1. Executive Summary
Wendy’s Old Fashioned Hamburgersis an international fast foodchain restaurant founded byDave Thomason November 15, 1969, inColumbus, Ohio, and moved its headquarters toDublin, Ohioon January 29, 2006. Wendy’s was America’s national food, and the world’s third largest hamburger fast food chain with approximately 6,700 locations. On April 24, 2008, the company announced a merger withTriarc, which is the parent company ofArby’s. Following the merger, Triarc came to be known asWendy’s/Arby’s Group. Arby’s Group is the parent company of Wendy’s, and is a publicly traded company. Arby’s group of restaurants is a wholly owned subsidiary of Wendy’s/Arby’s Group, Inc.
This report will be focusing on Wendy’s Burgers of the Wendy’s/Arby’s Group. The main aim of this report is to investigate and analyze the marketing activities of Wendy’s Burgers.
What is the Wendy’s orientation? What are the strengths, weaknesses, opportunities, and threats (SWOT) of Wendy’s? What are the competitive advantages of Wendy’s? What is the impact of Wendy’s marketing mix? And its positive and negative effects on the market and competitors in similar segment.
This report in its further course, will try to address the above questions and more.
Wendy’s/Arby’s Group is the parent company of Wendy’s, and is a well known publicly traded company. Approximately 77% of Wendy’s restaurants are franchised, the majority of which are located in North America. Wendy’s and its affiliates, employs more than 46,000 people in its global operations. In fiscal year 2006, the firm had $9.45 billion (USD) in total sales.While Wendy’s sets its standards for exterior store appearance, food quality and menu, individual owners have control over the hours of operations, interior décor/design, pricing, staff uniforms and their wages.
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Wendy’s ended the fiscal year 2007 with just under 6000 Wendy’s Old Fashioned Hamburgers restaurants in operation. Of these, 1,274 (21%) were company owned and operated by the company itself while the remaining 4,662 restaurants were franchised. In addition to Wendy’s Old Fashioned Hamburgers, Wendy’s has invested in the Cafe Express and Pasta Pomodoro restaurant chains, owning 70% and 29% of those chains, respectively. Until 2006 Wendy’s International, Inc. also owned the ‘Tim Hortons’ and ‘Baja Fresh’ franchises.
The chain is known for itssquareground beef patties in itshamburgers and the Frosty, a form of soft serve ice cream mixed with frozen starches contracted from potato products. The idea for Wendy’s “old fashioned” hamburgers was actually inspired by Dave Thomas’s trips toKewpee Hamburgersin his home town ofKalamazoo, Michigan. The Kewpee sold square hamburgers and thick malt shakes, much like the well-known restaurant that Thomas eventually founded inColumbus, Ohio, in 1969. Thomas named the restaurant after his fourth childMelinda Lou “Wendy” Thomas.
Nature of demand
Over the past century, market for fast food has increased drastically, time being one of the major constraints. A recession in the early 1980s, combined with high beef prices and Wendy’s explosive as well as threatening growth incited the “burger wars”. Wendy’s moved into the number three spot behind McDonald’s and Burger King, fueled by its introduction of a chainwide salad bar, chicken breast sandwiches, fish sandwiches, and baked potatoes.
Extent of demand
As of December 2006, Wendy’s was America’s national food, and the world’s third largest hamburger fast food chain with approximately 6,700 locations. Approximately 77% of Wendy’s restaurants arefranchised and the majority of which are located in North America. Wendy’s and its affiliates employs more than 46,000 people in its global operations. In fiscal year 2006, the firm had $9.45 billion (USD) in total sales and earned total revenue of $2.5 billion (USD) in 2007.
Wendy’s tries to sense the customers’ needs and demands. This proves that the company is purely marketing oriented. Wendy’s puts in much effort for orientation towards the marketplace and its market share. Companies have their respective beliefs concerning their marketing efforts which are usually varied from company to company. The challenging concepts beneath which companies perform their marketing activities are as follows:
Wendy’s Production Concept
Customers are attracted to those products which are readily available and cheaper in price. Organizations following this concept targets on accomplishing the large production competence, minimal costs and bulk distribution.
