Nelson Pelz Buys Wendy's

Last August, I wrote this post on the occasion of a Wall Street Journal piece about the decline of Wendy's, the fast food purveyor.

In that post, I concluded with these sentiments,

"The fact is, from a business history perspective, Wendy's had to slow at some point. It was Dave Thomas' passionate creation, and was inevitably destined to either grow too large, or miss some market trend. Companies don't grow forever. Changes in management, especially the loss of a gifted, passionate, insightful CEO, can cause irreparable damage.

If anyone should have had the sense to realize that Wendy's was finished as they once knew it, with Thomas' death, it should have been his family. Odds are, Nelson Pelz is more realistic about Wendy's than the family or its management. He realizes that it now is probably worth more in pieces.


A little perspective, and a lot less emotion, might have saved all the actors in this drama some grief, energy, time and money. Wendy's was destined to falter after the loss of Thomas, without some equally-passionate, experienced leader. Certainly, a relative newcomer, and an accountant, at that, wasn't going to be going toe to toe with McDonalds and winning. Or with Nelson Pelz, for that matter.


Sometimes, it's better to simply acknowledge change and get it over with."



This past week's announcement that Nelson Pelz had finally purchased the struggling firm elicited cries of outrage from Thomas' family.

Yet, it's a good bet that Pelz can do for the firm's shareholders what Kerrii Anderson never did in her more than five years as CEO after Thomas' death.



Much like Carl Icahn, Pelz is a fixer who puts his money where his mouth is. Shareholders should be happy at his arrival in their midst. Chances are, he'll get things moving to increase shareholder value in a business where management has gone to sleep.

As the nearby five-year price chart for Wendy's and the S&P500 Index clearly shows, Wendys' shareholders have not enjoyed the past half-decade. They missed out on a 50% rise in the index, and suffered a drop of about 10% in value instead.






But that's perhaps not the worst of the story.

By operating Arbys and Wendy's under one corporate roof, Pelz may get some economies of scale and leverage the business sense of his management team from Triarc about how to run a smallish fast food company in this era.

As much as Dave Thomas loved the company he created, and took public in 1976, the nearby look at Wendy's versus the S&P500 index from 1993 shows that Wendy's has only ever had a brief period of superior performance. That was twenty years ago, for a little less than three years. Then twice more, in 2002 and 2006, the cumulative price performance of the stock brought it briefly equal to the S&P.

That's a pretty small window of time for shareholders to have been fortunate to be holding the stock and enjoy a better return from it than from merely holding the more-diversified S&P500.

Rather than share the sentiment of Pam Farber, Dave Thomas' daughter, who, according to the Journal,

"...owns 33 Wendy's restaurants in Ohio with her four siblings," and said "It's just awful,"

of Pelz' acquisition, I believe this is the best hope shareholders and franchisees of the long-suffering, lagging burger chain have had in the last six years.