Change's at Wendy's - What are They?

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According to the recent SEC Filing on Wendy's, the Filing Party being Nelson Pelz's investment vehicle, Trian Partners.


"The Filing Persons have considered various alternatives with respect to their investment in the Company, including the possibility of proposing an acquisition transaction involving the Company and have had discussions with the third-party that has expressed interest on a preliminary basis in a potential acquisition involving the Company previously disclosed in this Statement.  

The Filing Persons also had recent discussions with other third-parties that had expressed an interest in a potential acquisition transaction involving the Company.  The Company recently announced that it is exploring strategic alternatives for its Arby’s Restaurant Group, Inc. subsidiary, including a sale of the Arby’s brand.

The Filing Persons agree with the Company that in order to maximize shareholder value the Company should focus on the Wendy’s brand, including the introduction of new products, expanding dayparts, such as breakfast, and expanding the Wendy’s brand internationally and in underpenetrated North American markets.  

The Filing Persons also believe that the Company is well-positioned to take advantage of these growth opportunities based on the Company’s current capital structure, including its strong balance sheet and cash flow, and the current competitive landscape.  Accordingly, the Filing Persons have determined not to propose either alone or with any third party any of the matters referred to in Item 4 of Schedule 13D at this time. There can be no assurance that any of the third parties referred to above or any other third party will or will not make any acquisition proposals. "

This is interesting because of what it doesn't say: why are the franchisees ready, willing and able to expand into breakfasts and create more locations in North America?  How many multi-units are stepping up to the plate and putting their money where Pelz's mouth is?

7 Comments

It would be interesting to know what will be different about the latest foray into breakfast by Wendy's?

Wendy's has made attempts at breakfast dating back to the late 1980s without success, but with new technologies and delivery systems available today it could be different this time around?

Which Wendy's units could be best for breakfast?

"Daytime" units, where the unit is visible to inbound traffic patterns, and where there is significant daytime population. This assessment has to be a store by store review.

Where is Wendy's underpenetrated in NA?

Since the US is so over restaurant developed, areas of opportunity will be limited, but California, Oregon, Washington and Hawaii have low current penetration. Canada is underdeveloped, has only 358 stores. Mexico has only 25 stores in total.

Of course, franchisee access to capital and store economics is essential for this growth plan to work.

The success of ARCO today (1000% oversubscribed) already at $21, opened at $17 will absoluely make international growth markets irresitable.

Hard to believe that the franchisee in Argentina, Arco, is twice as valuable as a brand as McDonalds:

"Arcos achieved valuations far beyond those of its U.S. parent: Based on 2010 earnings and the IPO price of $17, Arcos shares have a price-to-earnings valuation of 38.6, more than double that of McDonald's."

http://www.reuters.com/article/2011/04/13/us-arcosdorados-ipo-idUKTRE73C84S20110413?type=companyNews

Todays ARCO developments are very plain indicator that at least right now, there is a hunger for IPOs. Those of us in the restaurant space should take note.

Arco's unit economics trail that of MCD, see my post at http://www.seekingalpha.com/author-john-gordon/articles/latest.

Restaurant franchisees that are public typically trade less than their parent, since they have less territory to develop. Call it the "franchisees discount".

Todays ARCO developments are very plain indicator that at least right now, there is a hunger for IPOs. Those of us in the restaurant space should take note.

Arco's unit economics trail that of MCD, see my post at http://www.seekingalpha.com/author-john-gordon/articles/latest.

Restaurant franchisees that are public typically trade less than their parent, since they have less territory to develop. Call it the "franchisees discount".

Wasn't day part expansion the purpose behind the acquisition of Tim Hortons. When Wendy's realized co-branding was not going to work with the existing franchisees they spun Tim Hortons off as a separate company. What has changed today that makes Peltz and the shareholders believe day part expansion is now possible?

Edward, the spin-off of Tim Hortons probably had a lot to do with Tim's failure to penetrate the non hockey playing parts of the US.

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