(1) Wendy’s differentiated itself from competitors in the quick-service hamburger business by strategically targeting young adults and adults. Their unique concept of an “old fashioned” hamburger made from fresh beef, cooked to order, and served directly from the grill established a level of comfort with customers who could witness the cooking process. The square shape of their hamburgers further set them apart. Despite a seemingly saturated market, Wendy’s innovative approach, specialized target market, and differentiated product enabled its rapid growth.
The founding principle of Wendy’s was to create a successful company by combining product differentiation, market segmentation, quality food, quick service, and reasonable prices. Wendy’s founder, Dave Thomas, had an innovative idea to offer only four main menu items, allowing the company to remain competitively priced while delivering high-quality products. This “limited menu” concept resulted in time and cost savings for the company. By consistently producing delicious food, Wendy’s built a loyal customer base and established credibility. Focusing on a small number of main products helped Wendy’s differentiate itself from competitors. With a solid marketing strategy, Wendy’s attracted a diverse range of customers. Despite the seemingly limited menu, Wendy’s offered its hamburgers in 256 combinations by leveraging various condiments and toppings. By reducing waste through a streamlined menu, Wendy’s maintained lower prices and a significant competitive advantage.
The concept of a “limited menu” made Wendy’s susceptible to competitors. At the product level, this limited market reach allowed competitors to offer products not available at Wendy’s, potentially attracting future customers. Wendy’s lack of a children’s menu also gave rivals like McDonald’s the opportunity to steal potential customers. However, with the market expanding and increasing competition, Wendy’s had to abandon the limited menu and expand in order to meet changing customer demands. One aspect where Wendy’s excelled was with their drive-thru window, which other fast-food chains struggled to implement successfully. Wendy’s was the first among various establishments to introduce this concept in the 1970s, providing greater convenience for customers in a hurry. This drive-thru window further differentiated Wendy’s from its competitors, as other attempts by rival restaurants lacked excitement and failed.The attached computations reveal that Wendy’s ability to generate an initial level of excitement has surpassed that of its competitors. Being recognized as an innovator builds a strong connection with customers.
(5) The profitability of Wendy’s chili is determined by its out-of-pocket cost, which can be found in the attached document. Two scenarios were conducted to determine this cost. In scenario one, occurring 90% of the time, no additional meat needs to be cooked for the chili. In scenario two, a hypothetical situation occurring 10% of the time, meat needs to be cooked specifically for the production of chili. After calculating costs for both scenarios, it was found that under scenario one, the total cost per 8-ounce bowl is $0.3615 and per 12-ounce bowl is $0.5073. Under scenario two, the total cost per bowl is $0.5795 for an 8-ounce serving and $0.8343 for a 12-ounce serving.
(6) I recommend against discontinuing Wendy’s chili because it may appear unprofitable when using full absorption costing method that includes unnecessary costs like meat in calculations. By considering only out-of-pocket and joint costs in my analysis, we obtain a more accurate understanding of the actual cost per bowl of chili.I assume that either no meat or only a small amount has been purchased exclusively for making chili.My findings confirm that Wendy’s chili is indeed profitable and should remain on their menu unless there is a need for larger quantities of meat solely dedicated to making chili.In such cases,the numbers will significantly differ.
