What the Heck Happened to Wendy’s?

Last week I took my kids to Wendy's (NASDAQ: WEN  ) after soccer practice. It was clean, modern, and busy. It was nothing like the Wendy's that I expected. Personally, I'm not sure that I like the change, but as an investor I can see that the change was much needed and is one more contributing factor to what should be a successful period for Wendy's.

Moving ahead twenty years in six months
My city always had a Wendy's. We had two, actually. Just six months ago, both locations closed as the franchisee of 32 years walked away from what was becoming a financially troubled business. Less than six months later, a new Wendy's restaurant opened at the same site as one of the original locations. The location and the name were the only things that remained the same between the original restaurant and the new one.

In stark contrast with the prior establishment, the new Wendy's was bright, clean, modern, busy, and more expensive. The brightness, cleanliness, and modern look all came at a higher expense. However, it seemed customers were willing to pay the higher prices. This may quickly pay off for not only the new franchisee, but for the entire Wendy's Company as well as it works on an extensive re-branding.

The 'Image Activation' program being implemented at Wendy's restaurants across the country is part of an on-going initiative that started with a new Wendy's girl as the company's icon. In any case, the re-branding has progressed beyond the company logo to become a Taco Bell-esque -- owned by Yum! Brands (NYSE: YUM  ) -- transformation into a more fast-casual setting with a modern flair.

Will it work?
The transformation is drawing attention, but the response has not been overwhelmingly positive as some consumers miss the Wendy's of old and the traditional, family feel that Dave Thomas established over the years.

During its own re-branding initiative, Taco Bell made a natural transition from outdated to modern. While the Image Activation goals of Wendy's include many of the same goals, the challenge for the company will be greater than that for Taco Bell because it needs to make the transition while retaining the positive image and feel that is associated with its brand.

Taco Bell, on the other hand, felt a need to break free of its image as the quintessential, low-cost fast-food restaurant when it released its Cantina Bell menu items and remodeled its stores. While it has since drawn back slightly from its all-in approach of challenging Chipotle and embraced its original market with the Doritos partnership, Taco Bell's re-branding at the very least provided the impetus for a much-needed store remodeling.

Many of the existing Wendy's restaurants are in dire need of remodeling or, as was the case in my hometown, a complete demolition and rebuilding, but the new buildings and the new branding must still hold onto the Wendy's values that were associated with the now-replaced logo and building design. Personally, I didn't get the same feeling when I walked through the door of the building that sported the new company look, but the long line waiting to order suggested it might not matter.

What really happened
Nostalgia for Dave Thomas and the Wendy's of old aside, the changes being made by the Wendy's Company are necessary and great for investors. It's not so much an issue of what the heck happened to Wendy's, it's about what's currently happening. What's happening is that Wendy's is making a much overdue transition from 'old fashioned hamburgers' to new restaurants that resonate with today's diners. The modern look may come with a slightly higher price tag for franchisees and consumers alike, but so long as Wendy's can gradually draw more customers through its doors, the changes should help the company grow.

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Read/Post Comments (13) | Recommend This Article (12)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On May 29, 2014, at 12:47 PM, Techpapa wrote:

    All of this might be great for investors, but I don't see it as great for those of us that liked the food at the OLD Wendy's! To our family, Wendy's (the Dave Thomas version, not the ARBY's version) had the best burgers, fries, and we all loved the Frosty, too. After the purchase by ARBY's, the taste of everything changed, and NOT for the better. Yes, this is an investment column, not foodie column, but I MISS THE OLD WENDY'S!

  • Report this Comment On May 29, 2014, at 12:54 PM, Taz wrote:

    Our local Wendy's have always been clean and modern so I don't understand what the change is all about. I rarely go there though because (1) they don't offer onion rings and (2) the vanilla Frosty machine is almost always broken.

    Concentrate on the little things Wendy!

  • Report this Comment On May 29, 2014, at 2:10 PM, racsan2448 wrote:

    When they started those tv commercials with that smartass redhead is where they went wrong. their not as bad as they used to be, however she still comes off as a smartass.

  • Report this Comment On May 29, 2014, at 4:18 PM, wjl wrote:

    I was a huge fan of the Wendy's Classic Chicken

    from 1994 through 2004. Then they changed the

    bun composition, and also changed the chicken

    crust formula. Their fries used to be better than McD- which is not easy - but lately they are soggy, not even comparable to the McD formula. There burgers were always too salty - and more importantly - their pretzel sandwich bun was agreat idea - but poorly executed - too doughy.

    They blew it. I am no longer a Wendy's fan.

    Fast Food Expert.

  • Report this Comment On May 29, 2014, at 4:32 PM, cmvbbay wrote:

    They did away with the Cobb Salad recently. They lost a customer right there.

  • Report this Comment On May 29, 2014, at 6:19 PM, sosideirish wrote:

    Wendy's had always been my favorite hamburger. I also loved the fries, chili and, of course, the Frosty. However, when they changed the hamburgers, I stopped going. These new patties have a strange seasoning to them that I don't like, at all. Change is not necessarily good!

  • Report this Comment On May 29, 2014, at 7:12 PM, spintreebob wrote:

    I'm often at a Wendy's when the wifi works, which is iffy. I always order "double cheeseburger plain". Sometimes I get the big, expensive burger for the small cheap burger prices. Sometimes I get the small one for the big price. It evens out over time. All of Atlanta employees have no clue which burger is which. The cashier and cook are not on the same page. Cooks often think they're doing me a favor by putting in the stuff I'm allergic to for "free". Is training the problem? Or the pool of people from which they hire? Chik-fil-a has a far superior class of employees...but I don't like their food.

  • Report this Comment On May 30, 2014, at 12:16 AM, EdR wrote:

    That little redhead is gorgeous.. And exceedingly likable.. I think she epitomizes the new Wendy's..

  • Report this Comment On May 30, 2014, at 7:24 AM, m3anmach1n3 wrote:

    It's not about the restaurants, it's about the food. Compared to 15 years ago, it stinks. The burgers were juicier and the fries were tastier. If they don't get a handle on that, nothing else will matter.

  • Report this Comment On May 30, 2014, at 8:48 AM, Soakee wrote:

    Our local Wendy's was recently (and thoroughly_ remodeled and now the parking lot is constantly full with 10-12 cars at the drive-through too, but the funny thing is that it's STILL the same old menu. Personally, I'd sooner eat dirt off the floor than anything from Wendy's after discovering years ago that their burgers are soaked in hot water after cooking (hence their slogan "hot and juicy").

  • Report this Comment On May 30, 2014, at 12:51 PM, GregoTX wrote:

    The last time I walked into a Wendy's, I was greeted by a friendly woman with English I could barely understand. I had to ask her repeatedly what she was saying, and I just knew my order would be wrong. Someone else came over to help, and she wasn't much better with her English. My order came out wrong. Rather than fight that battle I just left and will not be back. Welcome to what post-amnesty America will look like.

  • Report this Comment On May 31, 2014, at 2:48 AM, Afterberth wrote:

    Their burgers are way too salty now. I can't eat them anymore because they give me the runs.

  • Report this Comment On June 01, 2014, at 1:53 AM, awallejr wrote:

    Anyone remember the all you can eat salad bar? I still believe that from a financial point of view Wendy's offers the best price in town. For around $5 you can get 2 sandwiches, a drink, and baked potato.

    And please replace the redhead on the commercials. She really does hurt and not help. I bought this at $4 and got out at $8ish. I don't feel compelled to get back in.

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