Analysts Grill Wendy's Over Changing Ad Tack

Despite Reporting Strong Quarterly Earnings, Talk Centers on Brand Identity

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CHICAGO ( -- During an earnings conference call today with Wendy's International, analysts didn't stick to asking about profits -- they also prodded the fast-food chain about its changing ad direction.
Wendy's, which launched Saatchi & Saatchi's so-called red-wig campaign last year to critical raves but few tangible results, debuted a new $435 million ad effort by MDC Partners' Kirshenbaum Bond & Partners at its franchisee convention in Orlando, Fla., last week. And today investors asked Wendy's officers why they believe the new campaign will drive sales when its predecessor failed to do so.

"The red-wig campaign did a lot of good things for Wendy's; it broke through the clutter," said CEO Kerrii Anderson. However, "we can't be something we aren't." She also said the campaign from Saatchi & Saatchi, part of Publicis Groupe, was polarizing.

About taste, not hipness
Wendy's has decided that it shouldn't base its strategy on cool, and said food-buying decisions are based more on taste than the hip factor. "People don't go to Wendy's because it's a cool place," said Paul Kershisnik, senior VP-marketing strategy and innovation. "They'll never go to Wendy's because it's a cool place."

Wendy's executives told analysts that the new work by Kirshenbaum Bond is a more authentic representation of the Wendy's brand. That will be particularly important for the company's 18- to 34-year-old target customer.

"What we've found thus far is the younger you are, the more likely it is that you don't have a connection with the brand," said Bob Holtcamp, VP-brand management. "The new advertising we've developed really sets the stage and clearly articulates what the brand is about. It's a reinforcement for anybody that's a bit older, but it's grounding for people a bit younger that aren't as in touch with the brand."

Before finalizing the campaign, Mr. Holtcamp said, Wendy's conducted tests in five markets pitting the Kirshenbaum Bond ads against the red-wig ads from Saatchi. "What consumers fed back was this new approach was more true to the fundamental principles of the brand," he said.

In-store changes too
The Kirshenbaum Bond campaign, breaking today, bears the slogan: "It's waaaay better than fast food. It's Wendy's." The first spot launches the premium fish-fillet sandwich. Others will highlight the chain's claim that its burgers are fresh, never frozen. Wendy's will also update menu boards and point-of-purchase displays to reflect the look and feel of the campaign.

Ms. Anderson said the new slogan "is a call to action and a rallying cry" for franchisees to improve every segment of their operations. "We need to be better in all areas," she said.

During the call, Wendy's reported a strong increase in fourth-quarter profits, to $14 million from $3 million a year ago, when the chain sold Baja Fresh at a steep loss. Fourth-quarter same-store sales were essentially flat, up 0.2% at franchisee-owned stores, but down 0.8% at company-owned stores. Management said that company-owned and franchised stores have sometimes been lopsided, with no clear reason as to why one side gets ahead from time to time.

The chain also put 2008 guidance on hold pending the decision of a special committee looking at strategic alternatives for the company. Wendy's has been approached by a number of suitors, including food mogul Nelson Peltz.

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