Wendy’s Continues Its Amazing Journey

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In today's consumer driven-economy, people have more dining options than ever, particularly in the fast food arena. in addition to finding at least something more than palatable food served fast, most consumers also want service with a smile. This is where Wendy's (NASDAQ: WEN  ) steps in and changes the game. 

A fine example
If you have been to Wendy's recently, then you might have noticed new uniforms, modernized décor, popular limited-time offerings on the menu, and smiling faces at the register. Wendy's has turned itself around, and Meritage Hospitality Group is a good example of what's taking place at this popular fast food chain.

Meritage Hospitality Group owns 113 Wendy's restaurants, 48 of which are in Michigan. There are approximately 6,500 Wendy's restaurants in the United States, so this is a small sampling ... but this isn't about numbers. It's about what it takes to transform a brand. Meritage Hospitality Group exemplifies this transformation.

Investing in people
If you own a company that's suffering, the solution might not be to invest in technology, but in people. Meritage Hospitality Group feels that if you spend time on people (training), then they will deliver a quality return on investment. In August 2013, Meritage Hospitality Group had already been reporting improved sales, fewer customer complaints, and more customer compliments. But why? 

In order to achieve this success, Meritage Hospitality Group held a job fair at every Wendy's restaurant throughout Michigan. Approximately 1,000 people showed up, but only the top 200 were hired (this is an estimate, not an exact figure). During the job interviews, Meritage Hospitality Group sought those who smiled, initiated conversations, and were engaging. The reason: the franchise owner wanted to hire people who were happy and capable of connecting with customers. 

This process was then taken to another level. Meritage Hospitality Group created a Corporate Trainer position. This individual then traveled to each Wendy's location throughout Michigan and spent two days there, training employees on appearance, how to treat regular customers (such as having their orders ready before they approach the register), and how to improve sales overall. The latter information wasn't reported, but it's safe to assume that it involves menu upsells. Mertiage Hospitality Group refers to this as its "Amazing Service Journey."

Creating an advantage
Wendy's generated a lot of excitement with its Pretzel Burger, a limited-time offering that has since ended. If you're wondering why it ended, it's partially because Wendy's has a schedule for limited-time offerings that it would like to follow (and also because it was a low-margin item.) The Pretzel Burger was actually extended due to its popularity. If you enjoyed it, then don't worry; Wendy's can always bring it back.

The reason the Pretzel Burger is being mentioned is because the excitement that it generated on social media platforms led to the name Wendy's resonating with younger consumers. This then led to more restaurant visits as well as repeat visits. Though not the biggest problem for McDonald's (NYSE: MCD  ) at the moment, this didn't help. Wendy's and Burger King are always fighting for market share. Burger King had a hit with its Satisfries, but Wendy's struck again. 

According to Wendy's, preliminary fourth-quarter results indicate that North American franchisee locations saw comps improve 2.8% versus a 0.6% decline in the year-ago quarter. North American company-owned comps improved 3.1% versus a 0.2% decline in the year-ago quarter. This is impressive compared to McDonald's, which saw fiscal 2013 global comps growth of just 0.2% due to higher average check on negative customer guest counts. Once again according to Wendy's, its improvements stemmed from the Pretzel Pub Chicken sandwich and Bacon Portabella Melt offerings.

The bottom line
Wendy's is seen as still being in the middle of a brand transformation, but the brand has already been transformed. With successful limited-time menu offerings, determined franchisees, and a more pleasant dining atmosphere than in the past, Wendy's is still on the march. Whether this translates to continued stock appreciation is unknown, but the underlying business has improved. Please do your own research prior to making any investment decisions. 

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Dan Moskowitz

Dan Moskowitz spends the majority of his time researching stocks. He believes that fundamentals, and logic pertaining to industry trends, win out over the long haul.

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Related Tickers

9/4/2015 4:00 PM
MCD $94.85 Down -1.16 -1.21%
McDonald's CAPS Rating: ***
WEN $9.08 Up +0.07 +0.78%
The Wendy's Compan… CAPS Rating: ***