DUBLIN Ohio Sixteen Wendy's franchisees representing nearly 20 percent of the 6,015-unit chain have accused Wendy’s International Inc.'s board of failing to communicate with the franchise community as the company considers a restructuring or a possible sale of the brand. The communication also blasted Wendy's management for undercutting Wendy's financial performance through inadequate product testing and changes in portion sizes, among other things.
The allegations regarding communication were disputed by Wendy's chairman Jim Pickett, who said he would welcome a discussion with the operators on the various issues.
Meanwhile, more than a dozen parties have signed confidentiality agreements or expressed interest in making a bid for the chain, The Wall Street Journal reported Monday, citing unidentified sources. It did not identify any of the potential suitors, though earlier disclosures have indicated that a confidentiality agreement was struck with concerns affiliated with activist investor Nelson Peltz.
In a letter addressed to Pickett and the rest of Wendy's board, the franchisee group said, “We no longer have confidence that we are receiving credible information upon which reasonable decisions can be made.”
The 16 franchisees make up about 23 percent of Wendy's franchise owners.
The letter said franchisees have watched “the slow decline of our brand due to mismanagement,” and it cited as examples inadequate product or operational testing, the diminishing of the quality or product size of some menu offerings and other problems that have resulted in “our current difficulties in delivering strong financial results.”
Pickett sent a written response to the group that essentially denied that the board has failed to communicate with franchisees.
“To suggest that we are not concerned or engaged would be uninformed, flatly wrong and disappointing, particularly in light of the special steps we have taken to reach out to you,” he said in the letter.
He further said that the board and management would welcome specific, constructive discussion of issues.
Darrell Valenti, head of Valenti Management, a 120-unit franchisee, told Nation’s Restaurant News that franchisees wanted more input in the future of Wendy’s.
“We want to have more input into possible restructuring that has a profound effect on the value of our franchise investments,” Valenti said. “It’s not a declaration of war, but I think they could do better. We have a lot at stake.”
Kerrii Anderson, Wendy’s chief executive, sent a memo to franchisees and employees in response to the franchisees’ letter.
“Management is listening carefully to the voices of the franchise community,” she said in the memo, a copy of which was obtained by The Columbus Dispatch in Ohio.
To date, only Triarc Cos. Inc., the parent of the Arby's fast-food chain, has publicly voiced interest in buying Wendy's. Peltz holds a 34-percent stake in Triarc, and investment arms of his New York-based hedge fund, Trian Fund Management, own 9.8-percent of Wendy's shares. The parties — Triarc, Trian, and Wendy's — signed a confidentiality agreement last month to allow the suitor access to proprietary information from Wendy's as it contemplates a purchase of the No. 3 burger brand.
Peltz has said he sees Triarc as a "natural, strategic buyer" for Wendy's, and said in August that Triarc was prepared to make a bid as high as $41 per share for Wendy's stock, or about $3.6 billion.