The Company has about 9,900 restaurants globally, giving it a strong market position in various products and markets. Wendy’s is the third largest burger chain in the world with a market share of about 13%. The company leverages its strong market position to gain economies of scale and increase its bargaining power. Increasing profitability: Wendy’s profitability has increased markedly in recent years. The company’s operating profit increased from $377. 2 million in 2005 to $452. 01 million. Increasing profitability provides a strong platform for the company’s future growth.
Wendy’s restaurant chain is based on various formats catering to different customer segments. Through Wendy’s restaurants, the company caters to the quick-service burger segment. Wendy’s can synergies with other brands like Tim Horton’s restaurants provide coffee and fresh baked products such as pastries and donuts. Baja Fresh restaurant provides Mexican fast food items such as burritos, tacos and nachos. The Pasta Pomodoro chain provides Italian fast-food cuisines.
Through its differentiated products offering, the company effectively caters to many fast food sub-segments, providing the company with a large consumer base and reduced business risks as a result of wide product offerings. Established Rapport with the study customers:- Wendy’s have an edge of having a study customer base with faith in its products. These customers prefer Wendy’s over the rest of the brands.
Weak returns: The Company has recorded weak returns in the last few years. Its return on average assets, return on investment and return on average equity for the period 2002-2006 were 6.
7%, 8. 1% and 12. 3%, respectively, considerably lower than corresponding industry averages of 8. 7%, 11% and 14. 9% for the same period. Weak returns indicate the inability of the management to deploy assets profitably and adversely affects investor confidence. However the management has recently gone for a restructuring exercise. This may help improve the current scenario Weak performance in the US: The Company’s performance in the US was weak in fiscal 2006. The revenues from US declined by 1. 4% from $2,475. 3 million in 2005 to $2,441. 1 million in 2006.
The US is the largest geographical market for the company, accounting for 64. 5% of the total revenues. Lack of product association: Similar to Wendy’s, rivals such as McDonalds and Burger King are household names. In contrast to its competitors Wendy’s does not have a branded product that is easily associated with the company. The names “Big Mac”, “Whopper” and “Zinger” are extremely well known global brands which are easily identifiable with their respective companies. Wendy’s needs to market and position a core product that can be used as a platform for the company’s image in order to expand market share.
Wendy’s image would have grown with its growth to the other regional markets outside US. It also reflects on the enlarged image of the company.
Increase in restaurant industry in the US: Consumer food expenditure on away-from-home dining is on a rise in the US. Demographic changes have been pushing consumers towards fewer meals, a preference for less meal preparation time, and more frequent snacking in lieu of sit-down meals. The Fast Food Hamburger Restaurant (FFHR) business in the US is expected to grow at an annual rate of 4% per annum during 2006-2011.
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