Wendy's Chili Revisited

CONTENTS Heading Page Executive Summary 3 Introduction 5 The Wendy?s Edge 5 Menu Unlimited? 6 Driving Ahead 7 Dollars and Sense ? The Cost of Chili 8 (i) Out of Pocket Basis 8 (ii) Full Cost Basis 10 (iii) The Real Cost 11 The Case For Chili 12 What Could Have Been 13 Looking Ahead 14 Conclusion 16 Appendix A 17 Appendix B 19 Appendix C 21 Executive Summary David Thomas founded Wendy?s in 1969 as a fast-food outlet providing quality food and quick service at reasonable prices. Since then Wendy?s has grown rapidly. The issue of dropping chili, one of the four items from the original menu, arose in 1994 when management began to examine cost and profitability issues more closely. Our analysis reveals that chili should continue to be served, as it enjoys a healthy profit margin of $0.278 per bowl served on a sales price of $0.99. Although management has successfully streamlined operations to this point, the company faces a whole new set of challenges in the future ? primarily a market characterized by fierce competition. Wendy?s will need to break from the traditional mould by providing innovative menu offerings and locating in high human traffic areas to compete effectively in the new millennium.

Introduction The main objective of this report is to determine the viability of retaining chili as an item on Wendy?s menu in terms of its costing and profitability. Our detailed analysis and discussion are found under the headings, ?Dollars and Sense? (page 8 ) and ?The Case for Chili? (page 12 ). We have also included discussions on Wendy?s attributes, ?The Wendy?s Edge?( page 4), why Wendy?s had to broaden its menu ?Menu Unlimited?, (page 6 ), the unique success of Wendy?s drive thru, ?Driving Ahead?, (page 7), a look at how Wendy?s could have better managed the difficult 80s, ?What Could Have Been??,(page 13) and a glimpse into the future of Wendy?s, ?Looking Ahead?,( page 14).

The Wendy?s Edge ?Great chefs are not made ? they are born.? David Thomas, the founder of