tion, restaurant revamps and mobile marketing all figure into the Wendy’s Co.’s recipe to win with millennials. Representing a fourth of total quick-service restaurant traffic, according to Wendy’s, the demographic carries high appeal with the fast-food chain and its competitors. But baby boomers comprise an even larger percentage of traffic, at 33%.“This clearly speaks to the need to address both millennials and boomers through our product and marketing efforts,” said Emil Brolick, president and chief executive officer, during a May 8 call with financial analysts. “Boomers and millennials definitely have different lifestyles, different product needs, and different media habits. However, what we have seen is that growing our relevance with millennials has not come at the expense of building our business with boomers.”
As an example, a recent Wendy’s advertising campaign that featured a millennial consumer resonated well across demographic groups, he said. To further engage the 18- to 34-year-old sector, the company plans to expand its digital marketing efforts on the success of last year’s social media campaign for the Pretzel Bacon Cheeseburger.
“The common denominator across consumer groups is that people love Wendy’s food,” Mr. Brolick said. “Our brand is strongly associated with great-tasting food, high-quality fresh ingredients, and innovative products. We believe this represents an important competitive advantage that we intend to leverage even more intently.”
In addition to launching new limited-time hamburgers, chicken sandwiches and salads, Wendy’s is evolving its core menu. This year, the chain added a pair of permanent salads, barbecue ranch chicken and Asian cashew chicken, as well as two limited-time offers: a bacon cheeseburger and a Tuscan chicken sandwich, both served on ciabatta bread.
“L.T.O.s will play an important role, but our core menu will also evolve to reflect the needs of the new Q.S.R. generation,” Mr. Brolick said. “While our food is central to the Wendy’s experience, technology plays an ever-increasing role in brand engagement, and in particular for the millennial consumers.”
Wendy’s is leveraging technology to create personalized, transaction-based promotions. Mobile payment is now available in 85% of Wendy’s U.S. restaurants, and the chain is currently testing mobile ordering and a mobile loyalty program.
“Clearly, we’re very excited about this because we do believe that this represents some operating efficiency potential, as well as, most importantly, it really gives us the opportunity to establish a different kind of relationship with our customers in a much more individual relationship,” Mr. Brolick said. “And, clearly, we’ve seen that this has been very successful for a number of brands who are further along in this process. So we’re very excited about it, and we’re getting tremendous support from our franchise community.”
Wendy’s value strategy represents another way in which the brand is targeting millennial consumers. Since debuting the Right Price, Right Size menu last year with products at multiple price points, the company has seen positive traction in its value transactions.
“What we have seen is, we have changed from the value bucket being a leaky bucket four quarters ago to a steady progress on that virtually every single quarter,” Mr. Brolick said. “And so we feel through our Right Price, Right Size menu, we’ve been heading in the right direction. But I continue to see upside potential there, as we continue to refine this model of our high-end messaging, as well as our low-end messaging out there. But value is something that is definitely a bit of an evolving thing in the marketplace, I think, in a lot of ways because of how millennials are a bit shifting their approach.”
The chain overcame harsh winter weather and ongoing marketplace challenges to deliver a solid first quarter. Company-operated same-restaurant sales increased 1.3% on the strength of successful product promotions and higher traffic at remodeled restaurants. The discontinuation of breakfast in underperforming restaurants had a negative impact on sales, Wendy’s said.
Net income for the quarter ended March 30 surged to $46,303,000, equal to 12c per share on the common stock, which compared with $2,133,000, or 1c per share, in the comparable period. Earnings benefited from a year-over-year reduction in interest expense as a result of debt restructuring in 2013.
Revenues dipped 13% to $523,196,000 from $603,682,000. The decline resulted from lost revenue from the sale of 418 company-operated restaurants as part of Wendy’s system optimization initiative.
Wendy’s said it is on track to reimage 200 company-operated restaurants and 150 to 200 franchise-operated restaurants in 2014, in addition to opening 15 new company-operated restaurants and 45 new franchise-operated restaurants during the year.
Looking ahead, Wendy’s said it expects to deliver an average of same-restaurant sales growth of 2.5% to 3.5% at company-operated restaurants.
