by George Putnam, editor The Turnaround Letter
The Wendy's Company
began in 1969 as a single restaurant in Columbus, Ohio named after
founder Dave Thomas' daughter. Now it has more than 6,500 restaurants in
the U.S. and 27 other countries.
After carving out a niche in
the fast-food industry based on good quality food and service, Wendy's
has faltered in recent years, suffering from a stale menu and image.
Nevertheless, we consider it one of our favorite turnaround ideas for
The company was acquired by financier Nelson Peltz in 2008, who tried
combining Wendy's with the Arby's chain, which he already owned.
is a company with a number of the characteristics that we like to see
in a turnaround situation: a well-known brand, renewed focus, a new
management team with turnaround experience, decent financials and a
large shareholder with a lot at stake.
After selling off the
Arby's franchise last year, the company is now solely focused on the
Wendy's brand. In late 2011 the company brought in Emil Brolick as its
Brolick has a long and successful career in the
restaurant business, including a previous stint at Wendy's where he
helped engineer an earlier turnaround beginning in the late 1980's.
is committed to restoring Wendy's quality image, with particular
emphasis on bringing back adult customers who have been lost in recent
years. Early efforts to remodel and re-image certain locations are
showing impressive results.
Brolick is also moving into the
lucrative breakfast segment, which Wendy's has missed out on until now.
Although there is a fair amount of debt on the balance sheet, the
financials look solid enough to support Brolick's turnaround strategy.
company recently increased its dividend and initiated a stock buyback
program. Peering over management's shoulder is Mr. Peltz who owns almost
100 million shares and has a big incentive to make sure things get back
on track at Wendy's.