Wendy's: Great Fast Food, Bad Investment

Jason Rivera profile picture
Jason Rivera

About a month and a half ago, I wrote an article stating that I believe Jack In The Box (JACK) to be overvalued despite the recent positive hype around the company. Lately, I have been researching Wendy's (NASDAQ:WEN) because it has had the opposite problem of JACK -- low expectations -- and I wanted to see if this might turn out to be a potential contrarian value play or a value trap.

I will be referencing and comparing Wendy's to Jack In The Box and the other fast food companies I wrote about in my JACK article, so if you would like to see how Wendy's stacks up against other fast food companies, please reference that article, linked above.

Wendy's Overview

Wendy's is an owner, operator, and franchiser of 6,543 fast food restaurants. Of those, 1,447 of the restaurants are owned directly by Wendy's, with the remainder owned by franchisees. Wendy's offers hamburgers, chicken sandwiches, salads, wraps, fries, and the rest of the typical fast food restaurant offerings, but at a higher quality profile than most of its other fast food competitors. Higher quality also leads to higher prices for its individual product offerings and meals, which greatly affected the company during the recession as customers generally sought cheaper meals. To meet this demand and remain competitive with its peers' lower-cost offerings, Wendy's has introduced its own value and extra value menus with prices generally under $2 per item within the past few years.

Since the recession, Wendy's has streamlined operations by selling off its Arby's subsidiary, enacting cost cutting measures, updating its menu to offer new products (including breakfast at some locations), and has started reimaging some of its restaurants via its Image Activation Program. The program has been put into place to update its restaurants by making them look more modern, offering more amenities to

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Jason Rivera profile picture
Jason Rivera is the author of How To Value Invest and has invested for five years and completely dedicated himself to becoming an excellent value investor in February of 2012. He is completely self-taught from books, websites, blogs, etc because he was not able to go to college due to health issues. He is a very conservative deep value and special situations investor who concentrates mainly on micro and nano caps and melds the philosophies of Warren Buffett, Benjamin Graham, Seth Klarman, and Joel Greenblatt into his own company analysis. He is aspiring to build his own "personal" MBA through the knowledge he is constantly gaining and contributes articles to Seeking Alpha, Guru Focus, Benzinga, and Insider Monkey. If you like my work feel free to visit my blog at http://valueinvestingjourney.com where I write about various investing topics, post my articles, list my goals, and where I have posted my investing philosophy. If you have any comments, questions, or potential job opportunities for me please contact me through Seeking Alpha, through my blog above, or at jmriv1986@gmail.com

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