As CEO of Wendy's International, Kerrii Anderson's challenge has been to focus on running the business for the long term when the company might be sold in the near term. Under pressure from large, activist investors, the Dublin, Ohio-based fast food restaurant chain has been exploring options, including selling off the whole company, as a way to unlock value for shareholders.
"One thing I have learned -- my lessons in life -- is I can control only what I can control," Anderson said after speaking at the W. P. Carey School's Economic Club of Phoenix, Nov. 14. "I am not going to control that [the sale decision] process. I may have input, but I'm not going to control it."
"There's no reason for me to fret and worry over it," she said. "I'm not going to keep from moving the brand forward and doing the right thing that I know needs to be done."
That's the message she sends to the franchisees, who own and operate 80 percent of Wendy's 6,600 restaurants.
"I'm telling them the same thing I'm telling my employees," she said. "Focus on your business. Focus on the operations and getting the orders right. That's the way we're going to build our business."
"At the same time I'm telling them we've got a long-term strategy to improve our beverages, to leverage hamburgers -- because that's the business we're in. I'm sharing with them, 'This is our strategy. This is where we want to go. But to get there we have to continue to execute.'"
Anderson's speech at ECP followed the disclosure by one of Wendy's potential suitors, Nelson Peltz's Triarc Cos., that its offer for Wendy's International Inc. was significantly lower than the $37 to $41 per share Peltz said he might pay last summer. The news sent Wendy's stock tumbling, shares losing 98 cents to close at $30.67.
It was the latest chapter in an almost three-year saga that has transformed Wendy's, resulting in the spinoff of its Canadian coffee and doughnut chain, the selloff of its Baja Fresh brand, the expansion of its board, the resignation of its CEO and the elevation of Anderson from Chief Financial Officer.
The finger of fate
The first chapter had nothing do with corporate maneuvering. In March 2005, a woman said she found a human finger in chili she bought from a Wendy's in San Jose, Calif.
The incident was fodder for late-night talk show monologues and inspired headlines such as "Diner Puts a Finger on What's Wrong with the Chili" in newspapers across the country. Wendy's sales plummeted.
"It's really frustrating to see the influence it can have on your business," Anderson said.
"What we did was fight fire with fire," she said. "We did what we thought was right."
The company was sure it had quality control systems in place to prevent a human body part from winding up in the fare. Wendy's conducted its own investigation and became more convinced the claim was false.
First, Anna Ayala, the alleged victim, dropped any claim. But because of the impact of the incident on its reputation, Wendy's pushed police for an arrest, Anderson said
One month after the incident, Ayala was arrested. Ayala and her husband Jaime Plascencia eventually pleaded guilty to attempted grand theft and making a fraudulent insurance claim.
Anderson said sales in the San Jose area still have not recovered.
Funds weigh in
In April 2005, Pershing Square Capital Management, a hedge fund, took a position in Wendy's, acquiring a 9.3 percent stake and proposing changes in the company. Specifically Pershing wanted Wendy's to sell of Tim Hortons, the iconic Canadian coffee and doughnut brand with 2,500 stores in Canada and more than 300 in the United States.
By July, Wendy's own analysis showed that the company could spin off Tim Hortons through an Initial Public Offering as well as buy back stock to create shareholder value.
In December 2005, Peltz's investment fund, Trian Partners, issued an ultimatum that it wanted to meet with Wendy's CEO, Jack Schussler, within 48 hours or it would make a filing with the Securities and Exchange Commission.
"I would suggest you meet with your investors," Anderson said.
There was no meeting and Trian issued a white paper recommending Wendy's sell off Tim Hortons and other brands immediately and cut costs. In January 2006, Trian filed a document indicating it would be willing to have a proxy fight.
By this time, Anderson said, hedge funds owned about 35 percent of the stock. Company analysis showed Trian would win a number of seats.
The management worked closely with the activist investors and reached "a standstill agreement."
