Restaurant Business

Turnaround: Wendy's workover. (Wendy's International Inc.) (company profile)

Though Wendy's has been beset by a series of difficulties since early 1985, the company appears to be in the midst of a successful attempt to turn the company around.

Spurred on by increased customer counts largely attributable to its new SuperBar self-service food bar, the number three burger giant's third-quarter sales were $769 million and earnings were $8.7 million. This follows on the heels of impressive firstand second-quarter results as well, although third-quarter earnings were $900,000 shy of second-quarter figures. Sales for 1988 are expected to reach almost $3 billion, and earnings to approach the $33 million range, with earnings per share of about 40cts. But according to both management and observers, the chain is not in the clear yet.

"We've accomplished a lot, but we're only starting," admits Robert L. Barney, chairman and CEO of Wendy's International Inc. Adds president and COO Jim Near, "We're not there yet, but we're starting to get it done." Indeed, Wendy's is still not completely out of the woods. In fact, some analysts talk about the possibility of the chain having to hit a "double bottom" before it permanently pulls out of its tailspin. Steven Rockwell, a securities analyst with Baltimore-based Alex. Brown & Sons, points out that "they hit a bottom in 1987, but I question whether the turnaround is sustainable. There are still troubles with the franchise system, and I wonder if the SuperBar sales can hold up once the novelty of the new product wears off." Caroline Levy, a restaurant chain analyst with Shearson Lehman Hutton, says, "There are some franchisees who remain unconvinced that management is on the right track," adding that "the SuperBar may not be the solution." "Wendy's might be in a turnaround on revenues, but I'm not so sure about earnings," says Leslie Steppel of Prudential-Bache in New York. She adds that securities analysts invited to a recent confab at Wendy's headquarters were less than pleased with managements revelations: "Real growth was down nine percent in October. And, with a new product like the SuperBar, traffic and earnings both should be higher."

But, in management's opinion, the SuperBar is clearly a sustainable winner. The 18-foot-long, 50-item, all-you-caneat food bar includes salad, Italian and Mexican specialties, and desserts, and generally sells for $3.99. It is now in all company-owned stores and about 45% of franchised locations. "The beauty of the SuperBar is that it gets us out of the line of fire of McDonald's, Burger King, and Hardee's," says Near. "It repositions us all by ourselves," adds Barney. But it also takes Wendy's far from its roots as the "keep it simple" burger chain. In addition, the repositioning forces the company to try to hang on to its burger base while it attempts to also become a food-bar outlet. A top executive from Hardee's, the chain battling Wendy's for the number three position in the burger segment, is more than happy about Wendy's stretegic departure. …

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