2. WENDY’S ORGANIZATION
Wendy’s founded by Dave Thomas
Went to work for Hobby House
Turned the three restaurants
around became a millionaire
3. FIRST WENDY’S
First Wendy’s November 15, 1969
Columbus Ohio
Offered a homey place and fast food
Made to order hamburgers
4. DAVE’S INNOVATION
1st to offer never frozen and fresh
beef
1st to offer salad bar and baked
potato
Creation of modern day pick-up
window
5. WENDY’S/ARBY’S
MERGE
April 2008 Wendy’s and Arby’s parent
companies Merge
Create 3rd largest fast-food restaurant chain
in the United States with 12.5 B sales,
10,000 units
Today Wendy’s has more than 6,600
restaurants in the US and other markets
6. INDUSTRY OVERVIEW
• 8 million restaurants in the world and some
300,000 restaurant companies
• Divided into full service and fast food
• The fast food industry is exceedingly
fragmented
• The top 50 companies hold about 25 percent of
industry sales.
7. INDUSTRY OVERVIEW
Wendy’s is a QSR
Competitors that we compared to Wendy’s
are McDonalds, Jack-in-the-Box, and Sonic
Taken as a whole, restaurant sales have
been increasing just over 5% annually.
8. ANNUAL SALES
The full-service restaurant segment of the
food industry is anticipated to generate $173
billion in sales
Fast food and quick service restaurant
industry includes about 200,000 restaurants
with combined annual revenue of $120
billion.
9. DIVERSIFYING WORKFORCE
Made up of 12.2 million employees and is
highly labor intensive.
Restaurant industry workers make up 9
percent of the nation’s workforce.
By 2015, the restaurant industry is predicted
to add another 1.8 million positions.
10. DIVERSIFYING WORKFORCE
• Increasing number of foreign-born workers in the
United States
• According to the U.S. Census Bureau there are 33.5
million foreign-born individuals in the United States
who make up 11.7 percent of the total population.
• Presence of foreign-born workers in the restaurant
workforce is anticipated to swell in the coming years.
• The supply of workers age 16 to 24 has been
declining
11. PORTER’S FIVE FORCES MODEL
• Rivalry Among Existing Firms
• Threats of New Entrants
• Threat of Substitutes
• Bargaining Power of the Customer
• Bargaining Power of Suppliers
12. RIVALRY AMONG EXISTING FIRMS
Help measure the level of profitability
QSR has intense competition for growth in
the market
Customers face low switching costs
QSR is labor intensive with low knowledge
required
Low level of growth increases the rivalry
13. RIVALS CONTINUED
QSR does not face many exit barriers
The industry is risky to enter
All firms offer same basic items
Differentiate through design, variety,
quality, and speed
14. THREAT OF NEW ENTRANTS
Economies of Scale
Capital Investment Requirements
Access to Distribution Channels
Reaction of Other Industry Players
15. THREATS OF NEW ENTRANTS
Economies of Scale
In mass production, as production efficiency
increases; cost decreases
Total assets: cash, inventories, property and
equipment, and trademarks
16. THREATS OF NEW ENTRANTS
TOTAL ASSET Data (in millions) obtained from companies 10k
2003 2004 2005 2006 2007
Wendy's $1,333 $3,198 $6,440 $2,060 $1,455
McDonalds $25,838 $27,838 $29,989 $29,024 $29,392
Jack in the Box $1,142 $1,325 $1,338 $1,520 $1,375
Sonic $486 $518 $563 $638 $759
AVERAGE $7,200 $8,220 $9,583 $8,311 $8,245
17. THREAT OF NEW ENTRANTS
Capital Investment Requirement/Legal Barriers
Stay up with location of units, quality and speed of service, attractiveness of
facilities, effectiveness of marketing and new product development
High overhead cost: rent, labor, rates and bank interest charge
Franchise ($250,000 to $1M)
High start-up and ongoing capital requirements
State/Federal regulation
Federal Trade Commission
Americans Disabilities Act
Trademarks and patents
Brand awareness
18. THREATS OF NEW ENTRANTS
Access of Distribution Channels
Acquiring subsidiaries
Wendy’s Bakery Co.
