Despite the January death of Wendy's founder and pitchman Dave Thomas, industry watchers are betting on Wendy's as the company to beat in the escalating quick-service restaurant wars. Citing the fast-feeder's planned 30% boost in media outlays to an estimated $308 million this year and its strong focus on in-store operations, Mark Kalinowski, restaurant analyst for Salomon Smith Barney, wrote in a recent report: "This one-two punch looks like a formidable foe for rival chains to face this year."
He forecast Wendy's same-store sales will grow 3% in 2002, eclipsing his 2% projections for Tricon Global Restaurants' Taco Bell and KFC, and his 1% to 2% projection for McDonald's Corp. Mr. Kalinowski called Wendy's track record of 12 consecutive years of positive sales growth "the most consistent of any of the large fast feeders."
In addition to the substantial spending rise, Wendy's plans other changes for this year, including a larger franchisee contribution to the ad fund, the launch of a major salad line, an increase in late-night advertising and a stronger reliance on cross-media advertising. "Without a doubt, this is the strongest plan we have ever had in this company," said Don Calhoon, Wendy's exec VP-marketing.
For 2002, the chain is also adding a promotional period to its national marketing calendar, bringing the total to eight-and allocating 13% more of its media spending to promotional periods. The additional funds will come from Wendy's franchisees that are hiking their contribution for national ad spending to 3% of sales from 2.5%. In an apparent vote of confidence, franchisees are decreasing ad dollars for local spending to 1% of sales from 1.5% of sales, funneling the difference into national advertising. That's in sharp contrast to the total franchisee contribution at McDonald's Corp., which Mr. Kalinowski said is declining from 1.85% to 1.5% this year.
In all, Mr. Calhoon projects Wendy's media plan will generate 60 million more targeted media impressions for the chain than last year. Media messages will be targeted at heavy fast-food users, kids and families and Hispanic consumers (see related story, P. 28).
Past Wendy's efforts supported a trio of core menu items: burgers, chicken sandwiches and its value menu. "In years past we stopped here," said Mr. Calhoon. Now, the chain is adding another core product focus: an upgraded salad line called Garden Sensations, aimed at bolstering its salad sales, which have eroded due to competing greens at quick casual and grocery chains. "We hadn't done anything new with [our salad] product line for almost 10 years," Mr. Calhoon said.
Designed to provide custom taste comparable to salads offered by casual-dining chains, the line comes packaged in a bowl with a fast-food price. In test for 18 months, the $3.99 Chicken BLT, Taco Supremo, Mandarin Chicken and $2.99 Spring Mix salads are now in full distribution. Wendy's is running an estimated $40 million ad campaign from Cordiant Communications Group's Bates Worldwide, New York, for the line with the theme using the tagline "We've raised the bar on salads."
Media support for Garden Sensations illustrates how Wendy's is leveraging cross-platform buying with AOL Time Warner. Five TV spots and three print ads introduce the salad line across 18 of AOL Time Warner's women's, general interest and entertainment magazines. Inserted with ads in five publications totaling 10 million circulation, including People, will be personalized blow-in cards with a sweepstakes offer to win a shopping spree and instructions directing the subscriber to AOL/Time Warner Web links.
Merrill Lynch analyst Peter Oakes estimates the Garden Sensations line will contribute 5% to total Wendy's sales, assuming the chain has accurately predicted demand. "Salads as a category are finicky for any format," he wrote in a February report.
Mr. Calhoon said Wendy's is also upping its commitment to late night TV advertising, leveraging a 124% media boost toward the daypart for advertising its hamburger line. Mr. Calhoon said late night has been a "major driver" for the chain since it began experimenting with the daypart two years ago during the summer months. According to company research, 45% of 6,000 burger chain consumers polled said Wendy's was the best place to "satisfy their late-night hunger" in the fourth quarter of 2001 vs. 26% citing McDonald's and 21% naming Burger King.
Wendy's also said it was boosting its kid media spending 8% this year.
The chain's management doesn't believe Mr. Thomas' absence will hurt the chain's momentum. In 1999, Wendy's began what it called a "seamless evolution" to a campaign without Mr. Thomas.
After exhaustive research, the team said it found the traits of quality, innovation and great-tasting food associated with Mr. Thomas transferred readily to Wendy's. They tested with consumers a wide range of ad concepts including some that will never see the light of day, according to Mr. Calhoon. But Mr. Calhoon will not discuss the new creative, which is expected to break in April.
"Wendy's is clearly differentiated in the minds of consumers with and without Dave," he said. "We've begun to turn our attention to developing advertising that has the continuity, brand recognition and emotional ties that Dave has brought us over these years. The perfect replacement for Dave is the Wendy's brand."