Lately, sales have only been cooking at Wendy's
Management certainly noticed the success of McDonald's
The difference between the two progeny is that Chipotle had rising sales leading up to its emancipation, while Baja Fresh is in decline. As Rick Munarriz noted last month, Chipotle had rising comps, an increasing store count, and 33% sales growth over the first nine months of 2005. Contrast that with Baja Fresh's soggy performance, including slowly dwindling store counts, same-store sales off 3.7% for the year, and sharply declining revenues, down more than 10% for 2005. Investors were appropriately eager for the McDonald's scion, but one has to wonder how they'll receive Wendy's offspring.
McDonald's also retained a significant ownership stake in its chain. Chipotle's IPO offered 6.1 million shares, and though McDonald's sold 3 million of its own Chipotle shares, it still remains a majority shareholder. As I noted the other day, when management retains a large claim in the new company, it may signal the parent company's interest in its spinoff's success.
Wendy's seems to have other ideas, however. In a push to meet investor governance concerns, the hamburger chain appointed three new directors to its board. Back in December, some of those investors had filed a statement with the SEC urging Wendy's to fully divest itself of Tim Horton's, Baja Fresh, and another small chain the restaurant had acquired, Cafe Express. Management had initially intended to retain a stake of at least 80% in Horton's, but now it seems that it will spin off the entire chain within nine to 18 months. And with Tim Horton's showing increasing sales, its IPO could be just as popular as Chipotle's.
Baja Fresh's customers seem willing to shell out the extra green, but will investors similarly pay a premium market price -- especially for an apparently declining brand?
We've spiced up further Foolishness:
- McDonald's Burrito IPO
- Soggy Performance for Wendy's
- Finding the Next Chipotle
- Holy Burrito, Chipotle!