Wendy’s Product Concept
The way that Wendy’s Old Fashioned Hamburgers does business and markets its products to consumers is due to the change in our society to where the consumer wants the biggest, quickest, and best product that they can get for their money. Wendy’s introduced healthier options amid rising obesity levels and a general interest in healthier foods, some fast-food companies have been going in the opposite direction, introducing ever more calorific and fat-laden burgers in a bid to win customers.
Wendy’s Selling Concept
The concept of ready-cooked food for sale is the primitive and foremost selling concept of Wendy’s burgers. Wendy’s uses ‘fresh, never frozen beef’/’fresh ground beef’ in their hamburgers. Wendy’s has moved in line with the Quick Service Restaurant or QSR industry and has been working to offer healthy food choices. Wendy’s has added sandwiches and salads to its menu, and offers side dish substitutes for French fries like salads for health conscious customers.
Wendy’s Marketing concept
Marketing is the science of actualizing the buying potentials of a market for a specific product. It in turn reflects a selling concept because it centers on promoting a product rather than meeting a defined area of consumer needs. The marketing concept sidetracks the basic conflict between the buyer and the seller. Consumers want good quantity and quality products for less prices, where as producers wants to sell at high prices. The marketing concept does not provide a solution to the classic bargaining problem which is widely prevalent.
Holistic Marketing Concept
This involves development, design and implementation of marketing programs, processes, and activities that recognizes organization’s breadth and inter-dependencies. Precisely, this concept is an approach to marketing that tries to identify and resolve the opportunity and difficulties of marketing activities. There are 4 main elements in Holistic marketing namely (Kotler and Keller 2006: 16):
* Integrated marketing involving communications, products & services, channels.
* Social responsibility marketing involving Ethics, Environment, Legal and Community.
* Relationship marketing involving Customers, Channel and Partners.
* Internal marketing involving Marketing department, senior management and other departments.
Wendy’s strictly follows the above concepts as it includes most of the marketing activities.
Wendy’s Business Strategies
Wendy’s new strategy puts its food products on center stage and changes its media-buying habits to zero in more narrowly on different market segments. TV spots and print ads will focus on specific audiences instead of delivering the same message to all demographic groups, tailoring the messages to the required audiences, broadening its scope.
In addition, the nearly 6,700-unit chain will advertise on the Internet to attract younger consumers and use a character named Smart Square to appeal to them in TV spots/advertisements.
Globally, all the Wendy’s employees work together to achieve in Driving Growth, Funding Growth and become Best Place to Work.
“SWOT analysis is a structured approach for evaluating the strategic position of a business by indentifying its Strengths, Weaknesses, Opportunities and Threats” (Jobber 2007: 63). To get a clear idea of Wendy’s/Arby’s group’s outlook, it is useful to analyze the restaurant’s Strengths, Weaknesses, Opportunities and Threats (SWOT). Additionally, a SWOT analysis summarizes the outcome of marketing audit of the company (Jobber 2007: 61).
Negative or potential to be negative
Positive, tangible and intangible attributes internal to an organization and within the organization’s control forms the strengths of a company.
* A strength in Wendy’s manufacturing is that their food is known for its freshness and quality.
* This quality of food is said to be one of the main reasons why Wendy’s has outpaced the annual sales gain of McDonald’s from 1998 to 2002 (“Industry Surveys,” 2003, p. 3).
* The expert management system of Wendy’s burgers adds to its much strength in time managing and store managing skills.
* The pleasant atmosphere of all the Wendy’s stores adds value to its strong customer oriented approach.
* Hamburgers are made with fresh, never frozen beef which is a huge hit with the customers.
* Being a Global brand, Wendy’s is capable of worldwide expansion with huge market left to be tapped and consumer base to capture.
* Strong supply chain is one of the key strengths of Wendy’s burgers with the suppliers meeting the fast food chains’ constant demand for the in time supply of raw materials in turn meeting the customers’ requirements.
* Another major strength of Wendy’s is its ‘mid night push plan’, it is operating its stores after the mid night also, which attracts the teenage and young people a lot.
* One of the major strength of the Wendy’s is its nutritional valued menu for the people who are maintaining a balanced diet.
* Wendy’s is the first restaurant which is offering a special menu for children and even for the kids.
Internal factors within an organization’s control that detract from the organization’s ability to attain the desired goal are the weaknesses of an organization.
