Wendy’s Beats McDonald’s for Consumer Sentiment

Wendy’s is now seen in a more positive light than McDonald’s, which could mean market share gains and sustainable growth for Wendy’s going forward.

Feb 4, 2014 at 10:15AM

Wendy's (NASDAQ:WEN) has done a good job changing its image by renovating its restaurants and offering healthier menu items over the past few several years. By mid-2013, it ranked No. 2 on YouGov BrandIndex's consumer-sentiment platform and had been there for two consecutive years. Only privately owned Subway ranked higher in the quick-service space, having held the top rating for three consecutive years. Subway was able to continue its strong momentum partially in thanks to its "Fresh Fit Meals" promotion and its summertime "Avocado Love commercial."

What other brands ranked highly at the middle of 2013? Did those brands maintain that momentum throughout the remainder of the year? 

A look back
In the middle of 2013, Pizza Hut -- a Yum! Brands (NYSE:YUM) subsidiary -- ranked No. 3 on YouGov's Brand Index list for quick-service restaurants. This was up from No. 4 from the first half of 2012.

Yum! Brands struck again with its Kentucky Fried Chicken brand ranking No. 4 for the first half of 2013. Unlike Pizza Hut, Kentucky Fried Chicken hadn't cracked the top five for the first half of 2012. The likely reason for the improvement: Original Recipe Boneless Chicken.

In mid-2013, McDonald's (NYSE:MCD) ranked No. 5, which might have had something to do with its Chicken McWrap offerings. At the moment, consumers can order three different types of McWraps, including Chicken and Bacon, Sweet Chili, and Veggie Signature. In regards to the latter, this is an attempt by McDonald's to target the health-conscious consumer and millennials more than in the past. McDonald's states that the Veggie Signature McWrap is a "delicious way to get your veggies."

Based on the company website, it describes its Veggie Signature McWrap as "made with [a] steamed whole wheat tortilla that's bursting with goodness of fresh, crisp veggies, shredded cheese, and tasty toppings." These new menu offerings could lead to increased foot traffic, but we still need to see how McDonald's performed in regards to consumer sentiment for all of 2013. 

Did Pizza Hut, Kentucky Fried Chicken, or McDonald's manage to stay in the top five for consumer sentiment throughout 2013?

Sustainable results?
Subway remained in the No. 1 position in regards to consumer sentiment for quick-service restaurants throughout 2013, sporting a Buzz Score of 29.4 (Buzz Scores range from negative 100 to 100 and are based on consumer feedback given what was had heard about the brand within the past two weeks.) Unfortunately, you can't invest in Subway (unless you want to franchise one).

Fortunately, it's easy to invest in Wendy's, which maintained its No. 2 position throughout 2013, sporting a Buzz Score of 19. Part of the reason for Wendy's continued success: Grilled Chicken Flatbread, which is only 370 calories and packed with 34 grams of protein.

Regardless of the reason for consumers seeing Wendy's in a more positive light than in the past, as well as compared to McDonald's, it's a good sign for the brand going forward. And it could lead to market share gains. 

Pizza Hut remained in the No. 3 position, with a Buzz Score of 16.4. However, Burger King took Kentucky Fried Chicken's No. 4 spot, with a Buzz Score of 12. As far as McDonald's is concerned, it fell out of the No. 5 spot, replaced by Chick-Fil-A, which delivered a 2013 Buzz Score of 11.9.

The Foolish takeaway
Though McDonald's should remain a long-term winner thanks to brand strength and cash flow generation, it's going through a transitional stage at the moment. Wendy's might be a much smaller company, but it's further along with its brand transformation. This is resonating well with consumers, and it allows for continued growth potential. Please do your own research prior to making any investment decisions.

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Dan Moskowitz has no position in any stocks mentioned. The Motley Fool recommends McDonald's. The Motley Fool owns shares of McDonald's. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

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Jun 12, 2015 at 5:01PM

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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