Why Wendy's Will Never Be Great Again


Wendy'sThese should be exciting times for Wendy's (WEN):

  • The company spun off its Arby's sibling last year, freeing it to focus on its flagship burger-flipping chain.
  • In September, for the first time in its 42-year history, Wendy's reformulated its signature sandwich.
  • Just last month, the fast-food giant reentered the Japanese market,
  • And, it's hoping to give the breakfast market another crack soon.

However, pull up a stock quote and you'll find that a single share of Wendy's fetches about the price of one of its value meals. In fact, shares of Wendy's have been trading in the single digits for more than four years. There's little reason to expect that to change.

New Burger, Same Problem

The autumn debut of Dave's Hot 'N Juicy -- accompanied by a retro marketing campaign that brought back nostalgic "Where's the beef?" memories -- should have helped. The new burger features a more bountiful beef patty, bakery-style buttered bun, and extra cheese. In a twisted tribute, the new sandwich was named after the deceased founder, Dave Thomas, who never saw a need for an updated burger.

Wendy's can't help it. The "gourmet" burger joints are coming. Places with names like Five Napkin Burger and the organic-oriented Elevation Burger are raising expectations on the informal sandwich. Then you have the regional faves that are making territorial strides. Virginia's Five Guys is opening hundreds of new locations a year. West Coast icon In-N-Out Burger is taking baby steps eastward.

Upgrading its burger is nice, but even Dave's Hot 'N Juicy is no match for what some of these places are cranking out. In the meantime, retail watcher Technomic reveals that McDonald's (MCD) continues to gain market share at the expense of Wendy's and the now privately held Burger King.

McDonald's hasn't had to toss a new burger on the fryer to keep its charmed streak of success going.

Arby's Wasn't the Enemy

A fire sale for a majority stake in Arby's was cheered by investors late last year, sending the stock up to a fresh 52-week high.


It's not as if unloading a concept has ever helped Wendy's turn around its namesake concept. A few years ago Wendy's shook off its fledgling Baja Fresh burrito joint and spun off Canadian bakery Tim Hortons (THI). All this did was bring down the stock to value-meal prices.

After all, it's not as if all of this focus led to a revival. Wendy's began 2008 with 6,645 stores. Three years later, there were just 6,576 locations.

This may not be entirely Wendy's fault. Burger King has struggled. Drive-in specialist Sonic (SONC) has also been a market laggard. Behind the Golden Arches, there is no worthy silver medalist these days. However, the facts are what they are. Wendy's is in trouble.

Will Goose Livers and Truffles Do the Trick?

It's not as if Wendy's hasn't gotten around to expanding overseas. It's just that it has been a disappointment as an export. Just 8% of its revenue comes from outside the United States. The burger chain may hail from Dublin, but it's the Dublin in Ohio.

Wendy's is getting crafty after flopping previously in Japan. Taking a page out of the gourmet playbook, the new Wendy's there offers a $16 burger topped with goose-liver pate and truffles. Yes, Wendy's just played the foie gras card. Whether that's the kind of novelty that will win it cult status in Japan or the ire of activists closer to home remains to be seen.

What about expanding the menu? When Wendy's tried to match Burger King and McDonald's in rolling out breakfast in the mornings, the a.m. rush never materialized, and Wendy's nixed its morning menu. (You know it's pretty bad when even Subway is promoting a breakfast menu, and you're not.)

More important, the consumer mind-set already has etched an impression of Wendy's that they can't shake loose. Trying to burn an older image by going all the way back to the glory days of Clara "Where's the beef?" Peller isn't going to be enough. If anything, in trying to be all things to all people, Wendy's may have lost the magic of its originally limited menu.

A few years ago, ordering a Frosty got you a simple frozen chocolate concoction. These days it's either vanilla or chocolate, and then an array of ways to turn what oozes out of that machine into sundaes, fruit parfaits, or shakes.

Wendy's can't go back to the past, and it may not be able to compete in the future.

Longtime Motley Fool contributor Rick Munarriz does not own shares in any of the stocks in this article. Motley Fool newsletter services have recommended buying shares of Tim Hortons and McDonald's.

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Wendy's new fries stink! Their salads not stink. The only thing that has not been screwed up is the chili. The rest of it is awful. I had to stop going. If they went back to basics maybe it would be ok. I drive past 2 of them to go to other food chains. Yes I even called the main number and told them there to.

