Wendy's Vows Improvement

But such moves won't satisfy Trian, which is headed by executives of Triarc Cos., owner of Arby's and other restaurant holdings. Trian said in public filings in December that it has acquired a significant stake in Wendy's and has offered what it calls, "A recipe for successful value creation" at the company. "While we acknowledge that Wendy's previously announced strategic initiatives are directionally correct," Trian said in its filing, "We do not believe that management's current action plan goes far enough towards maximizing shareholder value."

The "real problem" at Wendy's today is "the continually deteriorating operating performance of the Wendy's Old Fashioned Hamburgers business," Trian's SEC filings state. Trian also criticized Wendy's management's decision to launch a pending initial public offering of up to 18% of its Tim Hortons subsidiary."

The Trian filing calls the proposed Tim Hortons IPO "an attempt to avoid shining the spotlight on the poor financial performance of Wendy's" and says that the IPO "would perpetuate a highly inefficient and costly conglomerate structure that marginalizes two great consumer brands." It adds, "Wendy's needs to cease operating as an inefficient holding company." The principals of Trian and its affiliaited entities include Nelson Peltz, Peter May and Edward Garden, all officials of Triarc.

Among the ingredients in the Trian "recipe for successful value creation" at Wendy's are an immediate 100% tax-free spinoff of Tim Hortons, the sale of Wendy's "ancillary brands," the reevaluation of some components of Wendy's strategic initiatives and "a significant reduction in costs" at Wendy's Old Fashioned Hamburgers business. Wendy's responded to the Trian filing and the value creation suggestions with an announcement that said the hamburger chain "has previously analyzed and considered the elements" in the Trian proposal. Wendy's estimated at the time that Trian owned a total of 950,000 shares of Wendy's International Inc., or less than 1% of the company's outstanding shares.

"We are right on track with our strategic initiatives," Wendy's chairman and CEO Jack Schuessler said in the announcement regarding Trian's proposals. Schuessler called the recent stock buyback plan "the latest example of the continued progress we are making with our strategic initiatives." The registration statement that Wendy's filed in December for the intial public stock offering of up to 18% of its Tim Hortons subsidiary was one of the moves designed to enhance its financial position.

In addition to the Hortons IPO, other Wendy's strategic initiatives have included the recent and previous share repurchase programs, the sale of more than 175 real estate properties to franchisees and third parties, closing more than 40 underperforming Wendy's restaurants and focusing on improving restaurant operations.