'Better' Results Aren't Good Enough For Wendy's

In this “what-have-you-done-for-me-lately” world of ours, the headlines tell us that Wall Street is “disappointed” with Wendy’s first-quarter results, the company is scaling back on its expectations for this “transition year,” its “W” cheeseburger promotion offered too steep a discount -- cannibalizing sales of pricier menu items -- and its marketing was self-admittedly weaker that its competitors. 

“Better burgers don’t necessarily lead to bigger profits, or so it seems for Wendy’s Co., which had a sluggish first quarter,” writes Steve Wartenberg in the Columbus Dispatch.

All this negativity despite the fact that Wendy's reported net income of $12.4 million for the period ended April 1 versus a net loss of $1.4 million a year ago. And wasn’t it just last month that we were reading about the chain overtaking Burger King for the No. 2 position among burger slingers in U.S. sales? (No. 3 in fast foods overall after McDonald’s and Subway.)



Well, the AP notes that “since Wendy's sold Arby's to a private equity firm last summer, the company has been on a mission to improve its namesake restaurants and revamp its image as a higher-end burger chain.”

And the bar is indeed high under CEO Emil Brolick, who last September rejoined the company he’d left years ago to become president at Taco Bell and then COO at its parent, Yum Brands. 

“In Wendy's heyday, we beat to a different drummer,” he toldUSA Today’s Bruce Horovitz at the time. “When the competition zigged, we zagged. We have to focus more on looking out the windshield than the rearview mirror.” 

But Brolick also said, “Vision is great, but if you don't have strategies, people get frustrated quickly. A leader has to define reality and give hope.” He tells Horovitz that its biggest problem, has been a lack of brand vision: “Consumers like brands with clear positions. That's what I intend to do.”

The company has been remodeling both its restaurants and its menus in the process but Brolick noted yesterday, “we understand that it's not as simple as a pretty new restaurant." 

He also understands that the company has to make adjustments in its marketing “after realizing its messaging didn't resonate as strongly as the ad campaigns of unnamed rivals,” write Candice Choi and Michelle Chapman in Bloomberg BusinessWeek.

"Relative to our competition, our marketing messages were not as impactful as needed," concurs CFO Steve Hare, who also hindsighted that its "W" cheeseburger promotion was initially too cheap at $2.99, especially since the sandwich has more beef (4.5 ounces) than the Dave's Hot 'N Juicy (4 ounces), as Choi and Chapman tell us. But when the price was raised, consumers traded down to cheaper items.  

“Wendy's Gives W Cheeseburger an F, Pulls Plug on Promotion,” reads the headline over Maureen Morrison’s story in Ad Age

"In retrospectm the 'W' cheeseburger in December started to show signs of diluting our marketing message and cannibalized some of the success of Dave's Hot 'N Juicy," Hare says. "Still, we were hopeful that our February promotion of [Hot 'N Juicy] would help us regain our momentum, but unusually intense competitive couponing and discounting negatively impacted our sales growth.” 

A reprise of the famous “Where’s the Beef” campaign that ran for a bit last fall was clearly not the answer either. “In an era of obesity, is quantity still in question?” asked the subhed atop David Griner’s “Adfreak” review in Adweek

Procter & Gamble veteran Craig S. Bahner joined the company as CMO last month, Nation’s Restaurant News reported. Brolick called him a “proven brand builder and a five-star achiever,” at the time.  

Wendy’s launched a new campaign last month featuring two redheads –- “the real Wendy and another recurring character whose name is unknown,” Ad Agereported at the time, and it also canned the "You know when it's real" tagline that it had used for a few years. 

The “real Wendy” is Wendy Thomas, of course, daughter of Founder Dave and the long-ago model for the image in its logo. Ads that include her contain what senior vp-brand marketing Bob Holtcamp, told Morrison is a “mantra.”  

"She uses that line to explain the DNA of the brand,” according to Holtcamp. “There are certain things we do, and that's just Wendy's way.” 

The official tagline nowadays is "Now that's better."  

Better, perhaps, but judging by the reactions to yesterday’s results  -- both internally and externally –- not good enough yet by a whopper.

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