Submitted by: Atique Ahmed Hassan Taqi Umer Bin Jabbar Usman Nadeem

Introduction It all began in November 1969, when Dave Thomas, inspired by the hamburgers that he liked so much in his old hometown, opened in Columbus, Ohio, the first restaurant from what would soon become a successful franchise. Naming it after his fourth child, Melinda Lou "Wendy", with "Quality Is Our Recipe" as its first slogan, Wendy's kept growing. After only a year, in 1971, Dave Thomas opened another restaurant in Columbus, creating the first modern "drive-thru window". Stapling its square hamburgers and its soft ice cream mixed with frozen starches, the "Frosty", as its main products, Wendy's enjoyed a growing popularity among the people of Columbus. Its success determined Thomas to expand Wendy's to a full-sized chain, around North America, and soon spreading in more than 20 countries. While not having a "signature" sandwich like other fast-food chains do, Wendy's became known worldwide for its square burger patties. In the 1980's Wendy's improved their standing by being the first fast food chain to offer the "Salad Bar", where customers are provided all the salad components separately, to assemble a salad after their own unique taste. Besides their tasteful hamburgers and salads, Wendy`s also frequently rewards their customers with coupons which offer reductions or chances to win important prizes. The growing expansion of the Wendy's franchise, climbed Wendy's on the third place worldwide among hamburger fast food chains with about 6.650 locations opened until March 2010. While almost 77% of Wendy's restaurants are franchised, employing over 46.000 people and leaving decorations and pricing to the individual owners, Wendy's headquarters in Dublin, Ohio (moved from Columbus in January 2006) still sets the standards for exterior appearance, menu, and most important of all food quality.

Vision Statement: To continuously grow stakeholder value by leveraging the strengths of vibrant, independent restaurant brands. Proposed Vision Statement: Our vision is to be the quality leader in everything we do. Proposed Mission Statement We believe the most vital factor in the restaurant business is to take care of our customers. (1) As a global company, our goal is to provide our customers with the most enjoyable dining experience possible and be the quality leader in everything we do. (3, 7) .We will keep on bringing even greater variety, higher quality, more nutritious foods along with fresher menu choices into our restaurants. (2) We strive to continuously produce quality foods through food science technology and research. (4) Our company is committed to expanding and growing profits in order to sustain recognition while protecting the environment. (5, 8) Our philosophy is to provide for the needs of all our customers while creating a safe workplace for all employees. (6,9)

External Audit - Opportunities & Threats Opportunities 1. 53 percent of household income is spent eating outside of the home. 2. The Canadian dollar is getting a stronger exchange rate resulting in higher EPS from 0.11 in 2004 to 0.15 in 2005 3. Quick Service Restaurants sales have increased by 5 percent in 2006 according to the National Restaurant Association. 4. Burger King's market share dropped from 15.03% in 2000 to 10.95% in 2006. 5. The US Department of Agriculture states that consumption of eating out has risen 3.6 percent from 1990 to 2005 6. The breakfast food industry is a $77.6 billion industry. 7. McDonalds suffered an $8.5 million lawsuit and a decrease in sales due to not informing customers of trans-fats in their cooking oils. 8. Emerging markets and expansion abroad. 9. Product and services expansion 10. Competition is facing financial stress due to many factors including global economic condition resulting in competitors outlets being closed down. Threat 1. A 12 percent increase in beef costs over 2005 reduced Wendy's EPS by 0.07 cents 2. McDonald's new management team is returning them to a sales growth trend. 3. 60 percent of McDonalds are open 24 hours, worldwide.

4. McDonald's menu is expanding to offer more upscale coffee, and better quality chicken sandwiches 5. Natural disasters are causing vegetables to be in short supply for restaurant industry. 6. Burger King has invested $12 million in their United Kingdom restaurants. 7. Wendys has restaurants in only 20 international countries compared to McDonalds and Burger King who have restaurants in 120 and 65 international countries respectively. 8. Burger King plans to implement a dollar menu for breakfast items. 9. Economic crunch is resulting in financial stress situation for the company itself. 10. The future of fast food industry is rapidly growing in Asia and south East Asia and Wendys is not exploring into these markets as its competitors are. Internal Audit - Strengths & Weaknesses Strengths 1. First to introduce non-trans-fat fast food. 2. Improved goodwill from $19 million to $36 million. 3. Owns and operates 2 bakeries as apart of their vertical integration strategy. 4. Maintains industry-leading customer satisfaction scores.

