Wendy’s also opened its second outlet in Argentina and will be adding outlets in Singapore, the Middle East, North Africa, Japan, Russia, and in the Philippines. An increasing global footprint will be an added opportunity for generating long-term growth for the company.
Market dynamics
Earlier it was believed that the fast-food industry is recession proof, but the current weak eating-out environment has proved this wrong. People have indeed become more reluctant to spend money on restaurant food and when they do splurge, they often prefer healthier options.
But the irony of the situation is that neither the quintessential quick-service restaurants like McDonald’s nor the healthy eateries like Chipotle Mexican Grill, Inc. (NYSE:CMG) are having it easy.
McDonald’s Corporation (NYSE:MCD) reported a 1.2% decline in same-store sales in the US in the first quarter. Then, with super-aggressive promotions of its dollar menu, the chain attained a positive 0.7% comp in April. The company is sacrificing its margins to remain viable in the current scenario. Meanwhile Chipotle Mexican Grill, Inc. (NYSE:CMG) saw its same-store sales slow down to just 1%.
While this does not mean that either McDonald’s or Chipotle will stop growing, it points to the fact that all chains are having to work doubly hard to achieve their desired targets.
McDonald’s Corporation (NYSE:MCD) is introducing innovative menu items like Egg White McMuffins, McWraps, etc. while bringing back bestsellers like McRibs. It is also deliberating on introducing full-day breakfast.
Chipotle Mexican Grill, Inc. (NYSE:CMG), on the other hand, is fueling growth through aggressive store expansions and already added 48 new outlets in the first quarter of 2013. It has about 1,458 stores, which is not a lot for a restaurant chain. This leaves lot of room to grow. The company is looking to add between 165 and 180 outlets throughout the year.
Simultaneously, it is working on a menu expansion as it prepares to nationally roll out a new spicy tofu-based menu called Sofritas. It recently launched a premium Patron Margarita, as well. It has also started catering services in 14 states and plans to go nationwide by the end of the third quarter.
So by no means is it going to be easy for Wendy’s or any other chain to make a clean sweep. Each chain will have to carve a niche for itself to defy the odds. And The Wendy’s Co (NASDAQ:WEN) is trying to do just that.
What are Wendy’s chances?
The company has taken the right steps in the right direction. It is embarking on a growth path in both its home and international markets. It is trying to differentiate itself from rival hamburger chains by providing better quality food and an ambient restaurant environment. The stepped-up value promotions will further improve its competitive edge. As the new initiatives start bearing results, The Wendy’s Co (NASDAQ:WEN) can see some really rapid growth.
Gaurav Basu has no position in any stocks mentioned. The Motley Fool recommends Chipotle Mexican Grill and McDonald’s. The Motley Fool owns shares of Chipotle Mexican Grill, Inc. (NYSE:CMG) and McDonald’s Corporation (NYSE:MCD).
The article This Fast-Food Chain Is Planning to Make It Big originally appeared on Fool.com.
Gaurav is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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