With net income up 26%, Wendy's posts banner year

Nation's Restaurant News, March 8, 1993 by Milford Prewitt

DUBLIN, Ohio -- Strong increases in average unit volume despite reduced menu prices made 1992 one of the best years in Wendy's International's history as it reported its third consecutive year of profit growth in excess of 25 percent.

The nation's third-largest burger operator said net income in the year ended Jan. 3 rose 26 percent, to $64.7 million, on a 17 percent gain in revenues, to $1.23 billion.

The company also said average net sales at domestic operations rose 5.7 percent for the year, while average menu prices declined 2 percent, giving Wendy's nearly an 8-percent increase in real sales gains. Systemwide domestic average unit volume topped $912,000.

It was an achievement that made Wendy's top executive brag.

"I'm proud that our strong sales and profit momentum is continuing," Jim Near, chairman and chief executive officer, said in a statement. "We know we are outperforming our hamburger competitors in sales and transaction growth.

"This remains a simple but intense business with increasing competition. Our challenge is to exceed the customer's expectations."

Near's description of Wendy's performance, when compared with those of some of its segment rivals, was not an idle boast.

In both sales and profits, Wendy's rate of growth outscored segment leader McDonald's, which reported a 12-percent annual gain in profits on revenue increases of 7 percent, for its year ended Dec. 31.

Hardee's, the Imasco subsidiary that has become the fourth-largest burger system, reported a 57-percent increase in annual operating earnings, to $63.1 million, for the year ended Dec. 31, almost identical to Wendy's year-end profits of $64.7 million.

But Hardee's revenue growth trailed Wendy's. Although Hardee's reported average unit volumes reaching $1 million, revenues were up just 7 percent for the year.

Burger King, the No. 2 player in the field owned by the British-based Grand Metropolitan, does not report its financial results apart from its parent company. But franchisees in various parts of the country have been crowing about improvements in average unit volumes for the past year and a half.

For the three months of the fourth quarter, Wendy's said net income jumped 35 percent, to $14.7 million, on revenues of $305.9 million, a 13-percent gain.

Near said the company's results were largely a result of improved customer traffic.

"I'm extremely gratified that our sales growth is coming from customers choosing Wendy's more often, and not price increases," he said.

"This means we're taking better care of our customers; however, I know we still have a lot of room for improvement," he added.

Near said one of the keys in the company's performance was its success in selling products at both ends of the price range, giving customers a selection of 99-cent items to premium-priced offerings, with a mix of limited-time menu selections.

As has been the case for the past several years, Wendy's pointed to the continued customer reception of founder Dave Thomas' television ads for helping to advance the chain's performance.

"Dave's ads continue to appeal to everyone, and we plan to continue his straight-talking, old-fashioned commercials."

Wendy's, which is in the midst of a major expansion plan, broke the 4,000-unit barrier during the year, to finish with 4,010 outlets.

The company said the chain added 235 restaurants in 1992 and is projecting growth for 350, nearly one a day, in 1993.