Wendy's/Arby's Group, Inc. (www.wendysarbys.com) is the number three hamburger chain by sales, which trail only those of McDonald's and Burger King. The Group is comprised of the Wendy's® and Arby's® brands, two companies distinguished by traditions of quality food and service. The company, with approximately $12 billion in system-wide sales in 2008, owns or franchises more than 10,000 restaurants.

Wendy's/Arby's Group, Inc., restaurants offer burgers and fries as well as alternative items such as baked potatoes, chili, and salads. Each Wendy's restaurant offers a standard menu featuring hamburgers and chicken breast sandwiches, prepared to order with the customer's choice of condiments, as well as chicken nuggets, chili, baked potatoes, french fries, salads, desserts, soft drinks, and children's meals. Arby's serves traditional fast food with items such as slow- roasted and freshly sliced roast beef sandwiches, Curly Fries, Jamocha shakes, Market Fresh sandwiches, and wraps and salads made with wholesome ingredients and served with the convenience of a drive-through.

Dave Thomas, the founder of Wendy's, began his fast- food career in 1956 when he and Phil Clauss opened a barbecue restaurant in Knoxville, Tennessee. He put his restaurant experience to use in 1969 by opening his first Wendy's restaurant, naming it after his daughter. Thomas limited the menu to cooked-to-order hamburgers, chili, and shakes, charging prices slightly higher than rivals Burger King and McDonald's. The restaurants were dec- orated with carpeting, wood paneling, and Tiffany-style lamps to reinforce the relatively upscale theme. In the early 1970s, the company began franchising to accelerate expansion. It also founded its Management Institute to train owners and managers in Wendy's operational tech- niques. The first non-U.S. Wendy's opened in Canada in 1975. Wendy's went public in 1976, and by the end of that year, it boasted a collection of 500 restaurants. Its first national commercial aired in 1977. Two years later, the chain added a salad bar to its menu.

Dave Thomas retired as chairman in 1982 and took the title of senior chairman. Wendy's launched an $8 million TV

ad campaign featuring Clara Peller asking, "Where's the beef?" in 1984, and its market share jumped to 12 percent. When McDonald's and Burger King responded with their own campaigns, neither the introduction of a breakfast menu (1985), new products such as the Big Classic burger (1986), nor the SuperBar buffet (1987) could help reverse the erosion of the company's market share (down to 9 percent by 1987). With his honest demeanor and humble delivery, Thomas found an audience as Wendy's TV spokesperson in 1989. The company even attributed the rebound in earnings at the time to his appearances.

Wendy's reacted to growing concern about nutrition by introducing a grilled chicken sandwich in 1990. It also appealed to budget-conscious consumers with its 99-cent Super Value Menu. Wendy's had 4,000 restaurants by 1992, the same year it added packaged salads to its menu. The next year, high school dropout Thomas earned his diploma; his class voted him Most Likely to Succeed.

The death of Dave Thomas early in 2002 was a crushing blow to the company and a loss for the fast-food industry. Wendy's continued to perform well over the next three years, even after losing its founder, Dave Thomas. In November 2004, Wendy's decided to end its unsuccessful ad campaign featuring an Everyman-type character, an "unofficial spokesman" called Mr. Wendy, because the campaign drew attention away from the food. This marks an ongoing dilemma for Wendy's: how to brand the com- pany in the post-Thomas era. The company initiated a series of ads featuring still images of Dave Thomas in late November 2005 to commemorate the chain's 35th anniversary, but the long-term question of its identity remains. During 2005, it started a campaign built around the call to action "Do What Tastes Right" that underscores Wendy's 35-year heritage of serving great tasting, high- quality food. It featured a variety of different style ads, matched to targeted audiences. Included were advertising that promoted specific menu items as well as executions that supported the Wendy's brand as a whole.

In mid-2006, Wendy's International, Inc., created a new area of marketing to lead innovation efforts for the Wendy's

brand. The expanded role of Wendy's marketing department included the establishment of an Innovation and Strategy group comprised of Research and Development, Strategic Insights, & Innovation, and Operations Innovation.

Wendy rolled out its strategic growth plan in October 2007, and identified 10 imperatives for 2008. The impera- tives are focused on "Doing What's Right for Customers." The 10 imperatives build on Wendy's "Recipe for Success," which is focused on revitalizing the Wendy's brand, stream- lining and improving operations, reclaiming innovation leadership, strengthening franchisee commitment, capturing new opportunities (e.g., international growth), and embracing a performance driven culture.

In August 2008, Wendy's reached out to cash-strapped consumers with a trio of high-quality, signature sand- wiches priced at 99 cents. It introduced a 99-cent Double Stack cheeseburger and plans to aggressively promote this menu option, along with the company's popular 99-cent Junior Bacon Cheeseburger and 99-cent Crispy Chicken Sandwich. On September 29, 2008, Triarc Companies, Inc., the franchisor of the Arby's restaurant system, com- pleted its previously announced merger with Wendy's International, Inc. The combined company was renamed Wendy's/Arby's Group, Inc.

Wendy's is leading the way with some innovations such as fruit bowls and combo-meal flexibility. Wendy's is currently testing some new products, including a deli-style sandwich line using fresh-baked bread called frescata, and yogurt, granola, and mix-ins for its Frosty. Wendy's uses no preservatives in its bowls of pineapple, honeydew, cantaloupe, and grapes, which come with a low-fat, strawberry-flavored yogurt for dipping. Wendy's is also pinning hopes on a new double-sided grill to boost burger quality and speed of service, and said it may be ready to test breakfast in the next year or so. But Wendy's has a few hurdles to overcome. Rivals have caught up to the menu innovations of Wendy's. McDonald's has crested a youth wave with "I'm lovin' it" and music promotions. And, while Wendy's in the past came within a half share point of over- taking number two Burger King, Burger King now looks to have widened that gap, thanks to edgy marketing that's given it a cult following among the fast-food faithful. Wendy's advertising emphasized more clearly their points of differentiation from their competition, including higher quality, great taste, and fresh—never frozen—ground beef.

In order to survive the merciless fast-food industry, Wendy's conducted a survey. Wendy's wanted to study cus- tomer demographics and awareness of different competing fast-food chains; the satisfaction responses of consumers in terms of family orientation, comfort, price, quick service, healthy foods, cleanliness, and so on; and the patronage preferences of costumers in terms of eat-in or drive-through. The questionnaire used follows and the data obtained can be downloaded from the Web site for this book. Based on the data collected and analysis of this study, Wendy's intends to improve its service and brand orientation.

 

Question

 

Background of Wendy's for the above research proposal Case.