Introduction: The case objective was to analyze Wendy’s previous and current strategy and the accounting report to decide whether or not to add the chili on the new menu. In another word, we will test if the chili still does a large contribution to the total revenue of Wendy’s.
1. Wendy’s success is based on the combination of product differentiation, market segmentation, quality food, quick service, and reasonable prices. We will talk about each on the following:
Product differentiation: The most important product of Wendy’s is the “old fashioned” hamburger.
This is a hamburger made from fresh beef and is squared in a unique shape so as to differentiate from the others’. Wendy’s made the concept of “limited menu” that just includes four main products so as to be convenient for customers to choose the food.
Market segmentation: Young adults and adults are the main target customers of Wendy’s when it is found. The target group is sufficient in size to merit disproportionate attention and it is growing over time.
Its potential profitability is considerably greater than its size.
Quality food: “Quality is our recipe” is the permanent part of Wendy’s logo. In Wendy’s, Quality not only just means the food they served but also includes the way they treated customers and employees. Wendy’s quality services range from “old fashioned” hamburger which is made from fresh beef that was cooked to order and served directly from the grill to customers, to the layout of their restaurant and franchises that is specially designed.
Quick service: Dave’s initial goal is to build the first restaurant in Columbus that can get a really good hamburger without waiting 30 minutes. Wendy’s set a dining room that is designed to seat 92 customers, and a pick-up window to serve drive-thru customers in every restaurant and expand the scale continuously.
Reasonable prices: Wendy’s believe that one way for them to remain price competitive and still serve a better quality product was to limit the number of menu items. For example, they save the materials from making chili which is from “well-done” beef patties that could not be served as “hot ‘n juicy” old fashioned hamburgers.
2. The Wendy’s “limited menu” was launched by Mr. Thomas, the founder of Wendy’s, in early days. He decided that their menu only contains four main products: hamburgers, chili, french fries, and Wendy’s Frosty Dairy Dessert. By pursuing this special “limited menu”, Wendy’s remains the price competitive and gains above average returns. However, with the increasing of competitive of competitive pressures and changing customer demands, Wendy’s had no choice but to add other foods in their menu such as chicken and baked potatoes.
By studying the Wendy’s “limited menu”, we think that the “limited menu” is a double-edged sword for this company.
Advantage: It is the foundation of Wendy’s strategy that differentiated Wendy’s from McDonald’s and Burger King. It increased the company’s benefit and reputation. Secondly, it improved the quality of products and reduced the cost due to the increasing of working efficiency. Moreover, it also saved customers’ time in ordering.
Disadvantage: With the improving of human life, there is a growing demand of product variety. As we see it, it would hardly be a long term solution to serve such a large amount of increasing customers. Although giving up the “limited menu” may lead the company to loss some of benefits, it is good for company’s long term development.
Wendy’s aggressively introduce new menu to their restaurants to respond to increasing competitive pressures and changing customer demand in the quick-service industry. The company’ competitors had substantially improved the quality of their products, service, facilities, and menu items, so the “limited menu” is not Wendy’s competitive advantage any more.
3. Wendy’s drive-thru window is more successful than their competitors has following reasons. First is their site selection of restaurants. Wendy’s restaurants were usually located in urban or densely populated suburban areas, and their success depended upon serving a large volume of customers. Secondly, Wendy’s “limited menu” makes it convenient for customers to order. on the other side, it boosts employees’ efficiency. That’s the main reason why Wendy’s achieved above average returns than other competitors at the beginning.