The numbers for Q4 2004 compared with the same quarter in 2003 were: Tim Hortons (Canada), up 6.6%; Tim Hortons (US), up 9.1%; Wendy's (company owned), down 4.3%; Wendy's, franchisee, down 4%; and Baha Fresh, down 6.1%.
For fiscal 2004, things were better for the Wendy's brand. Compared with 2003, its same-store sales were up at Wendy's company stores by 2.9%, and up at its franchisees by 1.8%. Baja Fresh's 2004 comps slipped 6.3%.
But the real star for the company in 2004 was Tim Hortons, whose Canadian store comps were up 7.4% compared with '03, and whose U.S. store comps were up 9.8%. The former, or Canadian, figure is perhaps the more impressive of the two, since Tim Hortons is already practically a national institution in Canada, with more than 2,360 stores and a commanding market share among QSRs (about 27%). Tim Hortons U.S. operations, by contrast, are considerably smaller, with only about 250 shops in this country.
Still, the company looks to the chain's U.S. growth as the next big thing. "Tim Hortons is emerging as a growth driver in the United States," said Jack Schuessler, chairman and CEO of Wendy's, at the company's conference call on Thursday. "We have an opportunity for significant expansion. Our goal is to have 500 restaurants in the U.S. by 2007. We're concentrating on building out existing markets—in Michigan, Ohio, West Virginia and Kentucky—and new markets, such as Rochester, NY, and Erie, PA. And we'll grow by acquisition, such as last year's acquisition of Bess Eaton in New England."
Schuessler also addressed the company's struggle with Baja Fresh. "Baja financial results are not acceptable," he said. "Toward the end of 2004, we took action to position the brand for future growth. We took a goodwill write-off of $190 million last November, and we closed 20 underperforming units. Also, we've brought in a new management team since last April."
He said the company was striving to "evolve the concept. There are new products, including kids' meal offerings, tortilla soup, and a fajita burrito, which we're currently working on," he noted, adding that in response to customer complaints, the restaurant's menu board has been made easier to read, and some seating configurations have been changed to make the restaurants easier to navigate with small children.
Regarding Wendy's itself, Schuessler called 2004 a year "competitive convergence," in which other companies imitated some of the chain's ideas, such as new salads, chicken strips, and "healthy options" (i.e., fruit instead of French fries) for kids' meals. He also said that because customers are now allowed to substitute for French fries with their combos, "we're now selling 120 more combos per restaurant per week than we did before this program."
The company and its franchisees opened a total of 550 new restaurants during 2004, consisting of 285 Wendy's, 224 Tim Hortons, 40 Baja Fresh and one Cafe Express, a new concept. "We're going to slow down the growth of Baja Fresh this year," said Schuessler. "We're only going to open about 20 to 25 units in 2005, mostly on the East and West coasts. The idea is to get everything right before we start growing again in a meaningful way."
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