Wendy’s Case Analysis Paper
- Pages: 14
- Word count: 3427
- Category: Food
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Wendy’s (Formerly branded as Wendy’s Old Fashioned Hamburgers) is an international fast food chain restaurant founded by Dave Thomas on November 15, 1969, in Columbus, Ohio, United States. Wendy’s known as the Wendy’s/Arby’s Group is the third quick service restaurant company. The merger of the two companies in 2011 comprised of the two brands Wendy’s and Arby’s. Wendy’s/Arby’s Group generated about $12 billion in system wide sales and comprise over 10,000 restaurants. The industry as whole is dominated by what is termed the “big four” which comprises McDonalds, Burger King, Wendy’s/Arby’s Group, and Yum Brands. Wendy’s/Arby’s Group completed the sale of Arby’s Restaurant Group in July of 2011to Atlanta-based private equity firm Roark Capital Group, and dropped the roast beef sandwich chain from its name. The company will do business as The Wendy’s Company effective Tuesday and continue to trade under the ticker “WEN” on the New York Stock Exchange. Olsen, S. (2011, 07/5).
Wend’ys restaurants sells arb’ys chain, changes name. Retrieved from http://usatoday30.usatoday.com/money/industries/food/2011 Currently, McDonalds has gained the most attention among businesses within the quick service industry, which is shown through their strong advantage in market penetration as well as total revenue, while the Wendy’s has been generally recognized as the leader in quality and customer service. Wendy’s started out as a single store in downtown Columbus, Ohio and from inception was born placing utmost importance on providing quality. Dave Thomas believed quality was the foundation he put the phrase “quality is in our recipe” in the logo. There are approximately 6,600 Wendy’s restaurants in operation in the United States and in 21 other countries and territories. Wendy’s has seen slow but steady growth but financially and internationally, since their start in 1969 by reaching the milestones of going public in September of 1976, going global in 1988, and reaching 5000 stores by march of 1997. As of March 2012, Wendy’s was the world’s third largest hamburger fast food chain with approximately six thousand six hundred and fifty locations, following McDonald’s thirty one thousand plus locations and Burger King’s twenty two thousand plus locations.
Approximately seventy seven percent of Wendy’s restaurants are franchised, the majority of which are located in North America. Wendy’s and its affiliates employ more than forty six thousand people in its global operations. Wendy’s menu consists of hamburgers, chicken sandwiches, French fries, fish, salads, stuffed baked potatoes, side dishes, and beverages, including the Frosty, a form of soft serve ice cream mixed with frozen starches. The company does not have a signature sandwich, such as the Big Mac or the Whopper. Instead, the square burger patties are their signature items. The square burger patties are fresh ground beef rather than frozen burger patties. Wendy’s offers two different hamburger patties, a “Junior” 2.25 ounce (63.8 gram) patty and its “Single” 4 ounce (113.4 gram) patty. 4 ounce patties are sold in single, double, and triple sizes whereas the junior patties sell in single and double patties. The previous size of two ounces per junior patty was altered to 1.78 ounce size in 2007 to save on expenses from rising food costs. They then raised the patty size up to 2.25 ounces when Wendy’s Hot and Juicy hamburgers were introduced. In August 2011, the Junior Double Stack was discontinued and the new Cheesy Cheddarburger was introduced. Originally, Wendy’s had only two kinds of chicken sandwiches, fried and grilled.
The spicy chicken sandwich started out as a promotional sandwich. It was later put on the menu full-time in 1996 due to its popularity and the fact that compared to most promotional sandwiches, it was much simpler to make. The same condiments as the standard breaded chicken sandwich were used for the sandwich. In 1988, Wendy’s was the first fast-food chain to create a single price-point value menu where all items listed on that menu were priced exclusively at 99¢. The menu was restructured in 2007 due to rising costs as the Super Value Menu with prices ranging from 99¢ to $2.00. In 2010, Wendy’s introduced the Every Day Value Menu with nine items at $0.99 (eight items at $1.89 in Canada). Wendy’s has been regarded as one of the best food restaurants with exceptional customer service. Wendy’s Mission Statement is, “Do the Right Thing!”