5. World's #3 fast food chain controlling 14% of the fast-food market share. 6. 417 new restaurants in the US & Canada. 7. With healthier food selections such as salads, Wendys same-store sales rose 4.7%. 8. 1st to offer the 99 cent value menu. 9. Wendys Frescata product line increased sales by 3.2%. 10. New executive leadership in the company promotes stronger management and efficiency. Weaknesses: 1. Failed marketing strategy led to sales dip in 2005. 2. Last to accommodate changing customer preferences by introducing new products. 3. "The Chili Finger" incident drops sales by 2.5% in 2005. 4. Last food-chain to offer a breakfast menu. 5. Wendy's current strategy only focuses on US & Canada. 6. Tim Horton's 50/50 joint venture causes 50% drop in income from Tim Horton's. 7. Since the passing of Dave Thomas in 2002, Wendy's lost their opinion leader. 8. Low research and development is subsequently not allowing for new products. 9. Diminishing source of sustainable competitive advantage.

10. Restaurant closure has led towards a negative perception amongst Wendys customers. SWOT Matrix: SO Strategies Expand research and development function, strategic insights, and operations innovation by 25 percent (S1, O4). S1: First to introduce non-trans-fat fast food. O4: Burger King's market share dropped from 15.03% in 2000 to 10.95% in 2006.

Open 200 new Wendys franchises stores in the US and Canada to gain market share in the fast food industry (S6, O5). S6:417 new restaurants in the US & Canada. O5: The US Department of Agriculture states that consumption of eating out has risen 3.6 percent from 1990 to 2005

Display on all food packaging and in all restaurants that we use nontrans fat oils to cook our foods (S1, O7). S1: First to introduce non-trans-fat fast food. O7: McDonalds suffered an $8.5 million lawsuit and a decrease in sales due to not informing customers of trans-fats in their cooking oils.

WO Strategies Introduce a full menu and a 99 cent super value menu for breakfast in all restaurants in order to capitalize on $77 billion breakfast industry (W4,O6). W4:Last food-chain to offer a breakfast menu. O6:The breakfast food industry is a $77.6 billion industry.

Wendys will take advantage of the fact that 53 percent of household income is spent eating outside the home to increase sales of their foods through new marketing innovation. (W1, O2). W1: Failed marketing strategy led to sales dip in 2005 O1:53 percent of household income is spent eating outside of the home.

ST Strategies Continue to focus on providing customers healthier food options and not just expanding the menu (S7, T4). S7:With healthier food selections such as salads, Wendys same-store sales rose 4.7%. T4:McDonald's menu is expanding to offer more upscale coffee, and better quality chicken sandwiches

By implementing longer operating hours such as 24 hour restaurants, Wendys will improve customer convenience and satisfaction (S4, T3). S4:Maintains industry-leading customer satisfaction scores. T3:60 percent of McDonalds are open 24 hours, worldwide.

WT Strategies Expand the research and development function, strategic insights, and operations innovation (W2, T2). W2:Last to accommodate changing customer preferences by introducing new products. T2:McDonald's new management team is returning them to a sales growth trend.

Expand global operations by 40 percent over next three years (W5, T7). W5: Wendys current strategy only focuses on US & Canada. T7:Wendys has restaurants in only 20 international countries compared to McDonalds and Burger King who have restaurants in 120 and 65 international countries respectively

Competitive Profile Matrix (CPM)

Wendys Critical Success Factors Advertising Product Quality Price Competitiveness Management Financial Position Customer Loyalty Global Expansion Market Share Total Weight 0.10 0.15 0.12 0.12 0.15 0.15 0.11 0.10 1 Rating 4 4 3 3 1 4 1 3 Score 0.4 0.6 0.36 0.36 0.15 0.6 0.11 0.30 2.88 McDonalds Rating Score 4 0.4 3 0.45 3 0.36 4 0.48 4 0.6 4 0.6 4 0.44 4 0.40 3.73 Burger King Rating 4 3 3 3 3 4 4 3 Score 0.40 0.45 0.36 0.36 0.45 0.60 0.44 0.30 3.36

This matrix shows the major competitors of Wendys. The total sum shows that McDonalds is the best out of the three. But this doesnt stand true as all these values are on the basis of own judgment.

Financial Ratio Analysis For the year 2005

1. Current Ratio = Current Assets/ Current Liabilities Wendys 458,844/688,387=0.67 McDonalds 6,219,000/4,107,000=1.5

Burger King 634000/394000=1.6

Current Ratio which comes out to be greater than 1 is satisfactory. But the result for Wendys is quite low so they need to work on this factor.