* A manufacturing weakness could be that it will be difficult for Wendy’s to make dramatic improvements in the area of store management in the future.
* Breakfast menu – Wendy’s experimented with serving breakfast for a short time, but the endeavor was unsuccessful due to several issues.
* Constant management changes have lead to a reduction in customer as well as employee satisfaction hindering its growth and expansion.
* The franchisee stores are given freedom to have their own store atmosphere and layout and also employee uniforms.
* High dependence on a major country is the main weakness of the Wendy’s. Though it is globalized, it was operating mostly in USA and Canada. In the year 2007, more than 70% of its revenue is from the USA, this phenomenon leads to loss in profit rates in international market.
* The Wendy’s spreading of its stores is relatively very less, when compared to its close rivals, McDonalds and Burger King. The McDonalds opening 200 stores per year, the Burger King is opening at a rate of 150 per year, but Wendy’s is opening only 50 stores per year, so the expansion of business is very less comparatively.
External attractive factors that represent the reason for an organization to exist and develop. Brand recognition is the significant factor affecting their competitive position.
* Wendy’s’ international brand image gives it a scope for expansion into International markets.
* Recession has little or no effect on the fast food industry which provides a great opportunity for growth and expansion.
* Wendy’s was the first to introduce ‘fish sandwich’ making its mark and grabbing a huge market share.
* Rising of restaurant business in USA is great opportunity for Wendy’s. According to the Forbs magazine survey, in the year 2007 more than 25% of USA government revenue from fast food sector. The reasons for increment in convenient food consumption is, increasing single parent families, dual working households, no time for active cooking at home, hike in living standards of people etc. Wendy’s can utilize this as a great opportunity to increase its business
* Increasing population of teenagers and young people is a great opportunity for Wendy’s, as it was targeting them. According to the census in 2008, more than 40% of American people are teenagers, which was a great opportunity for Wendy’s.
* Increasing opportunities in developing countries like China and India. In 2007 Wendy’s make one percent of its revenue from India and two percent from China, still to be increased. There is a great opportunity for Wendy’s to develop its business in developing countries as there is less operating cost when compared to the developed countries.
External factors beyond the organization’s control which could place the organization mission or operation at risk.
* Accusation Wendy’s was accused recently as a consumer found a human finger in one of its item (Chili). Such kind of accusations would surely affect the brand image and high chances of drop in the market share. Much time and money is consumed to regain the lost share of the fast food market.
* Competitors Wendy’s faces stiff competition in the overall fast food industry, as McDonald’s holds a dominating 18% share of the market with Wendy’s and Burger King holding shares of approximately 2% each. In recent years Wendy’s has been lagging behind McDonald’s and Burger King in same store sales growth, an indicator of how established franchises are faring in the market. In addition to traditional hamburger-based fast food restaurants, Wendy’s must compete with chains such as Subway, Yum! Brands (YUM) and Jack In The Box (JBX).
* Controversy Wendy’s found itself the focus of a boycott bygay rightsgroups when the company pulled advertising from the sitcomEllenin 1997, which it deemed “controversial.
* Illnesses caused by food are the major threat for any fast food company. Though more care was taken, there was chance of food borne illnesses like e coli, gastric trouble etc. This was a major threat for Wendy’s.
* Food storage and transportation is also a major threat for Wendy’s. As it is more difficult to store raw materials as there are highly vulnerable to decomposition.
* Targeting a particular section of people is a major threat for Wendy’s, as it is targeting the teenagers only. This leads to a loss in the satisfaction of people of other sections.
* International Business expansion Limiting the business to the USA is the major threat to Wendy’s at international level. Limiting the business may leads to limiting the globalization and decreasing the brand name, profits and sales.
Make the most of these
Watch competition closely
Strategic turn around required
Wendy’s/Arby’s group has to maintain all their strengths and grab all the opportunities. On the other hand, Wendy’s/Arby’s group should sooner overcome all its weaknesses and work harder in overcoming the threats.
“Competitive advantage is the achievement of superior performance through differentiation to provide superior customer value or by managing to achieve lowest delivered cost” (Jobber 2007: 27).
