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Wendy’s Improvements Increased Its Same-Store Sales

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Same-store sales growth comparison       

Same-store sales growth is the percentage change in the revenue generated from an existing retail outlet compared to the revenue it generated over the similar period in the previous year.

The above graph shows the overall same-store sales growth comparison for 2014. Chipotle (CMG) was the best. Its same-store sales growth was about 17%. Yum! Brands (YUM) was close to 3%. Wendy’s was at 2%. McDonald’s (MCD) showed negative growth at -1%.

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Wendy’s same-store sales growth

The above graph analyzes the same-store sales for Wendy’s (WEN) company-owned and franchised restaurants. Company-owned same-store sales grew from 1.6% in 2012 to 2.3% in 2014. The franchise same-store sales growth was lower than company-owned same-restaurant sales. This was mainly due to some franchise image activation restaurants being temporarily closed for renovation during 2014.

Companies in the fast food restaurant industry can be accessed through ETFs like the Consumer Discretionary Select Sector SPDR ETF (XLY). XLY holds 0.35% of Darden Restaurants’ (DRI) stock.

Growth of fast-casual restaurants

According to analysts, due to the weak economy the lower income groups are cutting back on eating out. As a result, fast food restaurants started to target the relatively higher income groups in order to seek sales growth. This is where the fast-casual restaurant concept emerges. The fast-casual restaurant concept is a blend of the fast food restaurant and full-service restaurant concepts.

Wendy’s shifts to a fast-casual restaurant

The Image Activation program was positive for Wendy’s same-store sales growth. It produced a higher average check. Wendy’s new restaurant designs have an elegant look. Recently, Wendy’s offered limited edition gourmet menu options. This is another indication that Wendy’s intends to compete with the fast-casual restaurants.

Wendy’s also plans to invest in consumer-facing technology to boost sales. We’ll discuss this more in the next part of this series.

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