Established relationships with suppliers
19. THREATS OF NEW ENTRANTS
Reaction of other industry players
Starbuck coffee vs. McDonalds premium coffee
Dollar Menu
Who was the first to use the dollar menu?
Healthy fast food
Baked potatoes
salads
Yogurt
Bananas
20. THREAT OF SUBSTITUTES AND THE QUICK
SERVICE RESTAURANT INDUSTRY
The threat of substitutes in the industry is
very high
Many store locations and companies
A choice in the type of quick-service restaurant
One industry competitor of the QSR is the
Full-Service Restaurant Industry
Offershigher levels of service at higher prices
More focus on food quality
21. THREAT OF SUBSTITUTES BASED ON
ENVIRONMENTAL FACTORS
• The general state of the economy
– When consumers have more disposable income
they will often choose higher quality food
• Societal views and perceptions
– Consumers are becoming more health
conscious; this leads them to avoid many firms
within the QSR industry
22. SUBSTITUTES BASED ON ENVIRONMENTAL
FACTORS CONTINUED…
The age of the consumer
Older customers prefer higher service and food
quality
Mood of the customer
Families or couples who desire to eat and relax
will see firms in the FSR industry as the obvious
choice
23. BARGAINING POWER OF SUPPLIERS
“Definition”
Their ability to set their prices for their
customers
Truly competitive market
Best Deals = Long working relationships
24. BARGAINING POWER OF SUPPLIERS
“Factors”
Differentiation of Inputs
Switching Cost
Substitute of Products
Importance of Volume to the Supplier
Cost Relative to the Total Purchase of
Industry
25. BARGAINING POWER OF SUPPLIERS
Bargaining Power is Highest When:
Sellers product has few substitutes and is
important to buyer
When differentiation makes it costly to switch
suppliers
When suppliers can vertically integrate and
compete with buyer
When buyers can’t vertically integrate
backward and supply their own needs
26. BARGAINING POWER OF CUSTOMERS
The QSR products are undifferentiated
Companies must compete on price to attract
customers
This gives the customers a high amount of
bargaining power
Customers determine what products are offered
Customers determine what the price the products
27. ECONOMIC FACTORS IN THE ENVIRONMENT
Even though the economy is in a downturn
QSR companies sell a product that is ideal for the
current economic environment
QSR companies are still posting growths in sales
and revenues
QSR companies are still expanding their operations
28. ECONOMIC FACTORS IN THE ENVIRONMENT
Economic factor implications for the QSR
The current recession gives QSR companies the
ability to weather the storm
Could use the opportunity to take market share
away from full-service restaurants
Low borrowing costs can allow them to expand into
new markets
29. COMPETITIVE FACTORS IN THE ENVIRONMENT
The firms in the QSR compete on
Low price so they must continuously strive to cut
costs
Competing on price forces QSR companies to take
small margins on products
Successful competition depends selling a large
volume of products
30. COMPETITIVE FACTORS IN THE ENVIRONMENT
The competitive implications for the QSR
To survive in the QSR a company must have a
large number of restaurants
Only a few companies are able to compete on a
global scale
However regional and hometown offerings can
compete on a small scale
To compete with the smaller firms QSR
companies must improve customer service
31. TECHNOLOGICAL
Technology within the QSR has helped firms
gain market share from other suppliers
Point of Sale (POS)
Order taking
Speed of service
Computer capabilities
32. LEAN ACT
The Labeling Education and Nutrition Act
(LEAN Act) legislation is the first of its kind
affecting prepared foods which would require
chains with more than 20 units to post calorie
counts for all menu items
Requires packaged foods to include nutrition
information.