Factors like being the third largest chain restaurant, having a large market share in USA and its target consumers being teenagers who form a majority of consumer base are considered as the competitive factors by Wendy’s.
Lack of differentiation- Consumers have accessibility to similar menu that is used by other hamburger chains of the same segment. Hence fulfilling consumers needs.
Unique patty shape- Wendy’s burgers have a unique square shaped patty instead of a regular round patty, which other hamburger chains use.
Customer Loyalty and Satisfaction
Convenience- The ease of accessibility of its stores by deploying them in prime locations adds to consumers’ convenience.
Speed of service- Implementing drive through and home delivery system in all its stores to attain speedy customer service.
Third largest company in QSR or Quick Service Restaurants
Introduction of new products like fish sandwich, square shaped fresh ground beef patty, salads in its breakfast menu, etc have been introduced by Wendy’s.
Fifth in terms of highest total revenue generated next to McDonald’s Corporation, Doctor’s Associates, Yum! Brands and Jack in the Box.
Location variables – Setting up Wendy’s restaurants where the potential consumer(working class, teenagers, etc) concentration is high.
Strengthen penetration – To attain a firm grip in the market where it is already existing.
Centralized distribution center – Wendy’s has the strongest supply chain management system which is very efficient in saving unnecessary expenses thus reducing the number of distributing centers in turn cutting down on costs.
Reduce labor costs – Costs associated with labor is a major factor in the success of any business. Wendy’s labor costs include upper management, but the bulk of Wendy’s employees are the workers at individual restaurants. Wendy’s achieved to cut labor cost by downsizing the number of managers from 3.6 to 3.3 by June of 2007. Wendy’s expects that this will not only decrease labor costs but also enhance efficiency at individual restaurants as they have found that a high number of managers can result in division of responsibility and confusion. In 2007 Wendy’s total operating costs were approximately $2.29 billion while total revenue was about $2.45 billion, leaving a slim operating income of approximately $156 million. If Wendy’s labor cost reduction initiative can successfully decrease labor costs without negatively impacting revenues, Wendy’s could see a substantial increase margins and operating profits. http://cdn.wikinvest.com/i/px.gif
Economies of scale- Economies of Scale is achieved by balancing the capital invested and reducing costs.
International fast food market is the best place to invest in as far as Wendy’s investment options are considered.
Research on untapped foreign markets in order to gain knowledge for future investments.
Forces that Affect Competition
The Economy caused businesses everywhere to focus on low cost to the customer, this presents a problem when every firm lowers its prices.
The end result is that the low price becomes the new standard so competition now lies in value.
Wendy’s has taken this road before during the inflationary period of the 1970s, with the slogan “Quality is Our Recipe”.
The Super Size Me Documentary also affected competition among the major fastfood chain restaurants.
Caused a public backlash against fast-food restaurants.
In response to the 2004 film, Wendy’s introduced the Chicken Temptation® selections to their existing menu.
Competing in the Industry
Overall Wendy’s needs to stand by their strategy of creating a niche market by way of their side dish offerings.
Expand competition base by being innovative and effective.
The major competitive advantage of Wendy’s is ‘Healthy Fast Food’.
6.Marketing Mix Analysis
• The tools available to a business to gain the reaction it is seeking from its target market in relation to its marketing objectives
• 7Ps – Price, Product, Promotion, Place, People, Process, Physical Environment
• Traditional 4Ps extended to encompass growth of service industry
Marketing strategy is generally obtained by the 3 key elements namely the target markets, competitors’ targets and the competitive advantage (Anderson 2008). Once the marketing strategy is finalized, the company starts looking into the facts of the marketing mix. “Marketing mix is the set of controllable, tactical marketing tools that the firm blends to produce the response it wants in the target market.” (Armstrong and Kotler 2009).
Marketing mix is essential for the company to develop the demand for its products. This can be collectively done by the four vital categories which are well-known as 4-Ps of marketing mix. The 4-Ps are namely Product, Price, Place and Promotion (Armstrong and Kotler 2009: 83).
Product Customer solution
“Product is a good or service offered or performed by an organization or individual, which is capable of satisfying customer needs” (Jobber 2007: 28).
Brand name and Quality
The brand image is obtained by utilizing the fundamentals of marketing mix (Jobber 2007: 332).
