Wendy’s International, Inc.
Company Analysis
September 7, 2005
BAA 605
Mercer University
Dr. Coleman
Kacy Carney, Sonya Chhatwal, Susan Denny,
Amy Naso, Walker Roth, Maria Sikking
Table of Contents
● Facts
● New Products
● Community Involvement and Altruism
● Financials
▪ Revenue
▪ Profit
▪ Market Price
▪ Operating Margin
▪ Net Margin
▪ ROE and ROA
▪ Net Income Comparison
▪ Revenue Comparison
● Strengths
● Weaknesses
● Summary
● Appendix A: Chart Data
● References
Facts – Wendy’s International, Inc.
• Wendy’s made the FORTUNE 500 list for the
first time in April of 2005; they were named 498th
• Wendy’s International, Inc. owns more than 9,700 restaurants and
has systemwide sales of $11.6 billion
• Wendy’s International, Inc. owns the brands Wendy's Old
Fashioned Hamburgers®, Tim Hortons, Baja Fresh® Mexican Grill,
Cafe Express, and Pasta Pomodoro®
Facts – 2005 Strategic Plan
Facts – Wendy’s Brands
Facts – Wendy’s Old Fashioned Hamburgers
Concept:
Quick service hamburgers, chicken
sandwiches, salads and sides
Year Founded:
1969
Headquarters:
Dublin, Ohio
President/Chief Operating Officer:
Tom Mueller
Number of Stores: (as of 9/26/04)
6,572 worldwide
- U.S.: 1,302 company, 4,552 franchise
- Canada: 150 company, 223 franchise
- International: 5 company, 342 franchise in
20 countries, predominantly in Latin America
Wendy’s also owns the New Bakery in
Zanesville, Ohio, which produces Wendy’s buns
Facts – Tim Hortons
Concept:
Bakery-café serving coffee, baked
goods, soups and sandwiches
Year Founded:
1964
Headquarters:
Oakville, Ontario, Canada
President/Chief Operating Officer:
Paul House
Number of Stores: (as of 9/26/04)
2,632 in North America
- U.S.: 66 company, 167 franchise
- Canada: 28 company, 2,371 franchise
Tim Hortons also participates in a 50/50
joint venture of Maidstone Bakery which
produces parbaked goods for Tim Hortons
Facts – Café Express
Concept:
Fast-casual combining EuropeanAccented menus and a bistro
décor with quick service operations
Year Founded:
1984
Headquarters:
Houston, Texas
Chief Executive Officer:
Brion Grube
Number of Stores: (as of 9/26/04)
18 in North America
- US.: 18 company, 0 franchise
Facts – Pasta Pomodoro
Concept:
Casual dining, table and counter
service, Italian-inspired menu
Year Founded:
1994
Headquarters:
San Francisco, California
Chief Executive Officer:
Adriano Paganini
Number of Stores: (as of 9/26/04)
44 in North America
- US.: 44 company, 0 franchise
Facts – Baja Fresh
Concept:
Fast-casual, Fresh Mexican
Year Founded:
1990
Headquarters:
Thousand Oaks, California
Chief Executive Officer:
Brion Grube
Number of Stores: (as of 12/31/04)
295 in North America
- US.: 144 company, 151 franchise
Facts – Strategic Life Cycle
New Products
New Products (continued)
Wendy’s International has implemented the
following changes to their menus:
● Garden Sensations Salads including a fruit bowl
● Ability to choose side item with combo meals including side
salads, baked potato, and chili not just fries
● Kid’s Meal now comes with choice of mandarin oranges or
fries and low-fat milk, chocolate milk, or soft drink as the
included beverage
● Low-fat strawberry flavored yogurt with granola as an
alternative for desert rather than the traditional Frosty
Community Involvement and Altruism
Dave Thomas Foundation for Adoption
● Promotes public awareness of children in need of adoption,
as well as enhances efforts to find permanent homes for these
children
Wendy’s Classic Achiever Scholarship Program
● A Canadian program that granted 210 scholarships to high school
graduates continuing on to post secondary schools in 2004
Tim Horton Children’s Foundation
● Donated over $1 million to UNICEF to help children in
Southeast Asia affected by the tsunami
Financials – 10 Year Revenue
Revenue
$4,000
Revenues (in millions)
$3,500
$3,000
$2,500
$2,000
$1,500
$1,000
$500
$0
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
Year
● The steady increase in revenue can be attributed to the
diversification in restaurant franchises that occurred in the
last 15 years with the creation of Baja Fresh in 1990 and Pasta
Pomodoro in 1994
● These new and different restaurant concepts helped a well
establish company almost double their revenue over the course
of ten years
Financials – 10 Year Profit
Profit
$250
Profit (in millions)
$200
$150
$100
$50
$0
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
Year
