Arby's Chain Up for Sale - Analyst Blog

Wendy's/Arby's Group Inc. (WEN), the fast food chain is planning to sell its Arby's restaurants, so that it can focus its resources on building the Wendy's brand. In 2008, the company was formed through the merger of Triarc, the franchisor of Arby's restaurant chain, and Wendy's, the owner-operator-franchisor of the eponymous fast food chain.

The third largest quick-service restaurant company in the United States, said that although Arby's is showing signs of stabilization as company-operated same-store sales jumped 3.1% during the fourth quarter of 2010, Arby's has struggled in recent years to reverse falling sales and traffic. In the recently concluded quarter, Arby's system-wide same-store sales dropped 5.9%.

Wendy's/Arby's believes that Wendy's provides higher growth opportunities with 6,500 restaurants in more than 20 countries. After selling off its struggling Arby's sandwich chain, the company will be able to focus on expanding the Wendy's brand. The company will also take initiatives like value menu offerings and the introduction of new dayparts to drive traffic and improve same-store sales. Wendy's/Arby's has hired UBS Investment Bank, a part of UBS AG (UBS), to advice in the process.

Wendy's is not the only fast food chain looking to divest slower growth brands, Yum! Brands, Inc (YUM) is also planning to sell two of its brands -- Long John Silver's and A&W -- to focus on faster growing brands KFC, Pizza Hut and Taco Bell. Yum! Brands also expect to expand the brands in the U.S, China and other international markets.

With almost 3,700 restaurants, Arby's is the No. 2 quick-service sandwich chain in the U.S, but it lacks the international exposure and hence failed to perform during the U.S economic downturn. We believe that the company will certainly benefit from the sale of the brand, as poor performance of Arby's has been a drag on the company's results.

Wendy's/Arby's will release its preliminary fourth-quarter and full-year results and 2011 outlook after markets close on January 26, 2010.

 
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