Wendy's to cut $30M in expenses

by Monica Watrous
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DUBLIN, Ohio — The Wendy’s Co. has announced plans to reduce operating expenses by approximately $30 million and reinvest in growth initiatives.

“Given our expected higher cost structure in 2015 and beyond, due primarily to record high beef costs, wage inflation, and the implementation of the Affordable Care Act, we are taking proactive steps to strengthen our economic model and realign our G&A resources to focus on investments and consumer-facing restaurant technology, and accelerated restaurant development,” said Emil Brolick, president and CEO of Wendy’s, during a Nov. 6 conference call with financial analysts.

The savings include $8 million from the previously announced sale of 135 restaurants in Canada. The company said it also will realign US field operations and reduce expenses at the company’s restaurant support center in Dublin.

“But this initiative is about more than just cost-cutting,” Brolick said. “It’s also about the realignment of resources to enable same-restaurant sales and new restaurant growth.”

Wendy’s is investing in a mobile payment and ordering platform to drive customer loyalty with increased transactions, higher check and faster service.

“These initiatives are essential elements of our growth strategy to increase brand relevance and economic model relevance,” Brolick said.

Net income attributable to the Wendy’s Co. in the third quarter ended Sept. 28 advanced to $22,830,000, equal to 6 cents per share on the common stock, which compared with a loss of $1,939,000 in the prior-year period.

Net revenues totaled $512,489,000, down 20 percent from $640,779,000 in the comparable quarter, reflecting the sale of company restaurants to franchisees, higher beef costs and restaurant closures as part of Wendy’s reimaging program.

During the quarter, same-restaurant sales growth at company-operated restaurants increased 2 percent, slightly below expectations. While Wendy’s was pushing such premium items as a smoked gouda chicken sandwich on a brioche bun, the fast-food chain said it lost value-oriented business. Looking ahead, Wendy’s will promote its Right Price Right Size menu of lower-price items while continuing to plug such higher-end entrees as barbecue pulled pork.

“What we see is that actually if you think about the price-value marketplace, it’s not a totally homogenous marketplace,” Brolick said. “And what I mean by that is there are some people in that marketplace that are attracted by a value menu. Some of them are more coupon users. And then some of them are more users of what I’d call a higher-end promoted product that has been discounted. So, I think as we look at Right Price Right Size Menu, I think there’s some refinements we can make in messaging there. But we also have to just look at the portfolio of price-value messages that we put in front of the consumers.”
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