● In 2004, there was an increase of more than 20% in the price for beef due to
increased demand and new importing restrictions and has remained high through
2005
● The dramatic decline of profit in 2004 can also be attributed to the fact that in
2003, Baja Fresh took a "good will" charge in the amount of $186 million directly
from profits
● Baja Fresh had to close restaurants and clean up the books to make up for the loss,
resulting in only a $52 million gain and $0.45/share for the year
Financials – 10 Year Market Price
Market Price at year-end
$45.00
$40.00
$35.00
Market Price
$30.00
$25.00
$20.00
$15.00
$10.00
$5.00
$0.00
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
Year
● There are many factors that influenced the stock price of Wendy's
International, among those include a law suit of a woman that
allegedly found a finger in her chili
● They have also implemented strategic initiatives to enhance
shareholder value, including the IPO of Tim Hortons, selective store
closings, and nearly $1 billion in a common stock repurchase
Financials – 10 Year Operating Margin
Operating Margin
16.0%
Operating Margin (%)
14.0%
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
1995
1996
1997
1998
1999
2000
2001
2002
2003
Year
● Wendy’s operating margin remained steady from
1999-2003, but saw an almost 80% decrease in 2004
2004
Financials – 10 Year Net Margin
Net Margin
16.0%
14.0%
Net Margin (%)
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
Year
● Similar to Operating Margin, Net Margin remained relatively
constant from 1999-2003, with an almost 70% decrease in 2004
● This decrease in Net Margin shows that less revenue was
turned into profit in 2004
Financials – 10 Year ROE and ROA
Return on average equity and average assets
18.0%
16.0%
14.0%
Return (%)
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
Year
Return on average equity (%)
Return on average assets (%)
● Return on equity and return on assets decreased sharply in
2004, after a five year period of steady returns
Financials – Net Income Comparison
Comparison of Net Income
Net Income (in millions)
$2,500
$2,000
$1,500
$1,000
$500
$0
2002
2003
2004
Year
Wendy's
Yum! Brands
McDonald's
● Wendy’s net income has decreased, as Yum! and
McDonald’s have increased
Financials – Revenue Comparison
Revenue Comparison
$25,000
Revenues (in millions)
$20,000
$15,000
$10,000
$5,000
$0
2002
2003
2004
Year
Wendy's
Yum! Brands
McDonald's
● Wendy’s, Yum and McDonalds have all increased revenue of
more than 15% over the past three years
Strengths
● They have great diversity in holdings/acquisitions
● They have adapted well into the healthy food initiative
● They lead through innovation with expanding menu options
● Their stock return consistently outperforms competition and
S&P Index
● They have implemented a new 5 point initiative for improving
returns
● They had the fastest drive thru service in 2004
● Their revenues are on an increasing trend
Strengths (continued)
● They actively listen and follow through with consumer
demands, as seen through their new product offerings
● Currently ranked third in hamburger chains (behind
McDonalds, and Burger King)
● They have strengthened their financial performance, as
compared with other companies, and were added to the
FORTUNE 500 list in 2005
● The received a score of 75 from the University of Michigan’s
American Consumer Satisfaction Index (ACSI), which is higher
than its competitors (McDonalds=62, Burger King=71)
● Have implemented online guidelines concerning which Wendy’s
items are suitable for diabetics, calorie counters, and those with
food allergies or gluten concerns
Weaknesses
● Many of their holdings are still in the expansion stage
● Their net income percentage is behind competitors
● Expansion is being put on hold to improve returns on
existing stores
● They do not have as strong of an international presence as
their competitors
● Wendy’s focuses more on quality rather than competing in
price wars with McDonald’s and Burger King, resulting in
higher prices
● The “Whopper” and “Big Mac” reflect higher brand
awareness than the Old Fashioned Wendy’s hamburgers
● They need to better assess their purchases to prevent future
mistakes like Baja Fresh
Summary
● High customer satisfaction has been maintained through the successful
addition of nutritional products and menu diversification as consumer
demand for such options increased.
