Frescata Club Is Right for Wendy's

Front Counter Soda Dispensers Disappearing

You saw it first on Blue MauMau. It was one of our members who predicted that the CNN story about fecal matter on ice dispensers would cause franchise owners to take control over their fountains. Bob Frankman showed shortly after the story how front counter soda dispensers were being relegated to the back counter.

I would second that trend spotting. I'm seeing the same thing -- like the photo here at my local Wendy's. The soda fountains of quick service restaurants are increasingly in the back counter where franchise owners have better control over the machine's cleanliness.

After all, owners can train and require their staff to clean their hands and the dispenser; but they cannot ensure that customers will wash theirs. Have a customer come in with unclean hands who touches the ice nozzle and you have big problems.

Wendy's Is Coming Around

And while on the topic of hitting the bull's eye, I think we got it right when we spoke about Wendy's getting off the mark some time ago.

What a great lunch I had at Wendy's today. I'm heading back for more Frescata.

While eating, I was amazed how quickly this fast-food giant was turning around and getting their menu back on track.

I was thrilled about the quality of the new Frescata Club sandwich and the flexibility of Wendy's combo meal. It was explained to me with a smile and patience that with a combo, I could substitute a side salad, chili or other item instead of just fries. Likewise, a Frosty could be taken instead of a diet coke. In short, there was high quality food in which I could control the health, the calories and the food I wanted.

I ordered a Frescata club combo with chili and a diet coke.

I was thrilled. The substance at Wendy's is back. And I'm not alone in sensing this. Here's what Canada.com has to say about it:

"We're excited about the enthusiastic customer reaction to our Frescata deli sandwiches. It is one of the strongest initial responses we've had for a new menu offering in recent years," said Kerrii Anderson, interim chief executive officer and president of the Company.

The launch of Frescata and the cumulative impact of other marketing and operations initiatives enabled Wendy's to post the first positive same-store sales month since January 2005.

U.S. system same-store sales increased 0.4% for the April 2006 reporting period, with company restaurants up 0.2% and franchise restaurants up 0.5%. Same-store sales declined 5.5% in April 2005, with company restaurants decreasing 5.8% and franchise restaurants declining 5.5%.

Wendy's posted a five-point positive swing in same-store sales during the April 2006 reporting period compared to the first quarter of 2006. During the first quarter, same-store sales at company restaurants decreased 4.8% and 5.2% at franchise restaurants.

"These results are encouraging, but we fully understand that we're just getting started. We are focused on building momentum, and we're optimistic about the other initiatives in place to increase sales and customer traffic throughout the remainder of the year," Anderson said. "We also continue to execute elements of Wendy's Combo Plan, designed to reduce costs and return the Company to a position of long-term, sustained growth."

Prior to 2005, Wendy's had enjoyed 18 consecutive years of same-store sales growth. Full results for the second quarter will be announced on July 27.

The Frescata line includes Black Forest Ham & Swiss Cheese, Roasted Turkey with Basil Pesto, Roasted Turkey & Swiss Cheese and the Frescata Club. High-quality deli meats, fresh toppings and artisan bread -- baked at the restaurant -- separate the sandwich line from competitive offerings.

The Company is continuing to execute a 25-market sampling campaign across the U.S. to promote Frescata and prompt consumer trial. This effort will culminate in early June."

Now comes the challenge of the marketing machine being able to connect the new food experience to the consumer. They've made some misses of late. The marketing campaign hasn't been launched yet, but Wendy's focusing on market sampling to get it right is commendable. 

My prediction -- Wendy's is back with a vengence. It is amazing how fast these giant fast-food restaurants can be in changing direction. Small and mid-size franchise chains need to take notice because in my experience, they are sometimes more grid-locked than the giant chains that they should be able to dance around. After all, it should be quicker to make decisions when you only have a few staff.

I'm getting bullish on Wendy's, and apparently so is the stock market ...