Wendy’s strategic initiatives
Wendy’s (WEN) worked to reposition itself as a competitor in fast-casual restaurants. It used image activation and innovative “gourmet” menu items. It also developed consumer-facing technology. The improvements are expected to have a positive impact on its same-store sales.
Wendy’s plans to play a strategic role. It will transfer its operations to its franchisees. It will hand over the businesses, almost entirely, to third parties. Wendy’s management admits that it’s concerned about franchisee support.
Trends in share price movement
Wendy’s share price gained almost 30% since October 2014. Some analysts think that the rally might be over. Wendy’s franchisee model is expected to bring stable cash flow. It remains to be seen whether the possibility of further buyback has a favorable impact on the share prices.
Growing debt burden
Research by the National Association of Enterprise Economists indicates that the Fed might raise the interest rates before in the end of 2015. With Moody’s downgrading Wendy’s in February 2015, plans to raise further leveraging could be a cause for concern.
Major competitors—like McDonald’s (MCD), Yum! Brands (YUM), and Popeyes (PLKI)—already moved to emerging markets. Some of Wendy’s international ventures haven’t gone as planned. With limited international exposure, Wendy’s has to go a long way to achieve its vision to expand internationally.
Innovation, consumer-facing technological development, and brand building with its franchisees are going to be the three crucial aspects of Wendy’s future.
Companies in the fast food restaurant industry can be accessed through ETFs like the Consumer Discretionary Select Sector SPDR ETF (XLY). XLY holds 10% of its investments in restaurants and travel.
For the latest updates, visit Market Realist’s Restaurants page.