● Through organizations such as The Dave Thomas Foundation for Adoption,
the company upholds one of its core values, community involvement.
● Wendy's International is a company dedicated to constant improvement
and will manipulate dynamics to stay competitive in the quick service food
industry
● Relatively consistent financial performance and strong stock value help
uphold Wendy's as a solid competitor that values their shareholders,
employees, and customers
Summary (continued)
●The strategic plan for Wendy's Int. is maximizing shareholder
value. Revenues are up and the market price is up 45% from 2002 and holding
strong.
● The closing of under-performing stores, the converting of the majority of
company stores to franchisee stores, and the partial selling of Tim Hortons will
help to improve profits along with ROA and ROE.
● The growth of Tim Horton's and the overall strategic potential of Baja
Fresh, Cafe Express, Pasta Pomadora, and Wendy's International will help
keep Wendy's as one of the top leaders in the fast food industry for years to
come.
Appendix A: Chart Data
Year
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
$1,739
$1,890
$2,031
$1,942
$2,067
$2,237
$2,391
$2,730
$3,149
$3,635
$110
$156
$130
$123
$167
$170
$194
$219
$236
$52
Operating Margin (%)
10.0%
13.8%
10.9%
10.8%
13.5%
12.8%
13.7%
14.0%
13.3%
6.2%
Net Margin (%)
9.5%
13.5%
10.8%
10.7%
13.0%
12.1%
12.9%
12.7%
12.0%
5.1%
Return on average assets (%)
8.1%
9.9%
7.0%
6.7%
9.1%
9.2%
9.7%
9.2%
8.4%
1.7%
Return on average equity (%)
14.5%
16.6%
11.5%
11.0%
15.4%
15.9%
16.9%
17.0%
14.9%
2.9%
Market Price at year-end
$21.25
$20.88
$22.88
$21.81
$20.81
$26.25
$29.17
$27.07
$39.24
$39.26
Revenue (in millions)
Profit (in millions)
Net Income (in millions)
Year
Revenues (in millions)
2002
2003
2004
Wendy's
$219
$236
$52
Yum! Brands
$583
$618
$740
McDonald's
$992
$1,508
$2,279
Year
2002
2003
2004
Wendy's
$2,730
$3,149
$3,635
Yum! Brands
$7,757
$8,380
$9,011
$15,406
$17,141
$19,065
McDonald's
References
● Analyst and Investor Meetings (2005, August). Wendy’s International,
Inc. Retrieved August 27, 2005, from
http://www.wendys-invest.com/main/wen_irpres_aug05.pdf.
● The State of the Enterprise (2004, December). Wendy’s International,
Inc. Retrieved August 29, 2005, from
http://www.wendys-invest.com/main/enterprise1204.pdf.
● Strategic Plan (2005). Wendy’s International, Inc. Retrieved August 25,
2005, from http://www.wendys-invest.com/main/plan.php.
● Restaurant Data (2005). Wendy’s International, Inc. Retrieved August
31, 2005, from
http://www.wendys-invest.com/main/restaurant_data.pdf.
● Our Brands (2005). Wendy’s International, Inc. Retrieved August 26,
2005, from http://www.wendys-invest.com/wendys.php.
References (continued)
● Consumer Beat: Finding Satisfaction (2005, June). Restaurants &
Institutions, 115 (10):16. Retrieved September 4, 2005, from EBSCOHost.
● Wendy’s International, Inc. SWOT Analysis (2005, May). Wendy’s
International, Inc., 5-8. Retrieved September 4, 2005, from EBSCOHost.
● 11-Year Selected Financial Data (2004). Wendy’s International, Inc.
Retrieved August 25,2005, from
http://www.wendys-invest.com/main/11year_sel_finan.pdf.
● 2004 Annual Report (2004). Wendy’s International, Inc. Retrieved
September 6, 2005, from
http://www.wendys-invest.com/fin/annual/2004/wen04ar.pdf.
● Wendy’s International, Inc. Financial Analyst. Telephone Interview.
6 September, 2005.