Wendy’s/Arby’s Group is the parent company of Wendy’s, and is a publicly traded company. Wendy’s Restaurant Group, Inc. is a wholly owned subsidiary of Wendy’s/Arby’s Group, Inc. Wendy’s/Arby’s Group, Inc. is the franchisor of the Arby’s and Wendy’s restaurant systems and trades on the New York Stock Exchange under the symbol “WEN.” A change in the company’s ownership set the course for menu expansion and a strengthened brand. On September 29, 2008, Triarc Companies Inc. merged with Wendy’s International, Inc. to form Wendy’s/Arby’s Group, Inc. Wendy’s/Arby’s Group, Inc. is the third largest quick-service restaurant company in the United States.
Wendy’s restructured its cleanliness standards, menu and other operational details to ensure that stores met the goals and standards of the parent company so that its franchises were competitive in the market.
Wendy’s mission is to deliver superior quality products and services for their customers and communities through leadership, innovation and partnerships. Their vision is to be the quality leader in everything they do.
Wendy’s has a strategic vision focused on these core values: Quality: Freshly-made products and superior service are their passion; consistent excellence in customer service is their goal. All actions are guided by absolute honesty, fairness and respect for every individual. People (consumers) are the key to success; they value all members of the diverse family for their individual contributions and their team achievements. Satisfying internal and external customers’ needs is the focus of everything they do. Continuous improvement is how they think and innovative change provides competitive opportunities.
Features and Variety
The Wendy’s menu features a variety of products that are stated below which are unique from its competitors.
* Signature roast beef, including Roast burger.
* Market Fresh deli sandwiches.
* Market Fresh salads.
* Toasted subs.
* Jamocha and specialty shakes.
* Curly Fries and Side kickers.
* Wendy’s featuresFrench friesas a primary side item, but also offers a number of options for side items/dips, includingsalads(side and Caesar side),chili,yogurtwithgranola,mandarin oranges, andbaked potatoes. In several markets, the customer may request any of these side items to be substituted for fries in its value meals.
* In June 2006, Wendy’s removed their classic “Biggie” and also the “Great Biggie” sizes in favor of a more traditional sizing system like; “Small”, “Medium”, and “Large”.
* Frostydessert – It is asoft serve ice creamdessert sold in chocolate or vanilla flavours. Also sold as a floatand a mix-in dessert called the Twisted Frosty.
* In Japan, Wendy’s offers ared bean pasteand cheese sandwich called as an “An” Burger
* Big Classic- It is a sandwich that directly competes with the Burger King’s Whopper.
* Mayonnaise, lettuce, tomato,pickle, ketchup and onion served on aKaiser-style roll. A second version with bacon is available, called the Big Bacon Classic.
* Baconator- with mayonnaise, 6 strips of bacon, two 1/4 pound (113.4 gram) patties, ketchup and two pieces of American cheese.
* In Dec 2006, Wendy’s phased out and stopped offering their fried “Home style” chicken strips in most of its U.S.locations. There is now a chicken club combo in the place of the strip’s, which features a Home style chicken patty, Spicy chicken patty or a Grilled Chicken patty with Swiss cheese and also bacon. The Home style chicken strips are still available in parts of Canada.
* In the Philippines they serve fried chicken, which forms staple at most fast food restaurants in that country.
Price Customer cost
“Price is the amount of money customers must pay to obtain(buy) the product.” (Armstrong and Kotler 2009: 83). The price of any product partially highlights its quality.
The Pricing strategy primarily consists of
* Getting to know the market.
* Keeping in pace with the competitors.
* Because Price and Convenience are near universal throughout firms in the industry, Wendy’s must focus on becoming the “highly favored” fast-food choice. Doing so will give customers more inclination to visit store locations.
“Place includes company activities that make the product available to target consumers.” (Armstrong and Kotler 2009). The vital role of marketing is the process of how the product is being sent from seller to buyer.
The means by which the products and services reach the consumer from the producer and where they can be accessed by the consumer. The more places to buy the product and the easier it is made to buy it, the better for the business (and the consumer).
Approximately 77% of Wendy’s restaurants are franchised, the majority of which are located in North America. Wendy’s and its affiliates employ more than 46,000 people in its global operations. While Wendy’s sets standards for exterior store appearance, food quality and menu, individual owners have control over hours of operations, interior decor, pricing and staff uniforms and wages.
