BRAND IN DEMAND: Wendy's sidesteps pitfalls by mixing value with variety

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Defying criticism for "boring" advertising, Wendy's International has become an icon for solid branding and marketing that translates not only into happy customers but also into consistent performance on Wall Street.

"Over the last 10 years in quick-service restaurants, they've been at the absolute top without a hiccup to sales," said John Ivankoe, analyst for J.P. Morgan & Co.

While both are $2 billion enterprises, Wendy's is the polar opposite of Hardee's Food Systems, boasting a menu that balances value and variety, along with a stable marketing program. This year marks the 11th for Chairman-CEO Dave Thomas as star in TV spots developed by Bates USA, New York.

As its burger joint counterparts seem to be constantly dodging economic bullets, Wendy's appears unflappable. In the past year, the No. 3 burger chain has overcome the death of CEO Gordon Teter, rising real estate, labor and food costs, and weak category sales. The company last week reported record sales and its sixth consecutive quarter of mid-double digit earnings growth. The chain's outlook is so sunny that management is raising its 2000 earnings goal target to a growth range of 14% to 17%, from 12% to 15%.

All this comes during a time when most fast-feeders are switching agencies, strategies and branding initiatives and competitors trip over each other with limited-time menu offers as low as 29›. Wendy's by contrast, maintains a permanent 99› value menu and stays away from limited-time price promotions. That value menu and ongoing trade-up sandwich features have helped fuel burger sales and interest from competitors.


The combination of the two is what some industry analysts in their jargon have dubbed a "bait and switch" strategy, for a tactic that has proved irresistible to Tricon Global Restaurants' Taco Bell Corp. Last month, the flagging taco chain tapped Emil Brolick, Wendy's senior VP-planning, research and product marketing for 12 years to be its president and chief concept officer.

With Mr. Brolick's departure, Don Calhoon, senior VP-corporate marketing, will absorb the product development and planning duties. Beyond that, Mr. Calhoon, a 22-year veteran of Wendy's, doesn't expect much to change -- after all, Wendy's has emphasized food, operations and service over image for more than a decade.

"Our success is built on an idea to keep ideas simple and easily communicated to our franchisees," said Mr. Calhoon.


Plain and simple is how Mr. Calhoon describes Wendy's marketing. "We don't concern ourselves with awards or recognition," he said. "What's important at the end of the day is how is the business doing. Whatever we say, it has to be consistent, relevant, truthful and deliverable at the store level."

That philosophy starts with Mr. Thomas himself. "At a lot of places, their philosophy is to let marketing people run the business," Mr. Thomas said. At Wendy's "marketing people can aid and assist, but it's operations, operations. I think that's the difference. You'd have to say [marketing] is a piece of the puzzle, but the basic part is operations."

Wendy's focus is critical, considering its $217 million media budget is a fraction of those for No. 1 McDonald's Corp. and No. 2 Burger King Corp. "Every dollar has to work harder and be more focused to do the job where other people may have five," said Mr. Calhoon.

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