Wendy's Erupts in Ad Revolt

Marketing, Plunging Sales among frustrations of dissident franchisees

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CHICAGO (AdAge.com) -- Fed up with more than a year of sales declines and what it sees as a lack of voice in marketing, a group of powerful Wendy's franchisees have formed an independent organization to get management's attention.
The revolt is a stunning development for a company that has previously been famous for its franchisee relations.
The revolt is a stunning development for a company that has previously been famous for its franchisee relations.

The move is a stunner at a chain long the gold standard for franchisee relations. But its relationship with owner-operators has soured along with sales, leading a full 13% of its system -- or 760 restaurants -- to strike out on their own. The dissidents include some of the company's largest operators, who have set up shop as the Old Fashioned Franchisee Association, which plans to meet later this month.

looking for an ear

"We deserve to be heard when decisions are made which directly impact the future of Wendy's," said Dave Norman, chief financial officer and general council for DavCo, Wendy's largest franchisee and spokesman for the new association. Citing an unprecedented decline in same-store sales throughout Wendy's system, he said "We need a strong unified voice. We need franchisees to have a seat at the table. We're not here to attack Wendy's. We're here to ask that Wendy's simply engage and listen."

Same-store sales at franchisee-owned stores fell for the past 15 months at Wendy's, with U.S. franchise sales down 3.1% for all of last year. Company-owned stores posted a decline of 2.9% for the year. By comparison, McDonald's U.S. same-store sales were up 4.1% for the year.

Since the death of founder Dave Thomas, the chain has struggled to find a clear marketing direction and has cycled through campaigns, including the much-maligned Mr. Wendy. Under Chief Marketing Officer Ian Rowden, who succeeded longtime Wendy's marketing chief Don Calhoon in December 2004, the chain has been unable to spark positive traffic and sales despite broadening its target markets to include young adults and women, and launching the "Do what tastes right" campaign from Interpublic Group of Cos.' McCann-Erickson Worldgroup, New York.

Advertising is only one concern of the new franchisee group, which is mainly focused on strategic vision, supply chain, distribution, legal, financial and operational issues, with an eye toward greater return on investment to franchisees from those efforts. But marketing is in its sights. "When was the last time that you heard that Wendy's hamburgers are fresh, never frozen?" asked Mr. Norman. "We are quality, and that's the attribute most consumers attribute to us. But the changes in the Wendy's system have gone away from that and have lost focus on keeping Wendy's the top quality [fast-food] brand."

The new association will include a marketing committee of franchisees who hopefully will be able to aid the main franchisees' marketing committee in passing suggestions on to Wendy's, said Mr. Norman.

Denny Lynch, spokesman for Wendy's, said franchisees elected their members to the operations and marketing councils that have been around since the mid-1970s. "We have a great relationship with those committees and they bring forth the issues, thoughts and concerns from their constituents," he said.

"These committees are working diligently at solving the issues facing the business." He noted that the chain's senior management team recently ended one of its regular 14-day "listening tours" where all franchisees were invited to attend and could speak directly with the management team.

"They've talked to lots of people," said Mr. Lynch. "It's not that they haven't had a chance to voice their opinion." He added that the issues raised by the franchisees were discussed in every city. Moreover, he said the company has an "open door" policy where franchisees have free access to management.

"It was a speaking tour, not a listening tour," countered Mr. Norman.
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