights, and operations
innovation.
0.08
AS
4.00
TAS
0.32
AS
2.00
0.07
----
----
----
----
Owns and operates 2 bakeries as apart of their vertical integration
strategy.
Maintained industry-leading customer satisfaction scores.
0.09
----
----
----
----
0.05
2.00
0.10
4.00
0.20
0.02
0.01
-------
-------
-------
-------
0.1
0.05
4.00
2.00
0.40
0.10
3.00
3.00
0.30
0.15
World's #3 fast food chain controlling 14 percent of the fast-food market
share.
417 new restaurants in the & .
With healthier food selections such as salads, Wendy’s same-store sales
rose 4.7 percent.
1st to offer the 99 cent value menu.
Wendy’s Frescata product line increased sales by 3.2 percent.
TAS
0.16
0.02
4.00
0.32
2.00
0.16
The acquisition of Tim Horton’s restaurants increased Wendy’s revenue
by 31 percent.
Weaknesses
Failed marketing strategy led to sales dip in 2005.
0.03
----
----
----
----
0.08
----
----
----
----
Last to accommodate changing customer preferences by introducing new
products.
"The Chili Finger" incident drops sales by 2.5 percent in 2005.
0.05
3.00
0.15
4.00
0.20
Last food-chain to offer a breakfast menu.
Wendy's current strategy only focuses on US & .
Tim Horton's 50/50 joint venture causes 50 percent drop in income from
Tim Horton's.
Since the passing of Dave Thomas in 2002, Wendy's lost their opinion
leader who helped to create "TOMA."
SUBTOTAL
0.1
0.04
0.06
---2.00
----
---0.08
----
---3.00
----
---0.12
----
0.07
----
----
----
----
0.08
1.00
----
---1.15
----
---1.13
© Tony Gauvin, UMFK, 2009
Strengths
First to introduce non-trans-fat French fries.
Improved goodwill from $19 million to $36 million.
3/30/2009
Key Internal Factors
45
QSPM
Promote a healthier
menu.
Weight
0.04
53 percent of household income is spent eating outside of the home.
0.1
The Canadian dollar is getting a stronger exchange rate resulting in higher EPS from 2004 to 2005
0.08
Quick Service Restaurants sales have increased by 5 percent in 2006 according to the National
Restaurant Association.
Burger King's market share dropped from 15.03% in 2000 to 10.95% in 2006.
0.04
The US Department of Agriculture states that consumption of eating out has risen 3.6 percent from 1990
to 2005
The breakfast food industry is a $77.6 billion.
McDonald’s suffered an $8.5 million lawsuit and a decrease in sales due to not informing customers of
trans-fats in their cooking oils.
Threats
Where's the beef? A 12 percent increase in beef costs over 2005 reduced Wendy's EPS by 0.07 cents
AS
TAS
AS
TAS
---2.00
----
---0.20
----
---3.00
----
---0.30
----
0.03
-------
-------
-------
-------
0.02
0.11
-------
-------
-------
-------
0.05
3.00
0.15
4.00
0.20
0.04
0.24
---0.10
2.00
---3.00
0.16
---0.15
McDonald's new management team is returning them to a sales growth trend.
0.05
60 percent of McDonald’s are open 24 hours, worldwide.
0.06
3.00
---2.00
0.07
2.00
0.14
4.00
0.28
0.09
-------
-------
-------
-------
4.00
----
0.36
----
3.00
----
0.27
----
McDonald's menu is expanding to offer more upscale coffee, and better quality chicken sandwiches
Natural disasters are causing vegetables to be in short supply for restaurant industry. When hurricanes
Katrina and Rita hit the southeast in August and September Wendy’s lost approximately $25 million in
sales.
Burger King has invested $12 million in their restaurants.
Wendy’s has restaurants in only 20 international countries compared to McDonald’s and Burger King
who have restaurants in 120 and 65 international countries respectively.
Burger King plans to implement a dollar menu for breakfast items.
0.05
0.07
0.10
SUBTOTAL
1.13
1.27
SUM TOTAL ATTRACTIVENESS SCORE
2.28
2.40
© Tony Gauvin, UMFK, 2009
Opportunities
Burger King is closing more than 180 stores in 2006.
Expand the research and
development function, strategic
insights, and operations
innovation.
3/30/2009
Key External Factors
46
3/30/2009
© Tony Gauvin, UMFK, 2009
FUTURE PLANS
NEW
47
OBJECTIVES
Increase Market Share
 Grow franchise ownership
 Quality control through backwards integration and
process managemenat
 Expand meal and food offerings

© Tony Gauvin, UMFK, 2009
Objectives listed in 2006 Revitalization plan and
Commitment to Quality still apply for the next
three years
3/30/2009

48
RECOMMENDATIONS


Total Cost = $50,000,000
© Tony Gauvin, UMFK, 2009

Promote a healthier menu and these changes will
increase Wendy's sales.
$10,000,000
Expand the research and development function,
strategic insights, and operations innovation by 25
percent.
$15,000,000
Introduce a full menu and a $.99 menu for breakfast
in all restaurants in order to capitalize on the $77.6
billion breakfast industry.
$5,000,000
Acquire a farm that's main crop is vegetables, which
will allow Wendy’s to offer vegetarian items,
eliminate the cost and reduce the risk of vegetable
shortage.
$20,000,000
3/30/2009