33. GEOGRAPHICAL FEATURES
Wendy’s alone has over 6,600 stores in 20
countries
Though Wendy’s has merged with Triarc,
both entities have decided to continue
running independently of one another
34. GEOGRAPHICAL FEATURES CONTINUED…
In the four highest populated states, Wendy’s
operates over 1,400 stores
The majority of Wendy’s locations are in the
Central and Eastern regions of the United
States
35. SOCIAL FACTORS INFLUENCING THE INDUSTRY
Disposable Income
Teens in the US have large amounts of
disposable income
The United States’ middle class
Working adults spend 1/3 of the day working,
QSR firms rely on these individuals picking up
food on their commute home
Religious and Cultural challenges
McDonalds and the non-beef patty in India
Social Hierarchies aren’t present in parent country
36. CURRENT RATIO
Current Ratio
1.80
1.60
1.40
1.20
1.00
0.80
0.60
0.40
0.20
0.00
2003 2004 2005 2006 2007
Wendy's 0.88 0.67 1.30 1.66 0.82
McDonald 0.69 0.70 1.51 1.21 0.79
Jack in the Box 0.63 0.87 1.03 1.19 0.64
Sonic 0.93 0.70 0.54 0.54 0.69
Ability to pay back short-term debts with current assets
Industry as a whole seems normal
Inventories can be converted to cash quickly
37. GROSS PROFIT MARGIN
Gross Profit Margin
60.00%
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%
2003 2004 2005 2006 2007
Wendy's 48.62% 45.27% 44.51% 44.56% 33.21%
McDonald's 30.32% 31.75% 31.45% 32.36% 31.57%
Jack in the Box 17.62% 17.55% 16.99% 17.45% 16.52%
Sonic 34.68% 33.10% 32.29% 32.40% 34.02%
• Measures the ability to generate earnings
compared to expenses
• Ratio gives proportion of money left over for
revenue after cost of goods sold
38. NET PROFIT MARGIN
Net Profit Margin
20.00%
18.00%
16.00%
14.00%
12.00%
10.00%
8.00%
6.00%
4.00%
2.00%
0.00%
2003 2004 2005 2006 2007
Wendy's 9.32% 1.77% 10.48% 4.38% 12.57%
McDonald's 11.95% 12.25% 13.12% 16.42% 18.20%
Jack in the Box 4.30% 3.22% 3.66% 3.91% 4.02%
Sonic 11.70% 10.82% 11.31% 11.35% 10.20%
• Tells the company if it is effective at controlling
costs
• Net Profit Margin is the return on sales
39. RETURN ON ASSETS
Return on Assets
2.5
2
1.5
1
0.5
0
2003 2004 2005 2006 2007
Wendy's 0.95 0.94 0.67 0.63 0.85
McDonald's 0.72 0.72 0.71 0.72 0.73
Jack in the Box 1.94 2.03 1.95 2.07 2.01
Sonic 1.1 1.1 1.2 1.23 1.22
• Return on investment from stockholders and creditors
• Helps company see how efficient the company is at
generating revenues compared to use of assets
40. RETURN ON EQUITY
Return on Equity
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%
2003 2004 2005 2006 2007
Wendy's 16.29% 2.95% 13.06% 4.58% 3.47%
McDonald's 14.31% 19.02% 18.32% 23.40% 18.95%
Jack in the Box 15.10% 16.58% 16.54% 19.11% 18.25%
Sonic 22.66% 21.87% 21.04% 20.29% 22.04%
• Rate of return on stockholders’ investment in the
company
• How much profit the company is generating with
the stockholders’ money
41. DEBT-TO-ASSET RATIO
Debt/Asset
1.2
1
0.8
0.6
0.4
0.2
0
2003 2004 2005 2006 2007
Wendy's 0.57 0.72 0.86 0.69 0.69
McDonald's 0.53 0.49 0.49 0.47 0.48
Sonic 0.45 0.35 0.32 0.39 1.14
Jack in the Box 0.72 0.57 0.58 0.53 0.7
•Measures company’s ability to pay debt
•Measures solvency
•Little volatility within companies; but all are
satisfying debt requirements
