The American franchises keep coming, with popular fast-food chains Wendy’s and Arby’s now holding information sessions for “prospective operators” to open quick-service restaurants in Australia.
But like several of the American franchises heading down under, Wendy’s and Arby’s sales have struggled to keep up in the States’ sluggish retail environment with shares in the company’s parent dropping over 9% in the last week alone.
The news comes as clothing chain Gap prepares to open its first store in Melbourne in nine days, while last week New York-based frozen yoghurt franchise Tasti D-Lite said it is currently searching for franchise operators in Australia.
Wendy’s and Arby’s, both owned by the Wendy’s/Arby’s Group, is one of the biggest American franchises to scout Australian locations. It has over 10,000 locations in over 25 countries, turns over $US12 billion each year and has been operating in the US for the past four decades.
The Wendy’s/Arby’s vehicle is a holding company for the two separate brands, both of which have their own, distinct approach.
Wendy’s is the third-largest burger chain in the US, behind McDonald’s and Burger King. About 77% of its 6,650 locations are franchised, and it employs over 46,000 people worldwide, with locations in Canada, Malaysia, New Zealand, and throughout South and Central America.
Its key marketing gimmick is the use of square hamburgers, which it claims differentiates it from rivals. The company merged with Triarc in 2008, which eventually became the Wendy’s/Arby’s Group.
Arby’s has more of an adult-oriented approach, focusing on roast beef products and wraps and sandwiches. It has over 2,500 locations, with the majority of those owned by franchisees, with locations in Qatar, Turkey and the United Arab Emirates, as well as Canada.
But the company is suffering. The group’s shares have fallen over 9.4% in the past five days alone to $4.02, following a disappointing second-quarter results announcement.
Over the past six months the company’s shares have lost over 16% and over the last year the stock is down by more than 25%.
Chief executive Roland Smith announced the company’s results last week, saying that for the second quarter, Wendy’s total revenue was down from $US615.2 million to $US607.4 million, with same-store sales down by 1.7%.
Arby’s didn’t fare much better. Its revenue dropped from $US297.5 million to $US269.6 million, mainly due to the closure of 18 company-owned restaurants. Same-store sales dropped by a disappointing 7.4%.
Smith actually said in the company’s official statement it will take time for Arby’s sales to become same-store positive, “particularly in this tough economic climate”.
The Wendy’s/Arby’s Group has a whole expects 2010 EBITDA to be down approximately 3-5%, due to a combination of factors including flat same-store sales and over $165 million in capital expenditures.
“Our adjusted EBITDA outlook for full-year 2010 reflects lower than anticipated sales at each brand due to the challenging economic environment,” Smith said. “We are reviewing our 2011 outlook and plan to provide an update later this year.”
SmartCompany has been informed a Wendy’s/Arby’s representative was unable to reply to questions before publication. The company is directing inquires to the US consulate in Melbourne.
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
