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Wendy's, Arby's to focus on value pricing

Wendy’s/Arby’s Group Inc. said it would focus both its quick-service chains on value pricing this fall, including 99-cent Frosty treats and a new menu at Arby’s featuring 30 items for less than $3.

The Atlanta-based company, which operates or franchises more than 10,000 restaurants, continued to post negative sales trends at both its brands during the latest quarter, including same-store sales drops of 1.7 percent at Wendy’s and 7.4 percent at Arby’s.

Although Wendy’s has focused marketing on its premium products of late, including a new and expanding line of salads, the chain plans to return to a value message in September, when it will roll out 99-cent limited-time promotions for Frosty treats and Spicy Chicken Nuggets items.

“This will be perfect for the back-to-school season when customers historically spend less,” Wendy’s/Arby’s chief executive Roland Smith said during a conference call with investors on Thursday.

The company reported a 28-percent decline in second-quarter net income, to $10.7 million, or 3 cents per share, compared with $14.9 million, or 3 cents per share, in the same quarter a year ago. Latest-quarter total revenue fell 4 percent to $877 million.

Wendy’s also is set to expand its breakfast menu test, currently available at about 30 restaurants in three markets: Pittsburgh, Phoenix and Kansas City. The breakfast line will be rolled out to 150 more restaurants by the end of August, and another 100 stores by the end of the year, Smith said.

He noted that the company already has received a lot of positive feedback on Wendy’s breakfast menu and said that that “early positive response gives us some confidence that we are on the right track.”

The company pulled back on Wendy’s latest breakfast initiative in January 2009, as menu items were not gaining consumer traction.

At Arby’s, a new menu revamp with an emphasis on value will debut this month, Smith said.

“Improving value perception [at the Arby’s brand] is one of our top priorities,” he said. “We plan to use a three-tiered approach: entry value, which is really more about affordability; core value, which allows us to offer our classic favorites at more affordable prices; and premium value, which [consists of our] premium products offered at great value.”

A new menu featuring 30 items under $3 will debut this month, Smith said. Items include a roast beef deluxe sandwich meal deal priced at $2.99, as well as five new sandwiches, including one made with Angus beef and sliced in-store. Smith noted that franchisee reaction to the new menu has been positive.

According to Steve Hare, Wendy’s/Arby’s chief financial officer, the company revised its full-year outlook to include a 3-percent-to-5-percent decline in adjusted earnings before interest, taxes, depreciation and amortization, flat same-store sales at Wendy’s and negative same-store sales at Arby’s.

Contact Elissa Elan at [email protected].

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