Wendy's Chili

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In January 1979,the management of Wendy's International, Inc., a relatively young and rapidly growing quick-service restaurant chain, was considering adding a salad bar to its menu. Because Wendy's "limited menu" concept was one of the factors that had contributed to the Company's remarkable success, management felt that consideration should also be given to the desirability of dropping one of the existing products from the menu if the decision regarding the introduction of the salad bar turned out to be favorable. Of Wendy's four basic products, chili seemed to be the most likely candidate. In addition to being the menu "maverick," chili contributed the least to total restaurant sales and was also considered to have the lowest profit margin. On the other hand, Wendy's management was aware that the reasons chili had been placed on the menu at the Company's inception were, for the most part, still valid. The Company and Its Products

Wendy's Intemational, Inc. was founded in Columbus, Ohio, in 1969 by Mr. R. David Thomas. Prior to that time, Mr. Thomas had purchased an unprofitable Kentucky Fried Chicken franchise in the Columbus area, turned it around, and subsequently sold it back to Kentucky Fried Chicken at a substantial profit. He then became a co-founder of Arthur Treacher's Fish & Chips. So at the time he founded Wendy's, Mr. Thomas was no stranger to the quick-service food industry. Although he had been involved with businesses specializing in chicken and fish, Mr. Thomas's favorite food was hamburgers, and he frequently complained that there was no place in Columbus to get a really good hamburger without waiting thirty minutes or more. Someone finally suggested (whether in earnest or in jest was debatable) that he get into the hamburger business and make his own. After thinking it over, that's just what he did, and he named his new Company after his eight-year-old daughter, Wendy. His goal was to provide consumers with bigger and better hamburgers that were cooked to order, served quickly, and reasonably priced. By offering what he believed was a different product, Wendy's went after a different segment ofthe hamburger marketyoung adults and adults. In so doing, Mr. Thomas did not view his Company as "just another hamburger chain."

This case was prepared by E. Richard Brownlee, II, Associate Professor of Business Administration. This case was written as a basis for class discussion rather than to illustrate effective or ineffective handling of an administrative situation. Copyright @ 1979 by the University of Virginia Darden School Foundation, Charlottesville, VA. All rights reserved. To order copies, send an e-mail to dardencases@virginia.edu. No part of lhis publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in anyform or by any means-electronic, mechanical, photocopying,recording,orotherwise-withoutthepermissionoftheDardenSchoolFoundation.Ptev.l/81.0 -2- uvA-c-0871

Wendy's International, Inc., chose as its trademark the concept of the "old fashioned" hamburger. This was a hamburger made from fresh beef that was cooked to order and served directly from the grill to the customer. So that customers could see what they were eating, o'old fashioned" hamburgers were square in shape so as to extend beyond the round buns on which they were served. The unique shape also differentiated a Wendy's hamburger from those of other restaurants.

Mr. Thomas felt that one way for Wendy's to remain price competitive and still serve a better quality product was to limit the number of menu items. He thus decided on four basic productshamburgers, chili, french fries, and Wendy's Frosty Dairy Dessert. The standard soft drinks, milk, and coffee were also available.

Wendy's old fashioned hamburgers were pattied fresh daily from 100 percent pure domestic beef and served "hot 'n juicy" in accordance with individual customer orders....
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