2. Quick Ratio = Current Assets - Inventory/ Current Liabilities

Wendys 458,844-56010/688,387=0.58 McDonalds 6,219,000-144300/4107700=1.47 Burger King 634000-60300/394000=1.45 From an industry point of view, 1 is satisfactory and Wendys have less than one which is not good. 3.Debt-to-Equity Ratio = Total Debt/Total Stockholder's Equity

Wendys 593,607/1,715,689=0.34 McDonalds 8934300/15146100=0.6 Burger King 1282000/477000=2.68

4.Net Profit Margin = Net Income/Sales

Wendys 224067/2138365=0.10 10% McDonalds 2602000/19832000=0.13 13%

Burger King 47000/284000=0.16 16% Wendys have the lowest value with relation to its competitors so they should work on it.

Investment Return % ROE = Net Income/Stockholders Equity

Wendys 224067/1715689=0.13 13% McDonalds 2602000/15146100=0.17 17% Burger King 47000/477000=0.09

9%

ROA = Net Income/Total Assets

Wendys 224067/3197544=0.07 7% McDonalds 2602000/29988800=0.086 Burger King 47000/2723000=0.09 8.6%

9%

For every one dollar of assets the company gets a profit of ($0.07) which is not good.

Asset Turnover Ratio = Sales/Total Assets

Wendys 2138365/3197544=0.66 McDonalds 19832000/419988800=0.66 Burger King 284000/2723000=0.10

Growth Rates Sales Wendys 2455418-2502158/2502158=1.8% McDonalds 19832000-18594000/18594000=6.65% Burger King 1940000-185000/1850000=4.86%

External Factor Evaluation EFE

Key External Factors Opportunities
1. 53 percent of household income is spent eating outside of the home. 2. The Canadian dollar is getting a stronger exchange rate resulting in higher EPS from 0.11 in 2004 to 0.15 in 2005 3. Quick Service Restaurants sales have increased by 5 percent in 2006 according to the National Restaurant Association. 4. Burger King's market share dropped from 15.03% in 2000 to 10.95% in 2006. 5. The US Department of Agriculture states that consumption of eating out has risen 3.6 percent from 1990 to 2005 6. The breakfast food industry is a $77.6 billion industry. 7. McDonalds suffered an $8.5 million lawsuit and a decrease in sales due to not informing customers of trans-fats in their cooking oils. 8. Emerging markets and expansion abroad. 9. Product and services expansion 10. Competition is facing financial stress due to many factors including global economic condition resulting in competitors outlets being closed down

Weight
0.05

Rating
3

Weighted Score
0.15

0.04

0.16

0.05 0.06

3 3

0.15 0.18

0.05 0.03 0.05 0.07 0.06 0.04

3 4 3 4 1 3

0.15 0.12 0.15 0.28 0.06 0.12

Threats

1.

A 12 percent increase in beef costs over 2005 reduced Wendy's EPS by 0.07 cents 2. McDonald's new management team is returning them to a sales growth trend. 3. 60 percent of McDonalds are open 24 hours, worldwide. 4. McDonald's menu is expanding to offer more upscale coffee, and better quality chicken sandwiches 5. Natural disasters are causing vegetables to be in short supply for restaurant industry. 6. Burger King has invested $12 million in their United Kingdom restaurants. 7. Wendys has restaurants in only 20 international countries compared to McDonalds and Burger King who have restaurants in 120 and 65 international countries respectively. 8. Burger King plans to implement a dollar menu for breakfast items. 9. Economic crunch is resulting in financial stress situation for the company itself. 10. The future of fast food industry is rapidly growing in Asia and south East Asia and Wendys is not exploring into these markets as its competitors are.

0.06 0.05 0.05 0.04 0.05 0.03 0.05

2 3 2 2 2 3 4

0.12 0.15 0.10 0.08 0.10 0.09 0.20

0.03 0.06 0.08

3 3 4

0.09 0.12 0.32

Total

2.68

The above weighted average score has come out to be 2.68 which is greater than the industry average score that is 2.5. However there is still enough room for improvement because the highest total weighted average score would be 4.0. The rates suggest that the company can improve on their performance by an adequate increase in sales.

Internal Factor Evaluation IFE

Key Internal Factors Strengths
1. 2. First to introduce non-trans-fat fast food. Improved goodwill from $19 million to $36 million. 3. Owns and operates 2 bakeries as apart of their vertical integration strategy. 4. Maintains industry-leading customer satisfaction scores. 5. World's #3 fast food chain controlling 14% of the fast-food market share. 6. 417 new restaurants in the US & Canada. 7. With healthier food selections such as salads, Wendys same-store sales rose 4.7%. 8. 1st to offer the 99 cent value menu. 9. Wendys Frescata product line increased sales by 3.2%. 10. New executive leadership in the company promotes stronger management and efficiency.

