Recently in Wendy's Category

Bill Gates said that he was done with talking about cow farts.

But, the Beyond Meat movement shows that some people remain ignornant of the value herbivores bring to the table, as it were, for both the creation of topsoil & great food.

Kris Gunnars wants to you to be a proud meat eater.

McDonald's (MCD) weak same store sales results for October announced Friday threatened to take down the entire restaurant space stock platform.

One of the problems is MCD reports by calendar month. But not every month has the same number of weekdays and weekends each year, and MCD missed a Saturday and a Sunday this year.

This could be fixed. Fiscal year formats of 13 periods of 28 days have been standard for 30 years plus in this space and could so be adopted. Every back office system in the world has such flexibility.

I suspect the problem is getting franchisee reporting lined up. It's a change and will cost something. But we expect such systems from the QSR industry pioneer. And less stress on the publicly traded company is good for all.

To be sure, McDonald's was weak (-1.8% worldwide). Weaker than most expected. Wendy's (WEN) same day reported +2.7% system same store sales and Burger King (BKW) and its franchisee Carrols (TAST) reported a strong plus 6.2%, and an 'OK trend' thus far in October. 

What was of greater concern were the MCD sales components: With some analysts projecting an embedded 3% price increase in the U.S., either customer traffic was almost 5% lower or product mix shifted lower.

McDonald's sales momentum deterioration in the U.S. and Europe was the most pronounced. APMEA (Asia Pacific/Middle East/Africa) was -2.4% vs. the rest of world, had poor Japanese trends and bouncing Australian results, and has been weak or negative for some time.

McDonald's does not disclose results by nation, but we can tell by the process of elimination that the MCD powerhouse markets of France and Germany had to be down big time as MCD reported the U.K. was up.

Finally, while the same store sales metric is commonly understood in the business press, comparing to one prior year is not really the best measurement. It misses cumulative history.

McDonald's was down versus 2011, but still up versus 2010, 2009, 2008, and all years back to 2003. In fact, versus 2002, U.S. MCD same store sales is up cumulatively 55.4% coming into FY-12. Wendy's and Burger King do not have the same advantage.

Additionally, reporting same store sales on a five year compound average growth basis could be more meaningful.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

According to the recent SEC Filing on Wendy's, the Filing Party being Nelson Pelz's investment vehicle, Trian Partners.

"The Filing Persons have considered various alternatives with respect to their investment in the Company, including the possibility of proposing an acquisition transaction involving the Company and have had discussions with the third-party that has expressed interest on a preliminary basis in a potential acquisition involving the Company previously disclosed in this Statement.  

The Filing Persons also had recent discussions with other third-parties that had expressed an interest in a potential acquisition transaction involving the Company.  The Company recently announced that it is exploring strategic alternatives for its Arby’s Restaurant Group, Inc. subsidiary, including a sale of the Arby’s brand.

The Filing Persons agree with the Company that in order to maximize shareholder value the Company should focus on the Wendy’s brand, including the introduction of new products, expanding dayparts, such as breakfast, and expanding the Wendy’s brand internationally and in underpenetrated North American markets.  

The Filing Persons also believe that the Company is well-positioned to take advantage of these growth opportunities based on the Company’s current capital structure, including its strong balance sheet and cash flow, and the current competitive landscape.  Accordingly, the Filing Persons have determined not to propose either alone or with any third party any of the matters referred to in Item 4 of Schedule 13D at this time. There can be no assurance that any of the third parties referred to above or any other third party will or will not make any acquisition proposals. "

This is interesting because of what it doesn't say: why are the franchisees ready, willing and able to expand into breakfasts and create more locations in North America?  How many multi-units are stepping up to the plate and putting their money where Pelz's mouth is?

sWendy's logo

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According to the Nation Restaurant News, Wendy's is on the block and the franchisees are in the dark.

"Some Wendy's franchisees said Tuesday they were unprepared for chairman Nelson Peltz's possible plans to sell Wendy's/Arby's Group Inc., and fear it may become another distraction for the struggling chain.

Peltz, who leads Trian Management, a fund that holds a 23.5-percent stake in Atlanta-based Wendy's/Arby's, disclosed last week that he had received an expression of interest surrounding an acquisition of the parent restaurant company. 

Peltz said in a filing with securities regulators that he was entertaining the offer by an unnamed third party and would further explore the possibility of a potential sale. 

Roger Webb, chairman of Wendy's Old Fashioned Franchise Association, which represents more than 2,100 of the chain's more than 6,000 locations, told Nation's Restaurant News that the group had no idea Peltz, who purchased Wendy's in 2008 in a long takeover battle, was entertaining an offer to sell the company."

This is hard to understand, Peltz bought in order to sell.  From day one, the Old Fashioned Franchise Association should have made it a priority to educate their members about this possibility and prepare the group for some coordinated action.

As reported in BMM, John Gordon, principal of Pacific Management Consulting Group, a research and consulting firm for the restaurant industry, expounds,

 "Principals will be much more comfortable if the franchisees are onboard and won't be kicking and fighting when the new owners take over."

OFFA's website provides no details or even links to any industry analysts about this, nor is there even a link to their sister franchisee association at Arby's. 

It is difficult to see how the Wendy's franchisee are going to coordinate their actions without a public presence.  See also the discussion at BMM about the Wendy's sale, click here.

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