Wendy’s International, Inc. Company Analysis September 7, 2005 BAA 605 Mercer University Dr. Coleman Kacy Carney, Sonya Chhatwal, Susan Denny, Amy Naso, Walker Roth, Maria Sikking

Table of Contents ● Facts ● New Products ● Community Involvement and Altruism ● Financials ▪ Revenue ▪ Profit ▪ Market Price ▪ Operating Margin ▪ Net Margin ▪ ROE and ROA ▪ Net Income Comparison ▪ Revenue Comparison ● Strengths ● Weaknesses ● Summary ● Appendix A: Chart Data ● References

Facts – Wendy’s International, Inc. Wendy’s made the FORTUNE 500 list for the first time in April of 2005; they were named 498 th Wendy’s International, Inc. owns more than 9,700 restaurants and has systemwide sales of $11.6 billion Wendy’s International, Inc. owns the brands Wendy's Old Fashioned Hamburgers®, Tim Hortons, Baja Fresh® Mexican Grill, Cafe Express, and Pasta Pomodoro®

Facts – 2005 Strategic Plan

Facts – Wendy’s Brands

Facts – Wendy’s Old Fashioned Hamburgers Concept: Quick service hamburgers, chicken sandwiches, salads and sides Year Founded: 1969 Headquarters: Dublin, Ohio President/Chief Operating Officer: Tom Mueller Number of Stores: (as of 9/26/04) 6,572 worldwide - U.S.: 1,302 company, 4,552 franchise - Canada: 150 company, 223 franchise - International: 5 company, 342 franchise in 20 countries, predominantly in Latin America Wendy’s also owns the New Bakery in Zanesville, Ohio, which produces Wendy’s buns

Facts – Tim Hortons Concept: Bakery-café serving coffee, baked goods, soups and sandwiches Year Founded: 1964 Headquarters: Oakville, Ontario, Canada President/Chief Operating Officer: Paul House Number of Stores: (as of 9/26/04) 2,632 in North America - U.S.: 66 company, 167 franchise - Canada: 28 company, 2,371 franchise Tim Hortons also participates in a 50/50 joint venture of Maidstone Bakery which produces parbaked goods for Tim Hortons

Facts – Café Express Concept: Fast-casual combining European- Accented menus and a bistro décor with quick service operations Year Founded: 1984 Headquarters: Houston, Texas Chief Executive Officer: Brion Grube Number of Stores: (as of 9/26/04) 18 in North America - US.: 18 company, 0 franchise

Facts – Pasta Pomodoro Concept: Casual dining, table and counter service, Italian-inspired menu Year Founded: 1994 Headquarters: San Francisco, California Chief Executive Officer: Adriano Paganini Number of Stores: (as of 9/26/04) 44 in North America - US.: 44 company, 0 franchise

Facts – Baja Fresh Concept: Fast-casual, Fresh Mexican Year Founded: 1990 Headquarters: Thousand Oaks, California Chief Executive Officer: Brion Grube Number of Stores: (as of 12/31/04) 295 in North America - US.: 144 company, 151 franchise

Facts – Strategic Life Cycle

New Products

New Products (continued) Wendy’s International has implemented the following changes to their menus: ● Garden Sensations Salads including a fruit bowl ● Ability to choose side item with combo meals including side salads, baked potato, and chili not just fries ● Kid’s Meal now comes with choice of mandarin oranges or fries and low-fat milk, chocolate milk, or soft drink as the included beverage ● Low-fat strawberry flavored yogurt with granola as an alternative for desert rather than the traditional Frosty

Dave Thomas Foundation for Adoption ● Promotes public awareness of children in need of adoption, as well as enhances efforts to find permanent homes for these children Wendy’s Classic Achiever Scholarship Program ● A Canadian program that granted 210 scholarships to high school graduates continuing on to post secondary schools in 2004 Tim Horton Children’s Foundation ● Donated over $1 million to UNICEF to help children in Southeast Asia affected by the tsunami Community Involvement and Altruism

Financials – 10 Year Revenue ● The steady increase in revenue can be attributed to the diversification in restaurant franchises that occurred in the last 15 years with the creation of Baja Fresh in 1990 and Pasta Pomodoro in 1994 ● These new and different restaurant concepts helped a well establish company almost double their revenue over the course of ten years

Financials – 10 Year Profit ● In 2004, there was an increase of more than 20% in the price for beef due to increased demand and new importing restrictions and has remained high through 2005 ● The dramatic decline of profit in 2004 can also be attributed to the fact that in 2003, Baja Fresh took a "good will" charge in the amount of $186 million directly from profits ● Baja Fresh had to close restaurants and clean up the books to make up for the loss, resulting in only a $52 million gain and $0.45/share for the year

Financials – 10 Year Market Price ● There are many factors that influenced the stock price of Wendy's International, among those include a law suit of a woman that allegedly found a finger in her chili ● They have also implemented strategic initiatives to enhance shareholder value, including the IPO of Tim Hortons, selective store closings, and nearly $1 billion in a common stock repurchase

Financials – 10 Year Operating Margin ● Wendy’s operating margin remained steady from , but saw an almost 80% decrease in 2004