Weights
0.09 0.10 0.02 0.05 0.06 0.05 0.04 0.03 0.03 0.03

Ratings
4 3 3 4 4 4 3 3 3 3

Weighted Score
0.36 0.30 0.06 0.20 0.24 0.20 0.12 0.12 0.12 0.12

Weaknesses
1. 2. 3. 4. 5. 6. 7. Failed marketing strategy led to sales dip in 2005. Last to accommodate changing customer preferences by introducing new products. "The Chili Finger" incident drops sales by 2.5% in 2005. Last food-chain to offer a breakfast menu. Wendy's current strategy only focuses on US & Canada. Tim Horton's 50/50 joint venture causes 50% drop in income from Tim Horton's. Since the passing of Dave Thomas in 2002, Wendy's lost their opinion leader 0.10 0.04 0.08 0.05 0.05 0.04 0.05 1 1 1 2 1 1 1 0.10 0.04 0.80 0.10 0.05 0.04 0.04

8.

Low research and development is subsequently not allowing for new products. 9. Diminishing source of sustainable competitive advantage. 10. Restaurant closure have led towards a negative perception amongst Wendys customers.

0.04 0.03

1 2

0.04 0.06

0.02

0.04

Total

2.43

The above weighted average score which is 2.43 shows that company's internal position is weaker than its score should be since it is below industry average score which is 2.5. The company needs to work upon solutions to improve its predicament.

IE Matrix

Grow & Build

Hold & Maintain Market Penetration Product Development

Harvest or Divest Retrenchment Divestiture

The scores of Wendys fall in cell V of the IE Matrix. Divisions that fall into cell 5 can be managed best with Hold and Maintain Strategies which are Market Penetration and Product Development. Wendys is should focus on penetrating on new markets and work on research and development as well.

Space Matrix
(-6 worst, -1 best)Competitive

Advantage (CA) -1 -3 -2 -3

(+1 worst, +6 best)Industry

Strength (IS) 5 4 2 4

Product Quality Product Life Cycle X Market Share Axis Control over Suppliers & Distributors Average -2.25

Growth Potential Resource Utilization Ease of entry into market Profit Potential

Average +3.75 Total X axis Score = 1.5 (+1 worst, +6 best)Financial Strength (FS) (-6 worst, -1 best)Environmental Stability (ES) Working Capital 2 Price range of competing -4 Y Leverage 3 products Axis Inventory Turnover 5 Competitive pressure -6 Earnings per share 3 Price elasticity of demand -2 Risk involved in business -3 Average +3.25 Total Y axis Score = -0.5 h FS Conservative
Market Penetration Market Development Product Development Related Diversification

Average - 3.75

Aggressive
Backward, forward, horizontal integration Market penetration Market development Product Development Diversification (related or unrelated)

CA Defensive
Retrenchment (1.5, -0.5) Divestiture Liquidation Market development

IS Competitive
Backward, forward, horizontal integration Market penetration Product Development

ES

The space matrix tells us that Wendys should pursue a competitive strategy which includes backward, forward and horizontal integration; market penetration; market and product development. Furthermore the company should look into continuous product development; it need to now also consider entering into new markets as well.

Grand Strategy Matrix

The matrix above shows us that Wendys needs to come up with an aggressive strategy to overcome the hindrances it is facing. Although the industry overall is growing due to certain problems mentioned earlier Wendys has failed to capitalize upon its potential market. Careful deliberation has to be set upon why their current strategies have been rendered ineffective as per desired objectives and furthermore a lot of concentration/effort needs to be put into where they lack. Under new executive management this will be easier as the organization will have a fresh approach.

The Quantitative Strategic Planning Matrix (QSPM

Strategic Alternatives
Key Factors Promote a healthier menu. Expand the research and development function, to make current products healthier AS 3 TAS 0.15

Key External Factors Opportunities

1. 53 percent of household income is spent eating outside of the home. 2. The Canadian dollar is getting a stronger exchange rate resulting in higher EPS from 0.11 in 2004 to 0.15 in 2005 3. Quick Service Restaurants sales have increased by 5 percent in 2006 according to the National Restaurant Association. 4. Burger King's market share dropped from 15.03% in 2000 to 10.95% in 2006. 5. The US Department of Agriculture states that consumption of eating out has risen 3.6 percent from 1990 to 2005 6. The breakfast food industry is a $77.6 billion industry. 7. McDonalds suffered an $8.5 million lawsuit and a decrease in sales due to not informing customers of trans-fats in their cooking oils. 8. Emerging markets and expansion abroad. 9. Product and services expansion 10. Competition is facing financial stress due to many factors including global economic condition resulting in competitors outlets being closed down

Weight
0.05

AS 4

TAS 0.20

0.04

0.05

3 -

0.15

2 -

0.10

0.06

0.05

0.15

3 -

0.15

0.03

2 -

0.06

3 -

0.09

0.05

0.07

0.06

0.04

Threats

1.

