Triarc operates and franchises Arby's, a chain of fast food restaurants specializing in roast beef sandwiches with a total of 3,700 company-owned and franchised restaurants nationwide. In May, 2008, Triarc announced its $2.4 billion acquisition of Wendy's International, one of the world's largest hamburger chains, with just under 6,000 total restaurants in the United States as well as an additional 600 international locations. As of FY 2007, Wendy's had a 14% market share of the fast food, or Quick Service Restaurant (QSR) industry. The combined company will have approximately 10,000 restaurant units and projected annual sales of approximately $12.5 billion, making it the nation's third largest quick service restaurant company.
The newly merged company will face several important challenges moving forward. The cost of doing business has increased due to rising foods prices; because of intense competition from McDonald's , Yum! Brands (YUM) and Burger King, Wendy's and Arby's often absorb these costs to preserve market share, squeezing margins. Since mid-2007, the effects of these rising costs have been compounded by falling consumer spending in the U.S., a region which accounts for the lion's share of Wendy's and Arby's sales. Triarc's long-term success hinges on its ability to realize synergies through the merger that will improve sales and offset rising input costs. Post-merger, Triarc expects improved cost controls over food and labor expenses generating $100 million a year in operating profits with corporate restructuring saving an additional $60 million.
Wendy's and Arby's both franchise the majority of their restaurants. A franchisee, usually a local entrepreneur, requests permission from the company in order to open a Wendy’s or Arby's restaurant. The company's franchising agreement requires the franchisee to provide the initial capital for equipment, signs, seating and decorations. Meanwhile, the company owns or obtains long-term leases for the building of the restaurant and the land. These franchises generate revenue for the company through payment of rent, royalties based on sales, and initial fees.
Arby's is distinguished from is QSR competitors with its unique menu which features roast beef sandwiches.  Arby’s opened its first restaurant in Boardman, Ohio in 1964. As of December 30, 2007, ARG and Arby’s franchisees operated Arby’s restaurants in 48 states, and four foreign countries. As of FY 2007, there were 3,688 total Arby's restaurants of these 1,106 (30%) were company-owned and 2,582 (70%) were owned by franchisees.
Wendy's Old Fashioned Hamburgers was founded in 1969 in Columbus, Ohio by Dave Thomas. Since 1969 Wendy's International Inc. has become one of the largest restaurant operating and franchising companies in the world. Wendy's ended 2007 with just over 6,600 Wendy's Old Fashioned Hamburgers restaurants in operation. Of these, 1,414 (21%) were company owned and operated while the remaining 5,231restaurants were franchised. In addition to Wendy's Old Fashioned Hamburgers, Wendy's is invested in the Cafe Express and Pasta Pomodoro restaurant chains, owning 70% and 29% of those chains, respectively. Until 2006 Wendy's International Inc. also owned the Tim Hortons and Baja Fresh franchises.
Breakfast is a large component of sales for the fast-food industry, with long-time offerings from McDonald's and Burger King. McDonald's breakfast sales comprise 28% of its total restaurant sales In mid-2007 Wendy's re-entered the breakfast market after a 20-year hiatus. The breakfast menu will be rolled out across its franchises over the next few years, starting with selected markets in the US. If Wendy's can successfully take over a significant share of the fast-food breakfast market, it will augment revenue substantially as well as increase the strength and awareness of its brand. As of the first quarter of 2008, approximately 1,000 Wendy's nationwide offer breakfast menus.
The Quick Service Industry (QSR) is one of the largest components of the over $440 billion restaurant and food service industry, and is one of the most competitive industries in the world. Wendy's International most clearly falls under the fast food hamburger category, and competes against multi-national giants McDonalds, Burger King and Wendy's. Arby's, on the other hand, competes more closely with specialty QSR's such as Sonic , Quiznos and Subway. More broadly, both company compete with Yum! Brands, parent company of KFC and Taco Bell.
Wendy's and Arby's have been slower to move into the fast-food breakfast market than competitor McDonald's. Breakfast sales have propelled growth at McDonald's in the last fiscal year; 2007 breakfast sales were expected to top $8 billion or over a quarter or total sales. Breakfast is partly responsible for the discrepancy in the per restaurant sales of the two chains. McDonald's generates $1.8M per year compared with $1.4M and $1.01M at Wendy's and Arby's. As of the first quarter of 2008, Wendy's offered breakfast menus at 1,000 of its 6,600 locations.
Wendy's and Arby's have negligible international exposure compared to McDonald's and Yum's where 65% and 50% of sales are generated overseas. Lower international exposure makes Triarc much more dependent on U.S. consumer spending than Yum and McDonald's