ATLANTA — The proposed merger of Arby's and Wendy's could create significant behind-the-scenes changes for the companies, but the two restaurant chains are likely to maintain distinct brands in the eyes of consumers, industry experts say.
Triarc Cos., the parent company of Atlanta-based Arby's, and Wendy's International, based in Dublin, Ohio, are scheduled Monday to tally votes on the proposed merger at their shareholder meetings. Both company boards are backing the deal.
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If approved, Wendy's shareholders will receive 4.25 shares of Triarc stock for each share of Wendy's stock, making the deal worth about $2.3 billion.
The merger would create the third-largest U.S. fast-food chain in terms of system-wide sales, behind McDonald's Corp. and Yum Brands, which owns Taco Bell, KFC and Pizza Hut.
Arby's and Wendy's should benefit from combining operational functions, said Darren Tristano, executive vice president for Technomic, a Chicago-based food industry research firm.
The combined brands, for example, will have more leverage with suppliers, Tristano said. They also could eliminate redundancies by combining some administrative functions, he said.
Arby's and Wendy's, though, are well-developed brands with their own identities, Tristano said. It doesn't make sense to blur the line between the two, he said.
While both are in the fast-food category, Arby's is known for sandwiches, competing most directly with the likes of Subway and Quiznos. Wendy's is known for burgers, taking McDonald's and Burger King head on.
"I think you're most likely to see franchisees of one brand or the other getting the other brand because they're not competing directly," Tristano said. "It's very unlikely you'll see co-branding (both units in the same store). The biggest co-brander today is Yum, and they've already talked about doing less co-branding."
Arby's and Wendy's executives have said they will create a consolidated support center in Atlanta to manage "company responsibilities and other shared services." But under the terms of the deal, Arby's and Wendy's will operate as separate business units and keep their respective headquarters in Atlanta and Ohio.
The deal would cap years of turmoil at Wendy's, which has struggled to find leadership and a consistent advertising campaign since the 2002 death of founder Dave Thomas. Wendy's created a special committee last year to review strategic options. It ended up recommending a sale.
Pending completion of the deal, Triarc CEO Roland Smith will become Wendy's CEO, too, and leave his job as Arby's CEO. The senior leadership team at Wendy's also will include David Karam, a large Wendy's franchisee.
Many franchisees think the deal could be good for Wendy's because of the new management, said Walter Butkus, a partner with Redding, Conn.,-based Restaurant Research LLC.
Compared with most franchised chains, Triarc has a high number of company-owned restaurants, which means top executives have to know how to run stores, he said.
"The new management team that's coming in is seen as having more restaurant experience and operational experience than the management team that's on the way out," Butkus said. "That is seen as a positive."
Arby's and Wendy's, though, will continue to face a difficult U.S. fast-food market. Restaurants have been dealing with higher food prices, a rising minimum wage for workers and customers looking for better deals because of the economic slowdown.
Arby's and Wendy's might not look dramatically different to customers after the merger, but combining the brands could offer new opportunities for improving the bottom-line, Technomic's Tristano said.
"I think this is definitely more of a financial transaction than anything else," Tristano said. "In looking at this from a financial standpoint, how do you maximize your investment in the new brand? How do you streamline it? How do you cut costs out and how do you improve your margins?"
Joe Guy Collier writes for The Atlanta Journal-Constitution. E-mail: jcollier AT ajc.com