"They would stand still and allow us to execute our strategy," Anderson explained. Wendy's would add three members to the board, spin off Tim Hortons by the end of the year and return cash to shareholders.
Schussler resigned as CEO. The board appointed Anderson, who had been the CFO since 2000, as interim CEO and said it would make a nationwide search for a successor. Anderson would be considered.
"That summer I told my team, 'Forget about the interim word,'" she said. She knew she had to come up a strategy and execute it to keep the company on track.
Wendy's completed the Tim Hortons spinoff for about $4 billion. Wendy's had acquired the business in 1995 for $400 million.
Wendy's cut $100 million in costs and bought back $300 million worth of stock. By fall it reached an agreement to sell Baja Fresh. Anderson was named CEO.
Possible new direction
In April, the board voted to explore strategic alternatives, including recapitalizing the company or a sale or merger, after the standstill agreement expired June 30.
"As you can probably guess what got all the press was the possible sale or merger and not all the other alternatives," Anderson said.
No decision has been announced and it will probably take at least until December before there is a resolution.
In the meantime, Anderson and her team have worked to produce better economic results, particularly in improved operating margins.
Earnings per share were up significantly. Discounting special charges related to the Tim Hortons spinoff and the board's special committee to explore restructuring, Wendy's reported earnings per share of 44 cents in the third quarter, up from 21 cents a share the year before.
But sales growth at company-owned stores in the United States open at least a year was only 0.2 percent, down from 4.1 percent the previous year.
Wendy's was founded in 1969 by Dave Thomas, a high school dropout who had already become a millionaire from restaurants.
From the start, Wendy's was always different. For one thing it had square hamburgers. The company has always seen itself as an innovator, being the first national fast-food chain with a salad bar, and the first to introduce baked potatoes and chili as side dishes.
In 1989, Dave Thomas began appearing in TV commercials, making more than 800 before his death in 2002.
Thomas is gone on but his legacy lives on. Anderson said the company has a strong relation with franchisees because of Thomas. Wendy's is the only national chain whose franchisees don't have an association to deal with franchisors management, she said.
Sometimes the legacy shows up in unusual ways.
Despite the company history of innovation, Anderson encountered resistance when she wanted to introduce a vanilla Frosty. Thomas had always said Frosties should be chocolate. Anderson went ahead with the vanilla Frosty anyway.
"You have to continue to be innovative and think differently than the competition," Anderson said. "That's what separates Wendy's. That's what will be the driver for our performance."
Anderson has been in the business world for 30 years and she shared some lessons on leadership. She said every business leader must have a passion for their business and for people.
Profit is power. "You need to be profitable in all your businesses and certainly your core business," she said.
She said Thomas used to say, "If you make money, people don't mess with you."
"I don't think he used the word mess," she said.
The top priority for any CEO should be communication. "You have be able to communicate with all your constituencies," she said. "Your happy shareholders. Your unhappy shareholders. Your franchisees. Your employees."
Anderson said its important have a clear plan. "The only way you can get people to follow you is for them to understand where you're going," she said.
A leader must have the right people in the right place. "Five of the seven people who report to me either weren't there 18 months ago or were in a different position," she said.
Integrity is important. Anderson recalled Mel Schottenstein, a homebuilder she worked for, had a motto that if you weren't comfortable about getting up "in the morning to read about it in the newspaper, you probably shouldn't be doing it."
- Wendy's International CEO Kerrii Anderson has to stay focused and keep employees and store owners focused on long-term goals, even though a possible sale or merger of the company looms.
- Wendy's faced a slew of bad publicity when a woman falsely claimed she found a finger in chili she bought at a Wendy's. The company fought back hard. The woman and her husband were eventually arrested and pleaded guilty to fraud charges.
- Wendy's has been transformed over the past two years as activist investors pressured the company into spinning off Tim Hortons and selling off Baja Fresh. The company has gone from more 10,000 stores to 6,600.
- A company's culture must continue to evolve while honoring its legacy. Innovation must continue to drive a business or brand forward.