Would Wendy’s buy another brand?

The Wall Street Journal reported in mid-July that Wendy’s held merger talks with Papa John’s. The preliminary conversation fizzled following the John Schnatter incident, namely a July 11 report that Schnatter, the pizza chain’s founder, used a racial slur during an in-company conference call.

When asked if Wendy’s would consider future M&A opportunities, Penegor responded: “Yeah, we'd have to look at would it complement the capabilities that we have? Could it accelerate the capabilities that we have? Would it work for our franchise community?”

“But that said, investing in growth is our number one priority, and that's we'll stay focused,” he said.

Nothing new for now, but definitely worth keeping an eye on.

And about that growth …

Wendy’s opened 36 restaurants globally in Q2, including 25 in North America. Net with closures, Wendy’s expanded its footprint by 23 restaurants (13 in North America), bringing its development to 22 net openings globally year-to-date. There are more than 6,600 units worldwide and Wendy’s is sticking to its 2020 target of 7,250 global restaurants.

Wendy’s also continues to evolve its system with “franchise flips.” Last February, Penegor said, thanks to these franchisee-to-franchisee restaurant transfers, nearly 40 percent of its North American system had changed hands—a process he said strengthens Wendy’s system by ensuring restaurants are in the control of strong operators with access to capital. The chain completed 64 franchise flips in Q2 and is on pace for 200 in 2018.

Wendy’s continues to update its design through an Image Activation program, with plans to expand by about 10 percent this year. That would put Wendy’s north of 50 percent by fiscal 2019.

The company’s is curating smaller footprints to fit Wendy’s into all trade areas as well. There’s now anything from a 28-seat dining room store to 45 to 55 to the traditional 65-plus seaters. Wendy’s opened a “Smart 2.0” restaurant that pulled another $150,000 of costs out of the restaurant by optimizing its footprint. This built on Smart 1.0, which is a big part of Wendy’s pipeline today, Penegor said. The next iteration will play a role next year.

Leadership in the digital age

Wendy’s chief information officer David Trimm is retiring early 2019. With that news, the company took a fresh look at its technology platforms and decided to refocus its leadership structure moving forward “to ensure we continue to leverage technology across all we do,” Penegor said.

Kurt Cane, Wendy’s chief concept and marketing officer, will lead all digital initiatives under a newly created “Digital Experience Organization.”

Additionally, Wendy’s engaged a global consulting firm to accelerate its move toward consumer-facing technology, such as mobile ordering, rewards, and kiosks. About 60 percent of Wendy’s stores feature kiosk technology.

CFO Gunther Plosch is expanding his role by taking on all enterprise technology to ensure Wendy’s has a strong foundation across all of its IT systems.

Next, chief operation officer and head of international Bob Wright is transitioning his international responsibilities to Abigail Pringle. Wright instead will oversee in-restaurant technology and turn focus to driving operational excellence in North American units. Pringle will take on a newly create role of chief global development officer and head of international.

To say Wendy’s is taking its digital future seriously would be it stating it lightly.

The value of value (and fresh beef)

Wendy’s launched a 2 for $6 promotion in Q2. Penegor said it allowed “us to offer consumers some of our most popular menu items at a compelling price point.” It was a hit with loyal guests and was a nice check builder, he added. The Southwest Avocado Chicken Sandwich and salad LTO balanced out the calendar and highlighted Wendy’s commitment to fresh ingredients. Soon after, it introduced the 50-cent Frosty promotion to kick off summer. At the same time, Wendy’s highlighted its fresh never frozen stance with the Baconator.

Wendy’s has been more aggressive than usual lately in regards to this fresh positioning. Penegor said, in the past, awareness around this core beef trait was less than 50 percent. It’s climbed the mark recently thanks to marketing, both traditional and via social media, where Wendy’s is one of those most vibrant personalities on the channel.

Penegor has mentioned in recent calls that competitor’s switch to fresh beef (McDonald’s and Quarter Pounders) has actually enabled Wendy’s to drive the message home even further.

“If you look at overall awareness in association of our fresh never frozen beef, it continues to be really strong not only for our brand, but we have four times more the association of fresh never frozen versus our top two competitors,” he said. “So, people associate fresh with Wendy's. We continue to support that not only in our traditional media campaigns on TV, but as we focus on the food within our social media following. And when you look at how our businesses performed in the second quarter, we're pleased. We had nice growth on our premium hamburger business. So I'll leave it at that.