For Wendy's, Fancy-Fries Launch Declared a Success

"Want some fries with that?" At Wendy's the answer increasingly seems to be yes, thanks to the chain replacing its thin and soggy french fries with a crisper, skin-on version flavored with sea salt. The fast feeder will keep the pressure on with a campaign launching this week from Kaplan Thaler Group. Since the new fry hit the menu last November, orders with fries rose almost 10% per 100 transactions, "almost equal to McDonald's," Roland Smith, president-CEO of Wendy's /Arby's Group, said during the company's fourth-quarter earnings call earlier this month. "Our new-fry launch was a huge success," he concluded. "It's not often that companies like ours take a core product like fries and actually make a significant change and have that change be as positive as it was." For that reason, Wendy's took no chances. According to Kantar, in December -- the first full month the fries were available -- it spent nearly 79%, or $17.7 million, of its measured-media spend pushing fries, compared to spending of $26.9 million for all products in December 2009. During that launch month alone, fry units were up 17%, Mr. Smith said. The figures look more impressive considering the overall amount of fry units sold industry-wide has been in a slow decline over the past few years. The number of fries sold at quick-service restaurants in the U.S. fell 1% in 2010; 2% in 2009; 2% in 2008 and 2% in 2007, according to NPD Group. Moreover, consumers have generally perceived the new fries in a positive light. According to a Technomic Consumer Brand Metrics study conducted last month, 68% of consumers surveyed were aware of the new product, 61% had tried it and out of those 61%, 77% would recommend it. That was key for Wendy's , which often lost out on the "veto vote," according to industry experts, meaning that when consumers were trying to decide where to eat, they'd pass up Wendy's for another chain with tastier fries. And more than one in three orders at hamburger chains include fries. According to NPD Group, for the year ending Dec 2010, 41.3% of all orders at restaurants in the hamburger category included french fries. Logically, then, when first-quarter sales and traffic data become available, Wendy's will show an uptick, right? Not necessarily. "Fries are important, but they're going to be in conjunction with other things," said Eric Giandelone, director-food service research at Mintel. "They have to be executed well. But it's the total experience that's going to drive the success for Wendy's ." Many of Wendy's fries -- like most fast-food restaurants' -- are sold as part of a combo menu. Morningstar analyst Joscelyn MacKay said it's important to keep in mind that the fries are just another one of the many new products, such as salads and the yet-to-come national rollout of breakfast that Wendy's has introduced. "I don't think [fries are] going to be the magic bullet that propels their sales," she said, adding that "quick-service restaurants really need to roll out consistently appealing new products just to compete with their peers." That said, Wendy's is keeping the pressure on and is again featuring the fries in a TV campaign after focusing on other products in the early part of the year. The campaign launching this week will be a continuation of the message from the launch of the new fries -- that they're different from competitors' and prepared as simply as possible. Wendy's agency, Publicis Groupe's Kaplan Thaler, created the ads for the fries, as well as the overall campaign, "You know when it's real." And consumers likely find that message attractive. The phrases "sea salt" and "natural," Mintel's Mr. Giandelone said, resonate with consumers, as they connote that the processing may not be as intrusive as traditional fast-food processing methods. "It feels fresher, even if it is a placebo effect." Wendy's fourth-quarter system-wide same-store sales (which includes two months of the fry launch) were up 0.2% from the same period the prior year. Technomic estimates Wendy's 2010 sales at $8.3 billion, down 0.6% from 2009. That makes it the No. 3 burger chain, with about 13% market share. While that's well behind No. 1 McDonald's 48.2% share, the fries are one more weapon in its arsenal to inch it closer to overtaking Burger King, No. 2 in the category with 13.9%. Burger King, with $8.7 billion in 2010 U.S. sales, down 2.5% from the prior year, is facing its own set of issues. Aside from Wendy's closing in on its market share, the company since the end of February has merged its global brand marketing and operations functions, and parted with both its chief marketing officer, Natalia Franco, and its agency of more than seven years, MDC Partners' CP&B. Denny Lynch, senior VP-communications at Wendy's , indicated the chain will not turn up the marketing heat to take advantage of its rival's woes. He said Wendy's will continue to "stay with its existing plans."

For Wendy's, Fancy-Fries Launch Declared a Success

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