By doing the right thing, Wendy’s incorporates people excellence, applaud their people, involve others, and grow leaders within its culture. We at Wendy’s strive every day to uphold and implement the standards and morals that our founder, Dave Thomas, instilled in the Wendy’s name: Doing it “Dave’s Way!” “Here we never cut corners!” We, along with Dave, truly believe we are the “Employer of Choice,” and you will, too. Our vision is to continuously grow stakeholder value by leveraging the strengths of vibrant, independent restaurant brands. As of September 2012 Emil J. Brolick will take over as the new CEO of Wendy’s. CEO Roland Smith stepped down from the position. Emil J. Brolick is a company veteran and former executive at Yum! Brands and will be Ronald Smith’s successor. LaPrete, J. (2011, 10/18). Wend’ys ceo emil brolick has big plans to flip its ranking. Retrieved from http://usatoday30.usatoday.com/money/industries/food/story/2011-10-17/wendys-ceo-emil-brolick/50806918/1 Part II: SWOT Analysis
The industrial analysis of Wendy’s contains information and research relating to the Industry as a whole and how these factors affect not only Wendy’s but their competition. We did an external audit of the industry to determine target markets of competitors, what our competitors do better and worse than us as well as assess Wendy’s international situation compared to other companies. The Fast food industry’s target market as a whole is anyone who would like to eat a hot meal while on the go, in particular burgers and fries. However there are specific target groups that McDonalds and Burger King focus on through their advertising. In particular, children, teenagers, and minority groups such as African Americans and Hispanics are mostly targeted through commercials, print ads, and internet banners. Each of these groups is not only exposed to more advertisements then normal but will also be subject to content that caters and appeals to them specifically. Research shows that members of these target groups will see at least one McDonald’s advertisement each and every day.
Children are targeted by using child friendly characters such as the clown “Ronald McDonald” which is used by McDonalds, movie and television show partnerships such as using licensed characters for “Kid’s Meals”, and even companies like McDonalds even have websites such as “Ronald.com” that has games for children as young as 3. These tactics are found to be successful because young children request restaurants that they’re familiar with when they get hungry and most parents will oblige their child. Teenagers are usually targeted by humor and/or popular entertainers such as musicians or rapper. Our competition also uses “snack” offerings at unusual eating times to cater to a teenagers “on the go” and “spontaneous” lifestyle. In 2009 teenagers saw at least 5 advertisements of McDonalds or Burger King per day. These advertising tactics are successful due to teenager’s high calorie intake and 25% of teenager orders at fast food restaurants order a large or extra-large soft drink and fry, while 75% order larger than normal burgers. Minority groups are targeted by the selection of music played during an advertisement and the locations of the actual restaurants in urban neighborhoods.
African American teenagers view 50% more fast food ads than whites and 75% more McDonalds ads than their Caucasian counterparts. McDonalds even have programs such as “365 Black” to cater and support the African American community. Our competition is very successful using these tactics with their target markets across the board. Wendy’s target market compared to our competitors is a higher age group that embraces the quality and made to order precision of Wendy’s over a faster product that wasn’t made with the amount of care. Our competitors’ exploit their target markets with creative marketing tactics whereas Wendy’s likes to depend on the product and its humanitarianism to build a relationship with our customers that will last for years to come. Although we believe that our competitors such as McDonald’s and Burger King use of advertising and new sales tactics are better than Wendy’s, especially with youth and minorities we believe Wendy’s can still grow in this area without contradicting our belief in quality. We also believe that our meat selection which is “fresh, never frozen” and freshly sliced vegetables, and alternative side dish selection keeps our actual products and meal selection head and shoulders above our competition if quality is the only factor that mattered. Financial Ratio’s and Data Averages for Wendy’s:
Return on Assets| -2.3%|
Return on Invested Capital| -2.9%|
Gross Profit Margin| 25.1%|
Pre-Tax Profit Margin| -4.4%|
Post-Tax Profit Margin| -3.6%|
Net Profit Margin (Total Operations)| -3.6%|
R&D as a % of Sales| 0.0%|
SG&A as a % of Sales| 13.9%|
Debt/Equity Ratio| 0.66|
Total Debt/Equity Ratio| 0.68|
Below is our EFE and IFE Matrixes:
EFE of Wendy’s
The EFE Matrix is used to determine the external factors that can help or hurt the organization. Opportunities and threats are the factors that play roles in creating this EFE Matrix. This shows what kind of response the company can make and if it is important or not so important. Threats:
1. Vegetarian and Vegan Lifestyle are on the rise and has peaked in recent years, 5% of America is Vegetarian (2.5% of that are completely vegan) 33% of Americans eat “mostly vegetables.” 2. 47% of Americans eat at least 1 “vegetarian meal” per week. 3. Obesity causes over 325,000 deaths in the United States every year more than car accidents, drugs, alcohol, and guns combined. 4. – New York City Health Department became first city in nation to outlaw the sale of fountain drinks over 16 oz in restaurants. 5. Increase in Labor cost in US.