Wendy’s operates in 19 countries around the world while its headquarters is based in Dublin, Ohio. It operated in more countries, but closed down in some of them due to certain circumstances.
Wendy’s never uses frozen beef, it’s always fresh.
“Promotion means activities that communicate the merits of the product and persuade target customers to buy it.” (Armstrong and Kotler 2009).
Different ways of promoting the product are
Advertising is a major “phase” of overall product or service development and management. Advertising is specifically part of the “outbound” marketing activities, or activities geared to communicate to the market, e.g., advertising, promotions, public relations, etc.
Wendy’s recently began a cross-promotion withNintendo. When you buy specific Wendy’s items you receive a code on that can be entered on the web siteFrostyFloat.comand be entered to win aWii. Wendy’s marketing arm engages inproduct placementin films (such asThe Day After Tomorrow,Mr. Deeds,Garfield: The Movie, andClick) and television and is sometimes seen on ABC’s hitreality showExtreme Makeover: Home Editionserving food to the more than 100 construction workers. A recent Wendy’s commercial features the tune from theViolent Femmessong “Blister in the Sun.”ScrubsstarZach Braffcan currently be heard invoiceoverin Wendy’s newest commercials. With the launch of the new ad campaign, Wendy’s has also unveiled a new slogan, “That’s right.”
Few of the advertising slogans of Wendy’s are given below
US – Canada
* 1970 – Present:Quality Is Our Recipe
* 1978:Juicy hamburgers and lots of napkins
* 1979: ” Hot-N-Juicy
* 1980:Wendy’s Has the Taste
* 1981:Ain’t No Reason to Go Anyplace Else
* 1982:You’re Wendy’s Kind of People
* 1983:Parts is parts
* 1984:Where’s the beef?
* 1986:Choose Fresh, choose Wendy’s
* 1987:Give a little nibble
* Circa 1990:The best burgers and a whole lot more(also was printed inside the hamburger wrappers during the 1990s)
* 1997 – Present:Eat great, even late
* 2002:It’s hamburger bliss.
* 2004:It’s better here
* 2004:Always Great, Even Late.
* 2005 – 2007:Do what tastes right.(primary slogan)
* 2005 – Present:It takes flair to be square.
* 2007:That’s right.
* 2007:Uh Huh.
* 2007:Hot Juicy Burgers
* 1983:It’s the best time for…Wendy’s(Philippines)
* 2000 (approx) – Present:We don’t cut corners(New Zealand)
* 2000 (approx) – Present:Wendy’s cuadra contigo(Wendy’s fits with you). The wordcuadra(fit) is a reference to the wordcuadrothat meanssquare(Venezuela)
* 2001 (approx) – Present:El Sabor de lo Recien Hecho(The Flavor of the Brand New Made) (Honduras)
* 2007 (approx) – Present:Wendy’s es Sensacional(Wendy’s is Sensational) (El Salvador)
Personal selling involves incentive programs, sales presentations and trade shows (Armstrong and Kotler 2009: 383). Personal selling is oral communication with potential buyers of a product with the intention of making a sale. The personal selling may focus initially on developing a relationship with the potential buyer, but will always ultimately end with an attempt to “close the sale”
Personal selling is one of the oldest forms of promotion. It involves the use of asales forceto support apush strategy(encouraging intermediaries to buy the product) or apull strategy(where the role of the sales force may be limited to supporting retailers and providing after-sales service).
Sales promotion is any initiative undertaken by an organization to promote an increase in sales, usage or trial of a product or service. Sales promotions can be directed at either thecustomer, sales staff, ordistributionchannel members (such asretailers).
Public relations can be used to build rapport withemployees,customers,investors,voters, or the general public. There are various kinds of public relations, but the most important are financial relations with public, product relations with public,and crisis public relations.
§ Financial public relations – providing information mainly to business reporters.
§ Product public relations – gaining publicity for a particular product or service (rather than using advertising).
§ Crisis public relations – responding to negative accusations or information.
§ Wendy’s has their official worldwide websites where the it regularly updates information such as yearly annual report, products, interviews with management faculties etc.
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