by Jane Wells, via CNBC |
Emil Brolick returned to Wendy’s three years ago after a long stint at Yum Brands (mostly at Taco Bell). He’s overseeing a brand transformation at the 45-year-old chain that he calls “the new QSR,” (which stands for quick-service restaurant). Perhaps the best way to describe it is a mashup of fast casual chains like Chipotle and Panera, “but we’re doing it at a competitive price. … Our average check is 40 to 45 percent lower.”
Keeping prices low is not easy with beef costs high and labor costs rising. Beef constitutes about 20 percent of the Wendy’s commodity budget, which is one reason RBC Capital believes Wendy’s “stands the most to lose from rising beef costs.”
The company cut its margin target this year to between 16.3 and 16.8 percent, which is still higher than last year’s 15.4 percent. Brolick said they have raised some prices, “but we’re very, very sensitive about that because we really don’t feel that we should pass all the costs along to the consumer.”
Wendy’s just brought back the very successful Pretzel Bacon Cheeseburger after selling 50 million of them last year, spurring same store sales growth ahead of rivals until it was taken off the menu. Might it be back to stay? “We have a little surprise,” was all Brolick would say.
Meanwhile, the company is spending hundreds of millions of dollars remodeling stores to a more “fast casual” style, persuading franchisees to do the same. Brolick said it costs $450,000 to $500,000 to remodel an existing store, but sales have grown 10 to 20 percent where that happens.
Stores that have been built from the ground up in the new style, at a cost of $1.6 million to $1.8 million each, have seen sales rise as much as 35 percent. “You see the impact … virtually instantly,” the CEO said.
Then, Brolick took your questions. As we settled in by the Frosty machine at the company’s flagship store, CNBC selected five questions submitted on Twitter by viewers and put them to the CEO. They included everything from the potential for self-ordering to reduce labor costs to the rights of tomato pickers. Oh, and this: ‘Is a vanilla Frosty even a real Frosty?” Watch the above video to see if Brolick agrees.