6. The very low temperatures in the Plains have been causing damage to livestock, making the live cattle prices go up. $89.50-$95.50 per hundred weight.
7. Financially, obesity costs Americans 117 billion dollars every year in healthcare spending and lost wages. 8. Families are relying on food preparation outside of the home as a source for at home and away from home consumption. 9. Fast food expanding in large rural areas. 10. Food Service industry has grown 3.6% in the last year, made 604 Billion in 2011. Howard Hoyle III 11. Brand reinvention to improve visibility.
12. Commitment to reduce the levels of salt in the foods they serve, converting to large gains for the population’s health.
1. We weighed this as .03 because we felt like it was not very important and rated it a 1 because we are in a poor position to stop people from wanting to become a vegetarian. 2. This was weighed as .03 because we felt like it was not very important and rated it a 1 because we are in a poor position to prevent that amount of Americans to not eat a vegetarian meal. 3. It is weighed as .09 because we felt like it was not as important and rated it a 1 because we are in a poor position to prevent the obese customers who wants and continues to buy the products. 4. We weighed this as .09 because we felt like it was not as important and rated it a 2 because we are not in a good enough position to avoid this outlaw. This outlaw could start something worldwide. 5. This was weighed as .03 because we felt like it was not very important and rated it a 2 because labor costs could decrease the profits and cause layoffs. 6. We weighed this as .11 because we felt like it was very important and rated it a 1 because we are in a poor position to prevent the livestock in the plains from being too cold causing the cattle to die. Opportunities:
7. This was weighed as .09 because we felt like it was not very important and rated it a 1 because we are in a poor position to help aid because we can’t control what the customers eat. 8. It is weighed as .12 because we felt like it was important and rated it a 4 because we felt like we are in a great position to take advantage of the relying on food preparation outside of the home. 9. This was weighed as .12 because we felt like it was important and rated it a 3 because we are in a high position to take advantage of expanded in rural areas. 10. We weighed this as .11 because we felt like it was very important and rated it a 2 because we are not in a good enough position to take advantage of the entire fast food market. 11. It is weighed as .09 because we felt like it was not as important and rated it a 3 because we are in a high position to take advantage reinventing our brand to improve our visibility. 12. We weighed this as .09 because we felt like it was not as important and rated it a 2 because we are not in a good enough position to take advantage of reducing the salt levels.
IFE of Wendy’s
The IFE Matrix is used to determine the internal factors that affect the organization. Internal factors would include the strengths and weaknesses, which both go hand and hand with the advantages and disadvantages of the company. Ultimately, this chart shows what the company does better than their competition and what the company is lacking on. Internal Factors Evaluation for Wendy’s|
| Weight| Rating| Weighted Score|
Brand Name and Goodwill| 12%| 4| .48|
Cost Efficiency and Operations| 10%| 4| .40|
New Product Opportunities| 12%| 3| .36|
Advertising & Marketing| 10%| 3| .30|
Operation Hours (Open Late)| 6%| 2| .12|
Customer Value on Products| 10%| 4| .40|
Atmosphere (inside of the store)| 4%| 2| .08|
Global Market Placement| 12%| 1| .12|
Domestic Market Placement| 6%| 2| .12|
Menu Diversity| 10%| 2| .20|
Management Programs| 4%| 2| .08|
Lack of nationwide Breakfast Menu| 4%| 1| .04|
Total| 100%| | 2.70|
Brand Name and Goodwill- We weighed this .12 because we thought that is was very important since Wendy’s has created their selves to become one of the best fast food restaurants. We rated it a 4 because we consider this a major strength since Wendy’s had maintained with its competition. Cost Efficiency and Operations- We weighed this .10 because we thought that is was very important and rated it a 4 because this major strength shows we are relevant and a threat to the competition. New Product Opportunities- We weighed this .12 because we thought that is was very important and rated it a 3 because it’s a minor strength since fast food companies doesn’t come out with new products very often.
