What is in this article?:
- Wendy's to adjust marketing for remainder of 2013
- Building upon remodels
The company plans to focus advertising on both premium products and its new value platform.
Building upon remodels
Wendy’s plans to accelerate the opening of its “Image Activation” remodeled stores this year, from 68 since the start of the program in 2011 to about 200 incremental reimages this year. The remodel system includes three different tiers of investment.
Not all remodels or new-look builds will be Tier I projects, which were nearly all of the remodeled stores that began in 2011 and continued last year.
Wendy’s also will start executing Tier II and Tier III remodels that involve lower development costs — around $550,000 for Tier II and $370,000 for Tier III — but still target sustained sales lifts in the range of 18 percent to 20 percent, compared with pre-Image Activation sales levels.
Over the next three years, Wendy’s will invest between $440 million and $500 million in capital expenditures for the Image Activation program and projects to have half of all company-owned restaurants, or 20 percent of the total domestic system, reimaged by the end of 2015, chief financial officer Steve Hare said.
Wendy’s announced a new financing program for franchisees to adopt the Image Activation look, working with GE Capital to provide loans. More than 100 franchisees have already applied for the program, he said.
“With GE we’ll provide credit support in the way of first-loss protection in the early stages,” Hare said. “We think this loan portfolio is fairly low-risk, and we wanted something on the table early on, because our franchisees are looking to move right now. This is an early-adopter financing program.”
Brolick added that less capital-intensive rebuilding in Tier III projects has helped inform Wendy’s on how best to reduce the cost of its major Tier I projects and would appeal to many franchisees looking for return on investment in the high teens. A handful of Tier III remodels have been completed during the first few months of 2013.
“We really believe that the Tier III program is going to become more of the workhorse of the system for Image Activation,” he said. “Early results from those first few Tier III restaurants in terms of sales are very attractive.”
The positive same-store sales impact from remodeled stores is expected to offset that drag projected on same-store sales this year from the discontinuation of breakfast in certain markets, Brolick said.
Wendy’s operates or franchises more than 6,500 restaurants in the United States and 27 foreign markets.