How Wendy’s 1980s Turnaround Changed the Fast Food Industry

How to make a huge change, and succeed.
Oct. 5 2012 3:30 AM

Better Than Fast Food

How Wendy’s 1980s turnaround changed the fast food business.

(Continued from Page 1)

Besides getting elbow-deep in his company’s operations, Near also reworked the Wendy’s menu. He pressed for a skinless chicken breast sandwich and an expanded salad bar. And he revolutionized Wendy’s signature offering: the square burger. When you think about fast food hamburgers today, you probably imagine a small, two-ounce patty (or layers of them) tucked inside a bun. But in 1985, the only burger available to Wendy’s patrons weighed 4 ounces—the equivalent of a McDonald’s quarter pounder. Near believed he could nab more sales by introducing options for people with smaller appetites. So he launched a two-ounce burger initiative (one that, incidentally, also ended up catering to those with larger appetites, as it spawned double sandwiches). The bantam patties, which succeeded in driving up profits and expanding the chain’s customer base, had another important result: a value menu. Selling a quarter-pound burger for 99 cents would have been crazy; selling a 2-ounce version for the same amount translated into business gold. In 1989, Wendy’s was the first fast food restaurant to wholly embrace the cash-strapped young-adult market by offering a constellation of seven discounted items. That year saw a 25 percent increase in sales.

Near’s third and perhaps most brilliant maneuver was to coax Dave Thomas out of semi-retirement and into the national spotlight. At Near’s urging, Thomas became the face of a new Wendy’s advertising campaign. Competing in the fast food ad space with clowns and kings, the founder appealed to potential customers with his blend of endearing squareness and folksy charm. “He’s the Santa Claus of the system,” Near said of Thomas in 1991. Explaining his rationale further, he added, “We got to thinking we’re maybe the only major company in the business that has its own founder available. And [Dave is] just so good, and so genuine.”  

Thomas held Near in equally high esteem. As Rajan Chaudhry reports in a 1992 edition of Restaurants and Institutions, Thomas printed business cards in 1989 that read “Founder and Jim’s Right Hand Man.” The two men would take the mic at company conferences and playfully compete over who fried the better chicken breast. “When you’re in the audience, watching senior executives needle each other, you think, ‘Wow. These guys are joking and having fun,’ ” says Lynch. “It creates a culture where people enjoy their jobs.”  The newly upbeat atmosphere had real consequences for employees: Six years into Near’s presidency, Wendy’s turnover rate had dropped from 55 percent to 20 percent per year.

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The favorable numbers kept pouring in. After a $4.9 million loss in 1986, Wendy’s same-store sales began to rise—and continued to increase for 16 consecutive years. Consumer polls deemed Wendy’s food, menu variety, and atmosphere the best in the quick-service burger industry. The chain even snagged the overall top rating from Restaurants and Institutions between 1988 and 1994, beating out Burger King, McDonald’s, and six other competitors.

Near died suddenly of a heart attack in 1996, while attending the Olympic Games in Atlanta. Today, 16 years after his death, Wendy’s is regaining its footing in the wake of the recession and some destabilizing ownership changes. It tails McDonald’s, Subway, and Starbucks as the fourth most popular fast food business in the United States and boasts more than 6,500 stores worldwide, and more than 46,000 employees. Wendy’s ranks third in consumer polls that ask about “the most familiar and best quality quick-service brands” in the country. (The top five in order, in case you’re interested, are Subway, Dairy Queen, Wendy’s, Five Guys, and Chick-fil-A.) “The feeling is beginning to come back,” says Lynch. He says the new CEO, Emil Brolick, was hired by the Wendy’s Dream Team—Thomas, Near, and Gordon Teter, who succeeded Near—in the early phases of the ’80s turnaround.* If Smith learned anything from his predecessors, Wendy’s may be in for another pivot.

*Correction, Oct. 12, 2012: This article originally misidentified the current CEO of Wendy's as Roland Smith. Smith retired from Wendy's in 2011.

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