Advertising & Marketing- We weighed this .10 because we thought that is was very important and rated it a 3 because it’s a minor strength since advertising and marketing play a big role in the growth of the company. Operation Hours (Open Late)- This was weighed as .06 because we felt like it wasn’t very important and rated it as a minor strength because most of our competitors close at an latest time 11 o’clock; therefore, our late hours gives us an advantage. Customer Value on Products- This was weighed as .06 because we felt like it wasn’t very important and rated it as a major strength because our customers love our products. Atmosphere (inside of the store)- Weighed .04 because it is not very important and rated a 3 because the business is being handled correctly. Weaknesses:
Global Market Placement- It is weighed as .12 because we felt like it was important and rated it a 1 because we are in a poor position to control the placement in the global market. Domestic Market Placement- This was weighed as .06 because we felt like it wasn’t very important and rated it a 2 because we are not in a good enough position to focus on one single market. Menu Diversity- We weighed this .10 because we thought that is was very important and rated it a 2 because we are not in a good enough position to be able to switch up the menu since you don’t know what every customer likes. Management Programs- Weighed .04 because it is not very important and rated a 2 because we are not in a good enough position to start management programs, especially with the increase in labor costs. Lack of nationwide Breakfast Menu- It is weighed as .04 because we felt it was not very important and rated a 1 because we are in a poor position to increase on the breakfast menu since Wendy’s are known for their burgers.
Part III: Recommendations
Below is our QSPM model which we used to make our recommendations, QSPM for Wendy’s
Improve Management Programs
Expand the Menu and introduce
Vegetarian options (such as Veggie Burgers)
Brand Name and Goodwill0.124.484.48
Cost Efficiency and Operations0.102.203.30
New Product Opportunities0.123.362.24
Advertising & Marketing0.104.403.30
Operation Hours (Open Late)0.06–
Customer Value on Products0.103.302.20
Atmosphere (inside of the store)0.0431.2-
Global Market Placement0.124.48-
Domestic Market Placement0.0621.2-
Lack of nationwide Breakfast Menu0.04–
Vegetarian and Vegan Lifestyle are on the rise and has peaked in recent years, 5% of America is Vegetarian (2.5% of that are completely vegan) 33% of Americans eat “mostly vegetables.” 47% of Americans eat at least 1 “vegetarian meal” per week. Obesity causes over 325,000 deaths in the United States every year more than car accidents, drugs, alcohol, and guns combined. New York City Health Department became first city in nation to outlaw the sale of fountain drinks over 16 oz. in restaurants. Increase in Labor cost in US.
The very low temperatures in the Plains have been causing damage to livestock, making the live cattle prices go up. $89.50-$95.50 per hundred weights Opportunities:
Financially, obesity costs Americans 117 billion dollars every year in healthcare spending and lost wages. Families are relying on food preparation outside of the home as a source for at home and away from home consumption. Fast food expanding in large rural areas.
Food Service industry has grown 3.6% in the last year, made 604 Billion in 2011. Brand reinvention to improve visibility.
Commitment to reduce the levels of salt in the foods they serve, converting to large gains for the population’s health. WeightASTASASTAS
The newly revised mission statement is to be “Ahead of Schedule”. That means that we are striving to be one step ahead of our competitors. We will do our best to continuously assessing our customer needs in the delivery of products and services. Maintain a staff of highly qualified individuals that enjoy working with the public and who are knowledgeable in all facets of fast food industry standards and codes. We will constantly challenge ourselves to improve the quality of our work with the specific aid of new technologies, and committing ourselves to project completions “Ahead of Schedule”. There were a couple of recommendations for Wendy’s to take advantage of which is to improve management programs and expand the menu and introduce vegetarian options. By improving management programs that means increased sales means more profits. Even though labor costs have increased there are still strategies that can be used to improve our management programs. In order for any organization to be successful it starts from the top and works its way down. Some strategies is better training, project and team facilitation, consultation, and resources.
Expanding the food menu can attract new potential customers which could turn into an increase in profits. By adding vegetarian items to your menu that will add a dimension to the menu no other fast food restaurant offers. It will cater to a market that no one else is marketing towards. Since the obesity rate in the United States is at an all-time high adding healthier menu items can improve Wendy’s customers’ base and increase sales. A vegetarian item that can be added to the menu is the Veggie burger. A veggie burger is a patty that resembles a hamburger but is made from vegetables, textured vegetable protein (like soybeans), nuts, and mushrooms instead of meat. It tastes different than your usual hamburger but the nutritional value doesn’t compare. We think this would be a good addition to the menu to go along with other healthy menu items such as the various salads, chilli, and baked potatoes.