Financials – 10 Year Net Margin ● Similar to Operating Margin, Net Margin remained relatively constant from , with an almost 70% decrease in 2004 ● This decrease in Net Margin shows that less revenue was turned into profit in 2004

Financials – 10 Year ROE and ROA ● Return on equity and return on assets decreased sharply in 2004, after a five year period of steady returns

Financials – Net Income Comparison ● Wendy’s net income has decreased, as Yum! and McDonald’s have increased

Financials – Revenue Comparison ● Wendy’s, Yum and McDonalds have all increased revenue of more than 15% over the past three years

Strengths ● They have great diversity in holdings/acquisitions ● They have adapted well into the healthy food initiative ● They lead through innovation with expanding menu options ● Their stock return consistently outperforms competition and S&P Index ● They have implemented a new 5 point initiative for improving returns ● They had the fastest drive thru service in 2004 ● Their revenues are on an increasing trend

Strengths (continued) ● They actively listen and follow through with consumer demands, as seen through their new product offerings ● Currently ranked third in hamburger chains (behind McDonalds, and Burger King) ● They have strengthened their financial performance, as compared with other companies, and were added to the FORTUNE 500 list in 2005 ● The received a score of 75 from the University of Michigan’s American Consumer Satisfaction Index (ACSI), which is higher than its competitors (McDonalds=62, Burger King=71) ● Have implemented online guidelines concerning which Wendy’s items are suitable for diabetics, calorie counters, and those with food allergies or gluten concerns

Weaknesses ● Many of their holdings are still in the expansion stage ● Their net income percentage is behind competitors ● Expansion is being put on hold to improve returns on existing stores ● They do not have as strong of an international presence as their competitors ● Wendy’s focuses more on quality rather than competing in price wars with McDonald’s and Burger King, resulting in higher prices ● The “Whopper” and “Big Mac” reflect higher brand awareness than the Old Fashioned Wendy’s hamburgers ● They need to better assess their purchases to prevent future mistakes like Baja Fresh

Summary ● High customer satisfaction has been maintained through the successful addition of nutritional products and menu diversification as consumer demand for such options increased. ● Through organizations such as The Dave Thomas Foundation for Adoption, the company upholds one of its core values, community involvement. ● Wendy's International is a company dedicated to constant improvement and will manipulate dynamics to stay competitive in the quick service food industry ● Relatively consistent financial performance and strong stock value help uphold Wendy's as a solid competitor that values their shareholders, employees, and customers

●The strategic plan for Wendy's Int. is maximizing shareholder value. Revenues are up and the market price is up 45% from 2002 and holding strong. ● The closing of under-performing stores, the converting of the majority of company stores to franchisee stores, and the partial selling of Tim Hortons will help to improve profits along with ROA and ROE. ● The growth of Tim Horton's and the overall strategic potential of Baja Fresh, Cafe Express, Pasta Pomadora, and Wendy's International will help keep Wendy's as one of the top leaders in the fast food industry for years to come. Summary (continued)

Appendix A: Chart Data Year Revenue (in millions)$1,739$1,890$2,031$1,942$2,067$2,237$2,391$2,730$3,149$3,635 Profit (in millions)$110$156$130$123$167$170$194$219$236$52 Operating Margin (%)10.0%13.8%10.9%10.8%13.5%12.8%13.7%14.0%13.3%6.2% Net Margin (%)9.5%13.5%10.8%10.7%13.0%12.1%12.9%12.7%12.0%5.1% Return on average assets (%)8.1%9.9%7.0%6.7%9.1%9.2%9.7%9.2%8.4%1.7% Return on average equity (%)14.5%16.6%11.5%11.0%15.4%15.9%16.9%17.0%14.9%2.9% Market Price at year-end$21.25$20.88$22.88$21.81$20.81$26.25$29.17$27.07$39.24$39.26 Revenues (in millions) Year Wendy's$2,730$3,149$3,635 Yum! Brands$7,757$8,380$9,011 McDonald's$15,406$17,141$19,065 Net Income (in millions) Year Wendy's$219$236$52 Yum! Brands$583$618$740 McDonald's$992$1,508$2,279

References ● Analyst and Investor Meetings (2005, August). Wendy’s International, Inc. Retrieved August 27, 2005, from ● The State of the Enterprise (2004, December). Wendy’s International, Inc. Retrieved August 29, 2005, from ● Strategic Plan (2005). Wendy’s International, Inc. Retrieved August 25, 2005, from ● Restaurant Data (2005). Wendy’s International, Inc. Retrieved August 31, 2005, from ● Our Brands (2005). Wendy’s International, Inc. Retrieved August 26, 2005, from

References (continued) ● Consumer Beat: Finding Satisfaction (2005, June). Restaurants & Institutions, 115 (10):16. Retrieved September 4, 2005, from EBSCOHost. ● Wendy’s International, Inc. SWOT Analysis (2005, May). Wendy’s International, Inc., 5-8. Retrieved September 4, 2005, from EBSCOHost. ● 11-Year Selected Financial Data (2004). Wendy’s International, Inc. Retrieved August 25,2005, from ● 2004 Annual Report (2004). Wendy’s International, Inc. Retrieved September 6, 2005, from ● Wendy’s International, Inc. Financial Analyst. Telephone Interview. 6 September, 2005.