Wendy's aims to carry sales momentum through rest of 2014

The Wendy’s Co. is accelerating its remodeling initiative for 2014 and has expressed confidence in future menu promotions to sustain its momentum in sales growth.

Dublin, Ohio-based Wendy’s will double the pace of its “Image Activation” reimaging program in 2014 to at least 410 restaurants, compared with 200 remodels of company-owned and franchised locations last year. The chain expects to remodel 200 company-owned units and between 150 and 200 franchised locations. Wendy’s expects to build another 15 corporate restaurants and 45 franchised units with the Image Activation look.

Wendy’s executives noted that company-owned units outperformed franchised units in same-store sales growth during the first quarter primarily due to the greater number of remodeled restaurants in the corporate system, which experienced significant increases in traffic. Company-owned units saw a same-store sales increase of 1.3 percent during the quarter, while franchised units reported same-store sales growth of 0.6 percent.

“A lot of the Image Activation restaurants were done in the late part of last year, so that next big class of 2013 restaurants were done in the late third quarter and fourth quarter, so some of those are just going to start coming into our comp base,” chief financial officer Todd Penegor said.

The company is targeting same-store sales growth for 2014 between 2.5 percent and 3.5 percent, as well as a longer-term comparable-sales growth level of 3 percent.

Though chief executive Emil Brolick noted that spring weather and remodeled restaurants started to build same-store sales in the latter part of the first quarter, he also acknowledged that several menu strategies for Wendy’s were starting to bear fruit.

Brolick credited Wendy’s multilevel promotional approach that includes its value menu, new core menu items, and premium limited-time offers, like the current Tuscan Chicken on Ciabatta.

“We’re seeing some nice growth in customer counts, as well as [average] check,” Brolick said. “We feel this dual-layer strategy of having our higher-end messages, as well as some other messages against our Right Price Right Size menu, is providing a nice combination. Also our limited-time offers typically carry with them a higher transaction value and that way we’re able to elevate our average check but without necessarily a price increase.”

Successful promotions like those, not to mention last year’s breakthrough product from the third quarter, the Pretzel Bacon Cheeseburger, will put pressure on Wendy’s to keep the menu pipeline stocked with items that can perform against tough same-store sales comparisons, he said.

“It’s also one of the things we talk about in latent brand equities Wendy’s has,” he added. “Consumers are very, very engaged in food, and we have very strong brand equities in food. That gives us a distinct advantage when we introduce high-quality, high-end items that people have a natural gravitation toward that others might not be able to do as successfully.”

But Wendy’s is not just on the lookout for the next limited-time offer, Brolick added. Marketing around the Right Price Right Size value menu would sustain, as would menu innovation around permanent items on the core menu, like the two new salads introduced in the first quarter: Asian Cashew Chicken and BBQ Ranch Chicken.

“We want to evolve our menu as well to make sure people can come in every day and et products they’re excited about,” Brolick said. “That’s why these new salads are permanent items.”

Wendy’s operates or franchises more than 6,500 restaurants in the United States and 28 foreign markets.

Contact Mark Brandau at [email protected].
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