Wendy's/Arby's year begins with some promise

It's not an easy time to be in the fast-food business. For Atlanta-based Wendy's/Arby's Group, 2009 brought penny-pinching diners, price-slashing competitors and weakness at Arby's.

But two months into 2010, the company can point to some early successes. In January, sales at Wendy's stores open at least a year rose 0.3 percent in North America. The company tried to attract budget-conscious eaters with 99-cent spicy chicken nuggets and re-introduced a fish sandwich.

The company said January sales for Wendy's -- which accounts for about 70 percent of the parent company's business -- were among the strongest in the restaurant industry.

Executives cite February's menu introductions at Wendy's, including a bacon and blue cheese hamburger. A larger breakfast menu is coming. Executives promise additional new products for both Wendy's and Arby's but aren't yet disclosing details.

Arby's came off a fourth quarter in which its sales fell short of even pessimistic Wall Street predictions. But early in 2010, same-store sales trends at Arby's improved somewhat. In January, same-store sales at company-operated restaurants fell 7.4 percent in North America, an improvement from the 12.6 percent drop in the fourth quarter.

Wendy's/Arby's plan to increase customer traffic and sales at Arby's includes expanding value menus and remodeling stores. Wendy's/Arby's has also gotten its Arby's franchisees to sign off on bigger spending on national advertising.

As competitors such as Burger King have launched significant discounts, Arby's has rolled out its $1 value menu to more than 2,500 restaurants. To executives' chagrin, Arby's rated low on recent consumer surveys asking whether it was "worth what you pay for it." Many customers said they loved Arby's food but couldn't afford the prices.

"Competitors have moved to a price war," said Roland Smith, CEO of Wendy's/Arby's. "We have lost a significant number of sales. In this economy, you need to have a strong value proposition, or you lose the bottom end of your consumer base."