For Wendy's Co., based in Dublin, Ohio, reinvention is critical. That's why executives at the 6,600-restaurant chain spent the past two and a half years going over burger minutiae during an undertaking they call Project Gold Hamburger. That included deciding whether to switch from white onions on its burgers to red (they did), to change the fat/lean ratio of the meat (they didn't), or to go with plain or crinkled pickles (they picked crinkled.)
Wendy's is trying to boost lackluster sales and fight growing competition from much bigger rival McDonald's on one end and expanding fast-casual chains such as Five Guys on the other. Part of the problem is that Americans, who are being squeezed by the tight economy, are being pickier about how they spend their dining-out dollars. But the biggest issue is that Wendy's, which hadn't changed its burger since the chain began in 1969, let its food offerings get stale over the years while its competitors continued to update their menus.
Still, it can be risky to tweak an old and familiar product. In fact, the past is littered with examples of this, including New Coke and Clear Pepsi, which were eventually pulled from store shelves because customers didn't like the new versions. Wendy's stumbled a few years ago when it tried to introduce breakfast foods. The company now says it made a mistake by offering omelets and pancakes, which aren't conducive to eating on the go.
"We have a lot of catching up to do in some areas," said Gerard Lewis, Wendy's head of new product development. "But after we launch this hamburger there will be folks who need to catch up to us."
Project Gold Hamburger started around early 2009, shortly after hedge fund magnate Nelson Peltz bought Wendy's and combined it with Arby's. The marriage ultimately failed, with Peltz selling Arby's to a private-equity firm this summer.
It was clear Wendy's had lost its way. In six of the past 11 quarters, the company has reported lower or flat revenue at restaurants open at least a year, a key measure of a company's growth. And after Thomas died in 2002, Wendy's fell flat on finding a new face for its advertising, at one point running bizarre commercials featuring a man wearing a red pigtailed wig.
Also looming over Wendy's is strong competition from McDonald's, which has grown even larger in the past couple of years by remaking itself into a hip, healthy place to eat, with smoothies, Wi-Fi and high-margin coffee drinks. Last year, McDonald's had 49.5 percent of the fast-food burger market in the U.S, up from 41.6 percent in 2002, according to research firm Technomic. In the same period, Wendy's share fell to 12.8 percent from 14 percent. Burger King's fell to 13.3 percent from 17 percent.
Anxious to gain market share, Wendy's polled more than 10,000 people about their likes and dislikes in hamburgers. It found that people like the food at Wendy's but thought the brand hadn't kept up with the times. So, executives were shipped off to eat at burger joints around the country and measured each sandwich on characteristics like fatty flavor, salty flavor and whether the bun fell apart.
"I've traveled more with this burger than I have in my entire life," said Shelly Thobe, Wendy's director of hamburgers and new platforms.
Then, it was time for Wendy's researchers to consider the chain's own burger, ingredient by ingredient. Each time they made a change, they asked for feedback, visiting research firms around the country to watch through two-way mirrors as people tried each variation.
Wendy's chefs also tested new products at the headquarters in Dublin, just outside Columbus. From the test kitchens, they slipped new burger incarnations through little windows into a "Sensory Test Area," a white-walled room with 16 cubicles where tasting volunteers, or sometimes employees, ranked each burger.
Many suggestions sounded good but didn't ring true with tasters. They tried green-leaf lettuce, but people preferred to keep iceberg for its crunchiness. They thought about making the tomato slices thicker but decided they didn't want to ask franchisees to buy new slicing equipment. They even tested a round burger, a trial that was practically anathema to a company that's made its name on square burgers. (Wendy's ultimately did not go with the round shape, but changed the patty to a "natural square," with wavy edges, because tasters said the straight edges looked processed.)
Amid all the changes that were proposed that didn't make it, there were some golden nuggets. Tasters said they wanted a thicker burger, so Wendy's started packing the meat more loosely, trained grill cooks to press down on the patties two times instead of eight, and printed "Handle Like Eggs" on the boxes that the hamburger patties were shipped in so they wouldn't get smashed. And Wendy's researchers knew that customers wanted warmer and crunchier buns, so they decided that buttering them and then putting them through a toaster was the way to go.
In the end, Wendy's researchers changed everything but the ketchup. They switched to whole-fat mayonnaise, nixed the mustard, and cut down on the pickles and onions, all to emphasize the flavor of the beef. They also started storing the cheese at higher temperatures so it would melt better, a change that required federal approval.
"It's not about getting real exotic," said Lori Estrada, Wendy's senior vice president of menu innovation and packaging. "It's about making everything work."
Change is good but hard
But Wendy's acknowledges that remaking a burger that's been around for more than four decades isn't easy.
The company in July sued a group of franchisees who refused to install the toasters needed to make the buns for the new burger. Each restaurant was asked to install two toasters, at a cost of $5,000 to $6,000 per restaurant. Locations with older grills had to replace those too, at a cost of about $15,000.
But the franchisees, who own or have stakes in more than 300 of the 5,200 franchise locations, say that Wendy's hasn't addressed their concerns about the safety of the toasters. The suit's two lead franchisees, whose pictures hang on a "Hall of Fame" in the headquarters' front lobby, say that employees could burn or cut themselves while using the toasters. The suit is still pending.
Wendy's also faces the reality that some customers may not like the new burger or its price. At a time when Americans are cutting back in the down economy, Wendy's says prices for the burgers will probably increase, maybe by 10 or 20 cents, because of the higher-quality ingredients. Franchisees set their own prices, though. A Wendy's down the road from the Dublin headquarters, which was already selling the new sandwiches last week, was charging $3.49 for the quarter-pound burger, $4.69 for the half-pound, and $5.79 for the three-quarters pound.
Wendy's officials say complaints about the new burger are inevitable. After all, the company was bombarded with complaints for three or four weeks last year when it made changes to the fries, including flavoring them with sea salt. But Lynch said fry sales eventually went up and "exceeded expectations," although he declined to give figures. He also said the new burger "speaks for itself."
Analysts, meanwhile, are mixed on their views of the potential effect of the new burger. "It probably would have been a bigger deal if it had happened a lot sooner," said Bob Goldin, an executive vice president at Technomic. "It's still a big chain but it's got so much catching up (to do)."
Jeff Davis, at research firm Sandelman & Associates, said Wendy's still has a long-term reputation for quality and credibility that it can harvest. "If they can hit those buttons, it's going to work for them," he said.
For its part, Wendy's is hoping the burger will be one of many successful changes at the chain. Wendy's, which just got a new CEO last week, wants to expand overseas and on the West Coast, relaunch a breakfast line that's easier for on-the-go eating, and sell more high-margin snacks and beverages.
And early next year, it will introduce new chicken sandwiches.
The new undertaking has been code-named Project Gold Chicken.