2. 3. 4.

5.

6. 7.

8. 9.

A 12 percent increase in beef costs over 2005 reduced Wendy's EPS by 0.07 cents McDonald's new management team is returning them to a sales growth trend. 60 percent of McDonalds are open 24 hours, worldwide. McDonald's menu is expanding to offer more upscale coffee, and better quality chicken sandwiches Natural disasters are causing vegetables to be in short supply for restaurant industry. Burger King has invested $12 million in their United Kingdom restaurants. Wendys has restaurants in only 20 international countries compared to McDonalds and Burger King who have restaurants in 120 and 65 international countries respectively. Burger King plans to implement a dollar menu for breakfast items. Economic crunch is resulting in financial stress situation for the company itself. 10. The future of fast food industry is rapidly growing in Asia and south East Asia and Wendys is not exploring into these markets as its competitors are

0.06

2 2

0.12

3 -

0.18

0.05 0.05 0.04

0.10 3 0.15 0.16 -

0.12

0.05

0.03 0.05

0.03

0.06

3
0.08

0.24 3

0.24

Strengths
1. 2. First to introduce non-trans-fat fast food. Improved goodwill from $19 million to $36 million. 3. Owns and operates 2 bakeries as apart of their vertical integration strategy. 4. Maintains industry-leading customer satisfaction scores. 5. World's #3 fast food chain controlling 14% of the fast-food market share. 6. 417 new restaurants in the US & Canada. 7. With healthier food selections such as salads, Wendys same-store sales rose 4.7%. 8. 1st to offer the 99 cent value menu. 9. Wendys Frescata product line increased sales by 3.2%. 10. New executive leadership in the company promotes stronger management and efficiency. 0.09 0.10 0.02 0.05 0.06 0.05 0.04

0.36 2

0.18

0.15 2 -

0.10

4 3 -

0.16

3 4 -

0.12

0.03 0.03 0.03

Weaknesses
1. 2. Failed marketing strategy led to sales dip in 2005. Last to accommodate changing customer preferences by introducing new products. "The Chili Finger" incident drops sales by 2.5% in 2005. Last food-chain to offer a breakfast menu. Wendy's current strategy only focuses on US & Canada. Tim Horton's 50/50 joint venture causes 50% drop in income from Tim Horton's. Since the passing of Dave Thomas in 2002, Wendy's lost their opinion leader. 0.10 0.04

3 0.12 4

0.16

3. 4. 5. 6. 7.

0.80 0.05 0.05

0.10 3 -

0.15

0.04 0.05

8.

Low research and development is subsequently not allowing for new products. 9. Diminishing source of sustainable competitive advantage. 10. Restaurant closure have led towards a negative perception amongst Wendys customers.

0.04 0.03

3 -

0.12 4

0.16

0.02

Total

2.39

2.09

Based on the above total attractiveness score of Alternative 1 vs. Alternative 2 which is 2.39 vs. 2.09 clearly suggests that Wendys should go for strategy that states promoting a healthier menu. Even Wendys have the highest consumer score according to statistics in the cases study but this is good way to increase sales and make more loyal customers.

Recommendations Promote a healthier menu and these changes will increase Wendy's sales. Expand the research and development function, strategic insights, and operations innovation. Introduce a full menu and a $.99 menu for breakfast in all restaurants in order to capitalize on the $77.6 billion breakfast industry. Acquire a farm that's main crop is vegetables, which will allow Wendys to offer vegetarian items, eliminate the cost and reduce the risk of vegetable shortage. The company should explore more markets globally as fast food industry is growing in countries like India, China etc

References www.wendys.com Wendys International, Inc Form 10-K Sec filing for 2007 Global Fast Food Industry Profile 2008 US Fast Food Industry Profile 2008 http://ir.wendysarbys.com/phoenix.zhtml?c=67548&p=irolwendyreportsannual

 http://www.aboutmcdonalds.com/mcd/investors/annual_reports.ht ml http://www.annualreports.com/Company/2878