Wendy's Chili Revisited

CONTENTS Heading                                                                                          Page Executive Summary                                                                                 3 Introduction                                                                                          5          The Wendy’s Edge                                                                                 5          Menu Unlimited?                                                                                 6 Driving Ahead                                                                                          7 Dollars and Sense – The Cost of Chili                                                      8          (i)         Out of Pocket Basis                                                               8 (ii)         Full Cost Basis                                                               10 (iii)         The Real Cost                                                                        11 The Case For Chili                                                                                 12 What Could Have Been                                                                        13 Looking Ahead                                                                                 14 Conclusion                                                                                          16 Appendix A                                                                                          17          Appendix B                                                                                          19 Appendix C                                                                                          21 Executive Summary David Thomas founded Wendy’s in 1969 as a fast-food outlet providing quality food and quick service at reasonable prices. Since then Wendy’s has grown rapidly. The issue of dropping chili, one of the four items from the original menu, arose in 1994 when management began to examine cost and profitability issues more closely. Our analysis reveals that chili should continue to be served, as it enjoys a healthy profit margin of $0.278 per bowl served on a sales price of $0.99. Although management has successfully streamlined operations to this point, the company faces a whole new set of challenges in the future – primarily a market characterized by fierce competition. Wendy’s will...