WENDY'S EYES 60 NEW PRODUCTS, BOOSTS AD SPENDING

Initiative Follows First Yearly Same-Store Sales Decline in 18 Years

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CHICAGO (AdAge.com) -- Following its first yearly same-store sales loss in 18 years, Wendy’s International is developing up to 60 new products -- including a test of breakfast items -- for its menu. It will also pump up advertising by some $25 million in hopes of improving sales and margins.
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“None of us really liked that,” said John Schuessler, chairman-CEO, of the loss, with much understatement. To turn it around, he said the company will undertake a new “three-year, three-tier, combo plan.”

Three-tiered strategy
Central to the program is a new three-tiered strategy to increase same-store sales: implementing a breakfast menu; adding new core and specialty products; and introducing new menu platforms. It also calls for more relevant advertising.

Ian Rowden, Wendy’s chief marketing officer for the past year, said the company will have 30 to 60 products at the various stages this year, with seven to 10 new products or extensions hitting the market. Wendy’s is also as adding $25 million to the advertising coffers to support the new products.

Wendy’s estimates that its “fair share” of the total breakfast business will be $160,000 per store per year, but Mr. Rowden said it would take three years to reach those levels, beginning in 2007, when the company plans its rollout. In building its breakfast menu, Wendy’s will partner with General Mills, Coca-Cola Co. and Procter & Gamble Co., among others, to develop “distinctive” menu items.

Some of those items that will make their debut this year are the long-awaited Frescata gourmet deli sandwiches; four new Garden Sensations salads; a 10-piece Chicken Nugget Combo; and two kids' meal deli sandwiches. Other tests include a Double Melt cheeseburger, a 99-cent chicken sandwich, new beverages, a vanilla Frosty and three-tier combo sizing options.

Boost sales, cut costs
The marketer set a target to boost Wendy’s same-store sales by 3% to 4% this year and cut $40 million to $60 million in costs, Mr. Schuessler told analysts and investors at the company’s annual analyst meeting in New York

With its competitive set rapidly morphing, Wendy’s plans to focus on boosting the number of profitable transactions rather than simply boosting prices and check averages at the expense of traffic, the way Burger King and Carl’s Jr. have done. “We'll focus on adding value, getting more people into our restaurants and getting them to spend more once they’re there,” Mr. Rowden said.

Mr. Rowden said that in December the company ended its trial to raise prices on its value menu, noting that 20% of all fast-food consumers, especially young men, are “actively looking” for a price deal. And in fact, the price increase resulted in a 40% decrease in the number of Junior Bacon Cheeseburgers sold. “In the past two years we have seen substantial transaction loss amongst this [young male] market,” he said. Moreover, he said, 55% of all transactions at Wendy’s include a 99-cent value menu item.

Personalization position
The chain’s attempts to reinvigorate its core platforms have begun to gain traction despite still-lagging sales. Late in 2005, Wendy’s established its “personalization” position in an attempt to “reclaim” its custom-made-burger heritage that Burger King has become known for. “In recent weeks, we have seen key attribute ratings for our brand begin to rebound for the first time in two years,” said Mr. Rowden.

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