Filed under: Investing
Source: Wendy's
Wendy's announced Tuesday the early July return of the successful, limited-edition Pretzel Bacon Cheeseburger and its sister sandwich, the Pretzel Pub Chicken. Wendy's saw some of its best comparable-store sales in history with the pretzel-bun menu items but quickly rotated the items out for other limited-time sandwiches.
But the first-quarter report featured a comps drop, and Wendy's wants to reverse course. How much could the pretzel bun's return help Wendy's fend off competition from McDonald's and Burger King Worldwide ?
Potential comps improvement
Wendy's had a good run of comps growth last year as the competition struggled to stay above even.
|
|
Q1'13 |
Q2'13 |
Q3'13 |
Q4'13 |
Q1'14 |
|---|---|---|---|---|---|
|
Wendy's |
0.8% |
0.4% |
3.2% |
3% |
1% |
|
Burger King |
(1.4%) |
0.6% |
0.9% |
1.7% |
2% |
|
McDonald's |
(1%) |
1% |
0.9% |
(0.1%) |
0.5% |
Source: Company filings. Wendy's comps represent the average of company-owned and franchise-owned comps. Burger King and McDonald's comps represent their global performance.
And the comps bump in the third quarter showed that Wendy's improvement arrived thanks to the pretzel bun. The company specifically called out the Pretzel Bacon Cheeseburger in that quarter's report as driving the highest comps the company had seen since 2005, which was notably before the recession -- a period when Wendy's suffered due to its comparatively higher menu prices.
But Wendy's apparently believed the product's success was easily replicated and shoved the pretzel bun off the menu for the brioche bun and a succession of other limited-time sandwiches. And first-quarter comps dropped below those of Burger King.
So the pretzel bun has come back to save the comps. But did Wendy's already lose the competitive edge?
McDonald's falters, Burger King builds
Last year's comps also show the paths of the competition. McDonald's struggled with its own limited-time menu offerings that mostly fell flat with consumers. And the company faced increased competition from Burger King successfully marketing products mimicking the Big Mac and McRib from McDonald's.
McDonald's still wins in sheer size of both its restaurant fleet and global reach. But a look at historical comps shows that the house of Ronald had the roughest ride over the past two years. Burger King remained the steadiest with Wendy's following closely behind.
Source: Company filings
The fast-food industry remains fiercely competitive but economically pinched with comps staying within the low single digits for even those pulling ahead. Chains need to embrace any advantage while trying to develop future strengths -- even if that means becoming reliant on a certain bun type for a while.
Foolish final thoughts
Wendy's needed to bring back the pretzel-bun sandwiches. I've long argued that taking limited-time risks only works for the bigger picture if the success stories get to either stay on the menu or make frequent appearances. Right now, the pretzel buns are only back for the summer. But if comps pop back up to 3% after the summer, Wendy's needs to put these products on the permanent menu.
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The article Wendy's Brings Back the Pretzel Bun to Boost Comps originally appeared on Fool.com.
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