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$10 Million Purchase Marks Departure From Burgers

By Published on .

CHICAGO (AdAge.com) -- Despite being the best-performing national burger chain, Wendy's International is betting on new concepts to fuel growth.

A month after the death of founder Dave Thomas, Dublin, Ohio-based Wendy's announced the first deal in its acquisition strategy, sinking $10 million into upscale bistro chain Cafe Express, which is based in the Southwest.

"Cafe Express ... features high-quality food with flavors that are right on trend," said Wendy's Chairman-CEO Jack Schuessler in a statement. "They have the same values and principals that we do.

"Our goal is to provide access to capital for Cafe Express so that they can grow the concept," Mr. Schuessler said.

War chest
The purchase

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of the 13-unit Cafe Express, which was founded in 1984 by Lonnie Schiller and Robert Del Grande, barely dents Wendy's $200 million to $400 million war chest the company set aside in September for acquisitions. While Wendy's still could make a large purchase, the chain will look to casual dining and fast-casual concepts.

The company today forecasted same-store sales growth of 3% to 3.75% for its Wendy's chain and 5% to 6% growth for its Tim Horton's doughnut chain.

Growing segments
Meanwhile, casual-dining chains such as T.G.I. Friday's have reported mid- to high-single-digit growth and fast-casual restaurants, like Panera Bread Co, Chipotle and Cosi, have posted double-digit sales growth, according to restaurant consulting firm Technomic.

That the third-largest burger chain is preparing shareholders to expect growth to come outside its flagship brand seems to signal that saturation in the burger category is closer than what category leader McDonald's Corp. has been willing to admit.

McDonald's in 2000 began diversifying its brand portfolio with purchases in Boston Market, Donato's Pizza and Chipotle.

"I think [Wendy's] may be underestimating how much opportunity is left in the core concept," said Bob Goldin, executive vice president of Technomic. "They may be playing possum a little bit.

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