January 18 2012 at 10:08 PM Report abuse +1 rate up rate down Reply

Get to Work is right! (My) experience anyway is that drive-thru service is quickest/best at McDonald's and Wendy's lags. The regulars burgers were always good, the value stuff not so much. I used to like the Salad Bar, in places where it was kept up - it offers good choices, the sit-down may get people to buy more other stuff, enriching profits. Breakfast? Naturally I loved it in college in the 80's and naturally it got cut, like everything I like. The Hardee's breakfast biscuits were the best, but they are far away from the North where I live. I'm not knocking McDonald's, they get a lot right, but it would be nice to see others have some success too, which is better for everyone.

January 18 2012 at 9:33 PM Report abuse rate up rate down Reply

Wendy's hasn't been the same since Dave Thomas died

January 17 2012 at 8:52 PM Report abuse rate up rate down Reply
Dennis Faulkner

I still love Wendy's - for people like me - pre-diabetic - if they have an option of whole-grain buns, and other stuff we diabetic types can eat - this gives an edge over other places that we really shouldn't be eating at. I find myself amazed at how little I can "cheat" on my diet at times and feel decent. The white bread, potatoes, sugar, all supposed to be off-limits -

January 17 2012 at 7:27 PM Report abuse rate up rate down Reply

Just remember: Meat is murder, and it is killing us !

January 17 2012 at 10:16 AM Report abuse -1 rate up rate down Reply
2 replies to falconsso's comment

Fag comment.

January 17 2012 at 8:53 PM Report abuse rate up rate down Reply
1 reply to goblue9102005's comment

Fag response to fag comment.

January 18 2012 at 9:23 PM Report abuse rate up rate down

Meat is only murder for a cannibal, humans are omnivores and although I know you didn't mention them, PeTA spews forth half truths and are borderline terrorists.

January 18 2012 at 5:03 AM Report abuse +1 rate up rate down Reply

I like Wendy's food, but they seem to have by far the worst drive thru service. My orders are never right. If they'd clean up their management and improve service, they might see things going up instead of down.

January 16 2012 at 6:45 PM Report abuse +1 rate up rate down Reply
1 reply to GET TO WORK!!!'s comment

That's more a fault of local management. My local one has good service for a standard fast food burger joint both via the drive through and just walking into the place.

January 18 2012 at 5:09 AM Report abuse rate up rate down Reply
Bill Mc

My wife and I stopped at Wendy's for the first time in about 20 years, and we were pleasantly surprised at the quality of the burgers, cleanliness, and general appearance of the store, just off interstate St Louis to Chattanooga.

January 16 2012 at 5:58 PM Report abuse rate up rate down Reply
Personal Robot

"Wendy's nixed its morning menu"

Um, no - still have a full breakfast menu, just ate there on Friday. See the commercials all the time, too. In fact, they just added a bunch of stuff a few months back.

January 15 2012 at 3:14 PM Report abuse rate up rate down Reply

If Wendy's wants a come back, I disagree with the article. Going back to the past would work in my opinion. The W burger is just a lame attempt at mimicing a BigMac. Bad move. Wendy's needs to bring back the Salad Bar!! That's right. Who else has a fast food salad bar? If you want to make your own salad on the fly, Wendy's would become your logical choice.

January 15 2012 at 2:30 PM Report abuse +1 rate up rate down Reply

I actually love the new Wendy's. The old fries were soggy and mushy, the burgers were nothing special compared to McDonald's or Burger King. Their new fries are my favorite of any fast food drive-through chain I've been to. I love that they have the skins on them, they're crispy, and salty (although admittedly sometimes too salty for my taste). The burgers do have more meat than before and the buns are absolutely delicious. I can taste the butter and can tell that they're grilled. They are absolutely the best burgers when compared to McDonald's and Burger King, even Cookout which is the new chain in our town and supposedly has the best burgers. The others have flat, smooshed burgers that are soggy and too greasy with little taste or too much mayonnaise and ketchup - all of this is especially true for Burger King. While Wendy's burgers aren't what is pictured (no food item ever is) they hold their shape better than the others and are never soggy. I can't speak for the chicken personally as I never order it but my roommates love it. They always get the spicy chicken sandwich and say it's the best in our college town. The new Wendy's is what actually got me addicted to fast food. Before, I used to never eat at chains like that. Now I eat there at least once a month, much more so during exam weeks. I love the new Wendy's and I hope that people begin to realize how much better it is than McDonald's or Burger King. I've also never had an issue with employees being rude. The ones I've been too have always been very polite. But they have messed up my order before. But so hasn't other fast food chains. It happens although there's no excuse for rudeness when this brought to attention. I'm sorry that some of you have had issues with Wendy's but I personally love it. The burgers, the fries, the frosties. Wendy's is my favorite and even ideal fast food chain.

January 15 2012 at 1:05 AM Report abuse -1 rate up rate down Reply