Climb Every Mountain
He climbed Everest, then tackled the Wendy’s/Arby’s merger. Now CEO Roland Smith wants to streamline the company and boost profits.
Ramona Rosales
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E-mailFour months before he was named president and CEO of Wendy’s/Arby’s Group Inc. (WEN), Roland Smith embarked on what he calls “the greatest adventure of my life.” The 54-year-old Smith, then president and CEO of Triarc Cos. Inc. (the parent of Arby’s Restaurant Group), and one of his two sons, Justin, climbed Mount Everest in May 2008. To mark his accomplishment, Smith planted Wendy’s and Arby’s flags in the snow. “I never knew such exhaustion — or such exhilaration,” he says of the Everest experience.
Preparation for the ascent was grueling. A graduate of West Point (where Justin is a junior), Smith says his military background included positions as platoon leader, executive officer and pilot for the U.S. ambassador to Pakistan. An already fit Smith trained for 18 months, sleeping in a hypobaric tent to acclimate to the high altitudes and working out for 90 minutes a day — up to four hours on weekends — to prepare for the physical demands of the trek, he says. Both Smiths climbed without oxygen tanks and made it to their goal: Everest Camp 3 at 23,600 feet.
But why not to the summit? Camp 3 was “all I had time for,” Smith explains. “You need six to eight weeks to get to the top, and I had only three.” The day after he returned from Nepal to his home in Atlanta, his management team filed the S-1 proxy for the merger, and Smith began working on the Wendy’s/Arby’s transition plan, “an adventure of a totally different sort,” he acknowledges drily. As a central member of the team working to close the merger between Triarc and Wendy’s International Inc., Smith had his work cut out for him.
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Shareholders approved the $2.3 billion deal in September, when Triarc changed the company’s name to Wendy’s/Arby’s Group and made Wendy’s a wholly owned operating subsidiary. As soon as the ink was dry on the deal, Smith and his management team launched a multipoint initiative aimed at bringing additional traffic to Wendy’s, re-establishing the bedrock values of the brand, boosting store-level operating profit margins and driving the efficiencies available to a company of Wendy’s/Arby’s size. (The turnaround that Smith had already led at Arby’s was well on its way to reaching goals, the CEO explains.)
Uphill Climb
Smith says he knew he was in for a challenge. In addition to taking over the helm of the newly merged $12.5 billion organization, he was inheriting what he says was fallout from Wendy’s long, slow decline. Before 2005 the chain had delivered 18 consecutive years of same-store sales growth, reports food industry researcher Technomic Inc. But Wendy’s began to lose market share in recent years to other quick-service restaurant (QSR) chains, including McDonald’s Corp. (MCD) and Burger King Holdings Inc. (BKC), its two closest competitors. In the QSR industry, according to estimates by Technomic, each 0.1 percent of share translates into $56.3 million in annual sales.
The day after returning from Nepal, Smith began working on the Wendy’s/Arby’s transition plan — “an adventure of a different sort.”
Furthermore, Wendy’s franchisees, which represent 78 percent of the brand’s 6,625 restaurants, had grown increasingly restive as turnaround strategies launched in the early 2000s failed to gain much traction, concedes Joe Turner, CEO of First Sun Management Corp., which owns 50 franchised Wendy’s restaurants in four states. “It was a tough stretch made tougher by the loss of Wendy’s founder Dave Thomas,” he says.
Although its problems were milder by comparison, Arby’s (whose franchisees represent 69 percent of its 3,735 restaurants) also faced challenges, Smith says. Company same-store sales fell a reported 7 percent in the third quarter of 2008 as competitors Quiznos and Subway® sandwich chains both boosted customer traffic with $5 sandwich offers. At the same time, commodity prices rose, gas prices soared and strapped consumers cut back on eating out as the economy weakened, adding pressure to both the Wendy’s and the Arby’s brands, says Smith.
Nevertheless, the CEO says he knows all about tough climbs — and not just the literal scaling of the world’s tallest mountain. His résumé is filled with turnaround successes as CEO of companies as diverse as National Golf Properties, where he was president and CEO from 2003 to 2005; AMF Bowling Worldwide Inc., where he was president and CEO from 1999 to 2003; and, most relevant, Arby’s. During his tenure as president and CEO of the Atlanta-based sandwich chain from 1997 to 1999, operating profit tripled and same-store sales grew in the 4 percent range, the company reports. Earlier management positions at KFC International, which is part of Yum! Brands Inc. (YUM), Schering-Plough (SGP), PepsiCo Inc. (PEP) and The Procter & Gamble Co. (PG) sharpened Smith’s understanding of consumer behavior and the complexities of global operations and marketing, the CEO says.
