Wendy's franchisees ask role in sale talks

BUSINESS DIGEST

September 18, 2007|By Bloomberg News

Franchisees of Wendy's International Inc., the third-largest U.S. hamburger chain, say their input is being ignored and have asked to be included in any sale discussions.

Representatives of more than 1,100 restaurants, or a quarter of the company's U.S. owners, signed the Sept. 8 letter. Wendy's put itself up for sale in April after pressure from billionaire investor Nelson Peltz to boost profit and reduce costs.

"Should the Board of Directors choose to ignore the input for the bulk of the franchise community in this process, it may well reap a very public renunciation long before any sale can be concluded," the franchisees wrote in the letter.

Sixteen franchisees, including executives from DavCo Acquisition Holding Inc. of Crofton, owner of more than 150 Wendy's and Friendly's restaurants in the Mid-Atlantic, and the family of the late founder and former chief executive Dave Thomas signed the letter.

"As individuals, you are of course entitled to your opinions of Board performance," Chairman James V. Pickett wrote in a Sept. 14 response. "To suggest that we are not concerned or engaged would be uninformed, flatly wrong and disappointing, particularly in light of the special steps we have taken to reach out to you."

As of July 1, Wendy's had 4,661 restaurants owned by franchisees and 1,297 company-owned locations in the United States.

The franchisees are also concerned about the repeated "downsizing" of product and portion sizes "despite vocal objection from many franchisees." They asked that the company source all products from North America and that the chain not impose a single national pricing plan.

"Neither I nor any other director would suggest that we lack serious challenges as a system," Pickett wrote. "With all franchisees we share the objectives of improving brand Wendy's sales and profitability."

Wendy's cut its annual profit forecast in June on slower sales growth and higher costs for commodities such as beef.

Revenue slumped after the death of Thomas in January 2002, with sales at older stores dropping for six consecutive quarters before Chief Executive Officer Jack Schuessler resigned in April 2006. He was replaced by Kerrii B. Anderson.

Wendy's fell 32 cents to $32.57 in New York Stock Exchange composite trading yesterday. The shares have declined 1.6 percent this year. The chain trails McDonald's Corp. and Burger King Holdings Inc. in sales.

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