49
3/30/2009
© Tony Gauvin, UMFK, 2009
IMPLEMENTATION
50
EPS/EBIT ANALYSIS




# Shares Outstanding: 87M
# Shares Needed: 1,173,913
EBIT
Interest
EBT
Taxes
EAT
# Shares
EPS
EBIT
Interest
EBT
Taxes
EAT
# Shares
EPS
Common Stock Financing
Recession
Normal
Boom
50,000,000
200,000,000
500,000,000
0
0
0
50,000,000
200,000,000
500,000,000
17,500,000
70,000,000
175,000,000
32,500,000
130,000,000
325,000,000
89,173,913
89,173,913
89,173,913
0.36
1.46
3.64
70 Percent Stock - 30 Percent Debt
Recession
Normal
Boom
50,000,000
200,000,000
500,000,000
1,050,000
1,050,000
1,050,000
48,950,000
198,950,000
498,950,000
17,132,500
69,632,500
174,632,500
31,817,500
129,317,500
324,317,500
88,521,739
88,521,739
88,521,739
0.36
1.46
3.66
Recession
50,000,000
3,500,000
46,500,000
16,275,000
30,225,000
87,000,000
0.35
Debt Financing
Normal
200,000,000
3,500,000
196,500,000
68,775,000
127,725,000
87,000,000
1.47
Boom
500,000,000
3,500,000
496,500,000
173,775,000
322,725,000
87,000,000
3.71
© Tony Gauvin, UMFK, 2009

$ Amount Needed: 50M
Stock Price: $23
Tax Rate: 35%
Interest Rate: 7%
3/30/2009

70 Percent Debt - 30 Percent Stock
Recession
Normal
Boom
50,000,000
200,000,000
500,000,000
2,450,000
2,450,000
2,450,000
47,550,000
197,550,000
497,550,000
16,642,500
69,142,500
174,142,500
30,907,500
128,407,500
323,407,500
87,652,174
87,652,174
87,652,174
0.35
1.46
3.69
51
OTHERS ISSUES
Labor Turnover

What about the Internet??

Can we use it?
Cultural issues with International Stores
 Where to locate

© Tony Gauvin, UMFK, 2009
Management training
 Quality training

3/30/2009

Where the others fats food restaurants exist
 Near high traffic locations


Public relations
52
3/30/2009
© Tony Gauvin, UMFK, 2009
EVALUATION
53
EVALUATION MATRIX
Kaplan and Norton’s Balanced Score Card





Annual Reports


Continuous improvement
Financial
Customer
Operations
Employees
Financial
© Tony Gauvin, UMFK, 2009

3/30/2009

Independent Analysis
Market share
 Brand awareness

http://www.qualitysolutions.com/images/balance.jpg
54
Area of Objectives
Measure or Target
Time Expectation
Primary Responsibility
Customers
1
Satisfaction
Customer Survey results
Yearly
Marketing Department
2
Brand Identity
Industry Reports
Yearly
Marketing Department
Employees
1
Quality training
# TQM session
Yearly
COO
2
Employee Satisfaction
Survey
Yearly
Human resources
Operations/Processes
1
Productivity
Sales/man-hour increase 5%
Quarterly
COO
2
Quality
# Defective/stale products reduced 1%
Quarterly
COO
# of recyclable containers
Quarterly
COO
# of ethics training sessions
Yearly
Human resources
1 Sales and expenses reports
2% sales increase
1% expense reduction
Quarterly
CFO
2
better than Industry Avg,
Yearly
CFO
Business Ethics/Natural Environment
1
Waste reduction
2 Ethics Training
Financial
Ratio analysis

Stock prices continue to fall through 2007 and
2008
Income and revenues are down

McDonalds and Burger King revenues are up
Began rollout of breakfast menu with lukewarm
results
 Maintainsed 3RD Place in Market share
 Pelz’s Triarc buys out Wendy’s for $2.34 billion in
stock swap in April of 2008


Combine with Arby’s to form Wendy’s Arby’s Group


® 2009, Tony Gauvin, UMFK

30-Mar-2009
2008 UPDATE
http://www.wendysarbys.com/
Maintained as separate Brands
56
INFORMATION SOURCES
International Directory of Company Histories, Vol. 47. St. James Press,
2002.
Graphics from www.wendys.com

Wendy’s International, Inc Form 10-K Sec filing for 2007




Wendy’s International- 2007 Case Notes by Forest David of Francais
Marion University
Datamonitor
 Global Fast Food Industry Profile 2008
 US Fast Food Industry Profile 2008
 Wendy’s International, Inc. Company Profile 2008
© Tony Gauvin, UMFK, 2009

3/30/2009

Value Line Investment Surveys
 Restaurant Industry 2009
 Wendy’s Arby’s 2009
Analyst reports


TheStreet.com
CL King & Associates
57