Wendy's 2009 Annual Report Download - page 2

Dear Fellow Stockholders:
Wendy’s/Arby’s Group, Inc. 2009 Annual Report
I am pleased to report that Wendy’s/Arby’s Group made
significant progress in 2009, which was our first full year of
post-merger operations.
From our base of more than 10,000 company-owned and
franchised restaurants, our two brands generated $12 billion
in systemwide sales. We also produced $3.6 billion in consoli-
dated revenues and made excellent progress against our key
objectives. Our 2009 accomplishments included the following
highlights:
• Produced annual adjusted EBITDA1 of $425.2 million, up
15.9% from the previous year.
•
Began revitalizing our Wendy’s
®
brand with a new market -
ing strategy, an improved product development program
and an exciting new advertising campaign.
• Increased profit margin at Wendy’s company-owned
restaurants by 330 basis points.
• Established a national purchasing cooperative for the
Wendy’s system to provide consolidated purchasing
efficiencies throughout the North American supply chain
and to facilitate continuity of supplies.
• Achieved our targeted $60 million of synergies and effi-
ciencies in general and administrative (G&A) expenses.
•
Launched an everyday value strategy at our Arby’s
®
brand,
which is designed to rebuild customer traffic and sales.
• Developed a strategic plan for international growth for
Wendy’s and Arby’s and added experienced leadership
to capitalize on this important opportunity.
• Initiated a stock repurchase program and repurchased
30.4 million shares of common stock for approximately
$141 million through March 19, 2010.
• Strengthened our financial flexibility to fund long-term
strategic growth initiatives.
• Established seven core values for the Company: integrity,
accountability, respect, responsibility, innovation, team-
work and opportunity.
At Wendy’s, 2009 systemwide same-store sales were
–0.7%, which we believe was among the best in the quick-
service restaurant industry. Wendy’s increased company-owned
restaurant margins from 11.6% for pro-forma 2008 to 14.9%
for 2009, a 330-basis point improvement versus our goal for
the year of 160 to 180 basis points of improvement. We
repositioned the brand and created the “You Know When It’s
Real™” advertising campaign, which highlights Wendy’s qual-
ity ingredients and fresh, never frozen North American beef.
We also began revitalizing the new product pipeline with
great-tasting introductions such as Boneless Wings and the
Bacon Deluxe Cheeseburger. Wendy’s commitment to quality
products was recognized in Zagat’s 2009 Fast-Food Survey,
which ranked Wendy’s as the #1 Mega Chain in three catego-
ries—Top Food, Top Facilities and Top Overall.
At Arby’s, we were more significantly impacted by the
intense value promotions and aggressive discounting by our
competitors in 2009. Our same-store sales declined and
company-owned restaurant margin fell as a result of the sales
deleveraging. To stabilize and rebuild our business within the
sandwich category, we introduced an outstanding new prod-
uct line—premium Roastburgers®—which produced our best
sales and margin performance early in the year. We also
focused later in the year on more compelling value offerings
with our $5.01 combo meals and everyday $1 Value Menu.
Balancing more affordable menu options and premium prod-
ucts is critical to establishing Arby’s brand positioning, rebuild-
ing sales momentum and improving restaurant margins.
Reversing the sales decline and improving Arby’s profitablity
is a key priority for our Company. In January 2010, I stepped in
to lead the brand’s turnaround efforts as interim president until
we are able to complete our search for a new brand president.
In our international business, we ended the year with
303 franchise restaurants in 23 markets outside the U.S. and
Canada. During 2009, we conducted an extensive market
analysis that identified the potential for more than 8,000
restaurants outside of North America. To capitalize on this
important growth opportunity, we have developed a strategic
plan to aggressively grow our international presence by
expanding our current markets and entering new high-priority
markets selected on the basis of demographic, economic,
political and competitive factors. In addition, we signed major
agreements with franchisees in Singapore and the Middle
East/ North Africa, and we developed a dual-branded Wendy’s
and Arby’s restaurant in Atlanta as a training unit for our inter-
national franchisees. We believe that dual-brand restaurants
will generate higher unit sales volumes and a better return on
investment for our international franchisees.
For 2010, we are focused on key initiatives to grow our
business and enhance stockholder value:
• At Wendy’s, we will expand upon our “Real” brand posi-
tioning, focus on product innovation, optimize our new
purchasing co-op, remodel older restaurants and invest
to expand our breakfast initiative. We also will continue to
focus on initiatives to further improve Wendy’s company-
owned restaurant margins.
• At Arby’s, we have established a turnaround plan to
re-energize the brand including a national expansion of
our everyday value strategy, increasing our national media
presence, revamping our product pipeline, enhancing
customer service and investing up to $100 million in a
three-year capital program to remodel our company-
owned restaurants.
• At Wendy’s/Arby’s Group, we will continue to invest in
our people and our brands to drive sales and profits. We
will also identify new opportunities to reduce G&A
expenses. And finally, we will invest in our international
business to generate long-term future growth.
I am proud of our management team, restaurant operators
and crew, and franchisees for their efforts and accomplish-
ments in 2009 and look forward to communicating with you
about our progress throughout 2010. As always, I encourage
you to read the most current information about Wendy’s/
Arby’s Group on our website—www.wendysarbys.com.
Sincerely,
Roland Smith
President and Chief Executive Officer
1 See Selected Financial Data and Reconciliation of EBITDA (earnings before interest, taxes,
depreciation and amortization) to Adjusted EBITDA.