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As McDonald’s slowly exits its in-store business at Walmart, other restaurants rush to fill the void. And while some chains might offer some of the same products that McDonald’s offers, like Burgers and Fries, Wendy’s is stepping up the game by plating with some new exclusive items, especially for its Walmart locations.
Wendy’s is the third-largest fast-food chain with over 7000 locations around the world. They are famous for their “old-fashioned hamburger” with a unique square-shaped patty, unlike the regular round patties found with competitors. The problem is that though Wendy’s square patty is quite different, it hardly has any signature dish which sets it apart from the leading Burger brands.
Wendy’s is also the latest in many businesses to face a class-action lawsuit against customers whose credit card data was sacked following a data breach. The most recent case, filed in federal court against the fast-food chain, alleges that Wendy’s failed to comply with the Payment Card Industry Data Security Standards (PCI DSS).
Five Guys and Chick-fil-A are examples of hamburger restaurants with minimal capitalization requirements. The companies require significantly less capital to start up than other, more traditional fast-food joints like Wendy’s, McDonald’s, or Burger King. However, despite their lower costs of entry, these businesses are just as popular among customers.
The other major issue of owning a Wendy’s store is that there is no exclusivity of the territory of operation. Wendy’s also has been especially slow in introducing new items on its menu and has been accused of serving “not so fresh” food to its customers.
Wendy’s Business Overview And Franchise Information:
Dave Thomas, known to many today as “the face of Wendy’s,” was the founder of the company that operated restaurants all over America and appeared in 800 commercials. He opened his first store in Columbus, Ohio, in 1969, and since then, Wendy’s has grown explosively, sharing space with KFC and Jersey Mikes.
Wendy’s offers a wide range of prepared-to-order menus to its customers. It sells hamburgers, chicken sandwiches, salads, baked potatoes, deli sandwiches, shakes, french fries, and other related items.
Franchise Investment Overview:
Wendy’s is one of the most recognizable brands globally, and with that comes a high entry cost. It generally requires a new franchisee to have a liquid assets requirement of anywhere from $2 – $ million and a net worth of at least $5 million. While this investment is equivalent to other big franchisors, fresh brands require a much lower investment.
Wendy’s franchising costs break-up is as follows:
- Total Initial Investment: $2,018,500 to $3,688,000
- Application Fee – $5,000
- Background Check Fee – $500 per person
- Technical Assistance Fee (or franchise fee for a 20-year term) – $50,000 per restaurant
- Royalties – 4% of gross sales
- National advertising – 3.5% of gross sales
- Local advertising – 0.5% of gross sales
Wendy’s Growth Strategy for Franchisees
After the Death of Dave Thomas in 2002, the company restored its market share by strategic penetration. The same ideology is every franchise.
Market Penetration: Wendy’s has led with a focus on quality and affordability in its marketing pitch. Its market penetration strategy is to grow through low-cost expansion with economies of scale.
Market Development: TWendy’s uses a low-cost and pricing approach to develop in new markets.
Product Development: The company adds on new products to attract more customers. However, they have been pretty slow in developing new products as compared to most other competing brands.
Why You Should Not Buy A Wendy’s Franchise
Despite being amongst the biggest fast-food chains globally, Wendy’s has significant issues in its operations, making it not the best investment for your time and money.
We have researched through various franchises forums, Wendy’s FDD, company financial and news reports for their information and feedback to analyze and tell you the significant drawbacks of the brand.
#1 Wendy is a very Expensive Franchise:
If you plan to take up Wendy’s franchise, be prepared to shell out money in heavy proportion. Especially compared to the many upcoming franchise stores, Wendy’s franchise is very expensive and requires a lot of front-up capital.
We have found that, on average, Wendy’s franchises generate $66,500 in net profit each year. However, many owners make far more than that. The FDD states that most Wendy’s franchises bring in $1.5 million or more each year. With an investment of around 4000,000, Wendy’s franchise earning is not justified for many years.
#2 Nothing Special In Its Menu For The Customers:
For the longest time, Wendy’s was known for its square-shaped patty. While other competitors brought out their signature sandwiches, Wendy’s did not offer anything that made it stand out from the crowd. McDonald’s and Burger King have signature offerings — the Big Mac and the Whopper — which we all know and love. But Wendy’s doesn’t have a signature meal or one-of-a-kind item to call its own, leaving consumers with more of a “meh” attitude towards the brand.
#3 No Exclusive Territory for Wendy’s Franchise :
Even when you own the promising of Wendy’s territories, you may soon be competing with another of Wendy’s outlets. Wendy’s does not provide any exclusivity of the location to its franchise, which could be a considerable risk for the investors.
#4 Wendy’s Is Not So Fresh:
Wendy’s menu has been roasted on social media when other users on Reddit’ accused the brand of not serving quality food. The accusations, which became popular with many users, were a significant blow to Wendy’s reputation for serving fresh and healthy food.
Take Away
With so many restaurants out there, competition is fierce. While fast-food restaurants enjoy 80% of the market, thanks to their apparent ease of use, burger joints still manage to attract many customers even in the face of limited options. Wendy’s has not been able to impress both customers and franchisees with its quality; in fact, it does not seem to be doing well at all for many franchisees.
Sources:
https://franchisebusinessreview.com/post/wendys-franchise/
https://www.thebalancesmb.com/wendy-s-franchise-review-1350385
https://www.ibisworld.com/industry-statistics/market-size/fast-food-restaurants-united-states/
https://www.eatthis.com/largest-restaurant-chains-america/
https://digitalguardian.com/blog/wendys-class-action-beefs-details