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Wendy’s Orders a Hot ‘n Juicy Brand Reboot

Filed under Fast Casual, Food Costs, Marketing, Premium, Pricing, QSR Burgers

Urban planner/architect Daniel Burnham’s mantra was “Make no small plans” and that philosophy ruled Wendy’s annual Investor Day event on Monday, an upbeat revival meeting for Wall Streeters that made Burnham’s plan for developing Chicago look timid. Wendy’s sees a path to its future, and its one that includes a new, secretive, code-named ad campaign about “honesty”; new standards for employees; quiet test marketing of Black Label burgers and chicken flatbread sandwiches, and more.

Wendy’s believes it can “take the brand where we need it to be.” Where is that? “A quick-casual experience at a QSR price,” the quick–service restaurant business’s El Dorado.

Announcing 2011 results and a hefty Q4 same-store sales gain of 4.4% that was the chain’s best showing since 2004 (thanks to the overlapping Dave’s Hot ‘n Juicy and W Cheeseburger launches), Wendy’s President-CEO Emil Brolick delivered a one-man show about the chain’s future that was equal parts Stuart Smalley affirmation, Al Gore marketplace lecture, Tim Tebow cheerleading and Neil Patrick Harris showmanship. Wendy’s prospects for simultaneously upgrading and modernizing its food, restaurant interiors and exteriors, customer experience, employee effectiveness, and advertising punch were presented as so unrelentingly bright that Brolick seemed poised to break out in song.

Wendy's CEO says it needs more premium-price items like the Black Label burgers in test.

“If there’s any brand out there that stands for food innovation, it’s Wendy’s,” Brolick asserted with just the sort of confident cheeriness he was hired last year to inject into the company. Wendy’s menu already is great, of course, Brolick said, including the QSR market’s top spicy chicken and chicken-club sandwiches, the top salads and the best burgers, etc. Still, there’s room for even more super-great innovation, which will include the Black Label hamburgers previously disclosed to be in test. A new chicken sandwich (possibly the Bruschetta Chicken or Bistro Cheddar Chicken sandwiches that it has tested) will debut in 2012 and the Berry Almond Chicken Salad will return. Sides will be improved, too (think sweet potatoes and mac ‘n cheese, say sources).

Admitting that Subway has stolen share of the grilled-chicken market from Wendy’s and other QSRs, Brolick vowed to regain some of that business with a new chicken sandwich it is testing. It is not served on a burger bun, he hinted. This likely is Wendy’s Flatbread Grilled Chicken sandwich line that reported in test in December. Varieties were Asiago, Caprese, Smokey Apple BBQ and Smokey Honey Mustard.

In test the flatbread sandwiches were premium-priced at $4.49 a la carte or $6.49 in a combo. And Wendy’s needs more higher-price items (such as the $4.49 Black Label burgers), Brolick said, claiming the chain’s pricing currently is “a little out of kilter,” with too much low-end (the My 99¢ value menu). In 2012, pricing balance will get “back to where it needs to be,” he said. However, “we do not want to step away from the price-value business,” he said. “We definitely need to be a player there.”

An "image activated" interior

Wendy’s said its chicken prices declined 3.1% in 2011 and should rise in 5% in 2012. Beef, however, rose 9.6% in 2011 and are expected to go higher (+10.9%) this year. The “Gold Chicken” menu upgrade often promised by the previous CEO never were mentioned. Analysts never asked.

What Brolick outlined as Wendy’s positioning “A cut above” the competition will be communicated in a new ad/marketing effort beginning in April. Code-named “Red,” the campaign takes the current “You know when it’s real” campaign from Kaplan Thaler Group (“Clearly the best [ad] effort since the Dave Thomas campaign!” crowed Brolick) to another level. It will be “more hard-hitting” and clearly explain what makes Wendy’s better and different, he said. Judging by the slides used for the show, “Honest food. Honest ingredients. Honest preparation” are expected to be among the themes.

The goal is “having consumers understand that we’re playing a different game,” said Brolick, not just playing the old QSR game differently.

One of the new exterior designs

Steve Farrar, Wendy’s COO-North America, conceded that Wendy’s “certainly is not the cool place to go” right now. But all that will change, execs promised, if franchisees buy into the corporate plan. A total of 80 stores will benefit from full “image activation” (Wendy’s term for inside/outside remodeling) in 2012. These makeovers cost $750,000 to $850,000 each and can bring a 25% increase in sales, according to the company. “We have to get to a pace of doing a couple hundred of these a year” if the chain really is going to catch up the 21st century, Brolick admitted.

Brolick spoke much about Wendy’s “Recipe to Grow.” Like McDonald’s “Plan to Win” it is based on “the P’s” (price, product, promotion, place, performance, people), but Brolick insisted that what matters is not whether a plan is proprietary, it’s what you do with it.

What Brolick posited as the worst thing that could happen is to Wendy’s or other QSRs is to get “caught in the middle” between convenience-stores at the low end of the price spectrum and fast-casual at the high end. Traditional QSRs will get squeezed into irrelevance if they don’t break out, he argued.

The Wendy’s goal is to deliver consistent (if modest) same-store sales growth of 2% to 3% by hiring or retaining only what Brolick and others repeatedly called “five-star athletes” as crew. This staffing strategy was described as “rebooting” its restaurants, apparently since it involves “booting” all employees who don’t meet new tougher standards. This may turn out to be the boldest element of the Recipe.

Daypart expansion is another part of the Recipe. Wendy’s lack of a national breakfast program isn’t a deficiency, of course, it’s an opportunity for future growth. The chain remains slooowly moving toward that introduction. It is adding a breakfast test market in the Northeast, for example. And breakfast will be offered at the 50 stores Wendy’s will remodel this year and at the 20 company stores it will open in 2012. Wendy’s also is testing 24-hour operations at a few breakfast locations. Ultimately, Brolick said, one-third to one-half of Wendy’s restaurants could profitably operate between 2 a.m. and 6 a.m. But that, like so much else discussed, is down the road.