Wendy's 'Zees Need More Data to Evaluate Remodel Mandate
A Wendy's remodel example.
Wendy’s needs to provide more data about return on investment from the franchisor’s remodeling mandates, says Curt Staab, president of the Old Fashioned Franchise Association, the “one and only” independent association for Wendy’s franchisees.
Staab owns nine stores himself, in Nebraska and Colorado, and the association represents the owners of 2,000 stores. In all, there are 4,800 franchised stores domestically.
“I would say there has not been a clear road map or transparency from the brand on the ROI,” he said in an interview last week, about the association’s views on the Wendy’s v. DavCo lawsuit. Wendy’s has sued DavCo, its fourth-largest franchisee, for allegedly balking on completing required remodels. DavCo claims there’s “no ROI” from the program.
“I don’t think there’s anybody against remodeling,” Staab says about his association’s members, but the issue is the size of the mandate and the sparse information about whether it’s worthwhile. “The board is committed to protecting its members’ financial interests, and we are asking the franchisor for transparency on the remodeling mandates and the financial feasibility.”
So far 600 stores have been remodeled under the so-called Image Activation program, Staab says, 300 of which have been franchised and 300 corporate stores. Association members own about half of the 300 franchised stores. “So we have our members’ data, and we’re showing mixed results,” Staab says.
Beyond those stores, little information is available except for anecdotes. “I believe there is a start on the data, but to really get an accurate read you’d have to wait one year, two year, three years” after the remodels to analyze return on investment.
Wendy’s first prototype remodel cost well over $1 million, but that has since been dialed back to two lower-cost remodels: $600,000 to $650,000, including deferred maintenance, for buildings older than 15 years; or about $500,000 to $550,000 for more modern buildings.
The latest design, called “Refresh” for any building that generates less than $1.4 million in annual sales, costs under $250,000. “We applaud the fact that they’re looking for more affordable options,” Staab said, but “there’s no history” on results.
Staab said he’s been fielding phone calls from concerned franchisees since Wendy’s sued DavCo, in December, and DavCo answered and filed a counterclaim, in March. Last week he forwarded a list of concerns over the Image Activation program to corporate. “We are in dialogue with leadership regarding a future meeting,” he says.
Wendy’s said in the past it had “no other choice but to file suit” against DavCo, and is “confident in its position.”