Over at Burger King, big time changes were happening in Fiscal 2006. Burger King’s private equity investors offered up the company to the public. John Chidsey was named CEO to replace turnaround artist Greg Brenneman. QSR 50 measures show stagnant systemwide sales and continuing unit closings, but the 4-percent increase in annual unit volume is the most indicative of what’s happening with the King.
Burger King’s premium burger line continues to influence positive sales, and the company reports a rise in its breakfast market share. For second quarter 2007, the company reported its eleventh consecutive quarter of positive comps in North America and twelth worldwide.
Wendy’s, meanwhile, is still struggling to find its place in the market. After nearly challenging Burger King for the number two spot a couple of years ago, Wendy’s finds Subway nipping at its heals just $90 million in sales shy of taking the number three spot away. While Kimberly Savilonis, vice president of business development at GE Capital Solutions, Franchise Finance, advocates caution in reading too much into any single annual figure, reading the Wendy’s financial releases gives you the feeling the company is scrambling to right itself.
Wendy’s year started out with an IPO of its more successful Tim Horton’s chain, followed by a complete spin off later in the year. Next up was the retirement of CEO Jack Schuessler and a reorganization of the restaurant operations leadership team. CFO Kerrii Anderson was tapped as interim and finally full-on CEO and president. By the end of 2006, Wendy’s finally sold off its boat anchor Baja Fresh chain, which lost over 4 percent in system sales and unit volumes in a year where Chipotle, Qdoba, and Moe’s grew at 30–40 percent.
In February of this year, Anderson was touting Wendy’s new comprehensive strategic plan as “already paying dividends.” The plan touts the “Quality Made Fresh” “brand essence,” improving operations, introducing more than 10 new products, providing incentives to franchisees to reinvest in existing restaurants, expanding the breakfast program, and tying compensation to company performance.
By May 2007, however, Wendy’s had hired JP Morgan and Lehman Brothers to “explore strategic options.” Among the options are changes to the aforementioned strategic plan, changes in capital structure (taking it private?), and a sale, merger, or other business combination.
The next big story of the year was the continued strength of the fast-casual market. Fast-casual grew at double the rate of traditional quick-serve, 9.5 to 10 percent according to Lombardi. The seven fast-casual chains that made the 50 grew at a whopping 17.9 percent in systemwide sales and 11.6 percent in unit counts. By comparison, traditional quick-serve chains in the 50 grew sales at 5.3 percent and units at 4.8 percent.
“Quick-casual is still spot on with what consumers want and still underdeveloped,” Lombardi says.
The undisputed powerhouse of fast-casual, Panera Bread continues to grow at a healthy pace. Even with double the units of its nearest quick-casual competitor and 6.5 times that of the following competitor, Panera grew at almost 20 percent in sales and 17 percent in units.