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October 2006 |
Volume 7, Issue 10, Part 2 |
 McDonald's Corp., the world's largest hamburger chain, announced that it would increase by 50 percent the number of company-owned restaurants it is seeking to sell, in an apparent effort to diminish efforts by a hedge fund activist. The shift toward selling more stores came the same day the company said third-quarter profit rise 15 percent, spurred in part by higher European sales and a new chicken snack wrap in the United States. Executives also reported that the restaurant chain would boost the number of restaurants it wants to sell to 2,300. Additionally, the company announced it would sell 1,500 of the more than 1,800 company-owned eateries.
So far this year, the company has sold 121 restaurants, resulting in a pretax loss of $30.2 million, according to the filing. Once it divests a unit, McDonald’s invests no more capital and collects royalties ranging from 2 percent to 7 percent based on sales from a licensee, who owns the business and the real estate. The shift to sell more restaurants than originally planned comes as William Ackman, managing partner of Pershing Square Capital Management, steps up pressure to force McDonald’s to sell or spin off to shareholders all of the company-owned restaurants. Ackman has announced plans to purchase $2 billion in McDonald’s stock in a move towards a possible proxy fight with the burger giant.
(Chicago Tribune, 10/20/06)
Wendy's Unveils Improvement Plan
 Wendy's International, Inc., only weeks after selling its struggling Baja Fresh Mexican chain, reported that it will invest about $525 million over the next five years into improving its hamburger restaurants. Wendy's (NYSE:WEN) also said it would buy back up to $34.5 million in shares, or nearly 30 percent of the total outstanding over the next two years. It will start that effort with an $800 million Dutch auction, in which shareholders set the price they're willing to take for their shares. The company then buys back shares from the lowest bidders.
The Dublin, OH-based hamburger chain said it is making the following investments to strengthen the chain: $100 million over the next five years to buy franchised restaurants to renovate and resell; about $60 million a year over the next five years to renovate company-owned restaurants; and about $25 million a year over the next five years in incentives from franchisees to upgrade their restaurants. Wendy's said preliminary results for the just-completed third quarter show a 4.1 percent upswing in same-restaurant sales at U.S. company-owned outlets and 3.9 percent at U.S. franchise restaurants.
(Bizjournals.com, 10/12/2006)
 Hilton Hotels plans to more than double its European hotels within four years and is seeking a partner in China to add about 100 inns. The company, one of the largest hotel operators in the United States, will probably have 450 hotels in Europe by 2010, up from about 180 now. Beverly-Hills, CA based Hilton Hotels bought Hilton Group in February, reuniting the companies for the first time since 1966 and allowing Hilton to expand overseas, where the British company had managed the brand's non-U.S. properties. The company now has around 3,000 hotels in 80 countries. Hilton is also looking to expand in less-developed countries and plans to have over 100-plus hotels in China in the next three to five years.
(International Herald Tribune, 10/13/2006)
 Taco Bueno is breaking out beyond its Texas and Oklahoma borders, where it has been a small, popular Mexican food chain for decades, with the goal of becoming a regional player in the fast-food industry. The company has signed nine franchise agreements that could lead to 91 Taco Buenos in the next seven years. Under the agreements, Taco Bueno will open in Arkansas, Kansas, Missouri, New Mexico, North Carolina and Nebraska, as well as parts of Texas.
In addition to new locations, the chain will also be trying out a new restaurant prototype. The new design will include updated restaurant equipment and a refreshed design with a modern-color scheme. The first location with the new style should hit the market next year. Although the chain considers itself competition with everyone from burrito-maker Chipolte to taco-selling Jack in the Box, Taco Bueno hopes to set itself apart from fast-food Mexican chains like giant Taco Bell. Over the next two years, the company will open 35 company-owned units and about 25 franchise restaurants. By the end of this year, Taco Bueno will have more than 150 restaurants in eight states.
(Dallas Business Journal, 10/13/06)
 Players in the mature pizza category are feeling some new competitive pressure with the launch of the first national media campaign by the fast-growing CiCi's Pizza chain. The advertisements will hopefully secure the way for CiCi's, which has more than 600 units in 27 states, to grow even faster into a national brand that can compete more forcefully against such larger rivals as Pizza Hut, Domino's and Papa John's.
Projecting that it will be a 1,000 unit chain by 2010, CiCi's already is surpassing its segment leading competitors in terms of growth percentages. It ranked in a recent study of the nation's 100 highest-grossing foodservice chains of all types at No. 15 overall in its rate of new-unit openings in 2005, adding about as many U.S. branches as Pizza Hut did. Also, CiCi's ranked No. 1 in U.S. sales growth percentage versus the other five pizza chains in the study as the category's only double-digit performer. CiCi's differentiates itself from competitors with its menu of 16 different pizzas, plus pasta, desserts and salad bars. During the summer it rolled out bolder-tasting Classic Chicken Parmesan and Buffalo Chicken Pizzas.
Read all about Cici's and other top Pizza chains in our research report
Click here.
(Nation's Restaurant News, 10/16/2006)
 Marriott International, Inc., the world's largest hotel company by revenue, announced this month that it plans to add 85,000 to 100,000 hotel rooms worldwide between 2007 and 2009 as well as increase the number of hotel rooms it has outside North America by more than 30 percent by the end of 2009. Marriott said its worldwide system should have nearly 600,000 rooms by the end of 2009. Its rooms outside North America should reach approximately 120,000 by the same period.
The company also said it will add about 12,000 to 14,000 rooms in the regions of Europe, The Middle East and Africa, and about 4,000 to 5,000 rooms in the Caribbean and Latin America. Additionally, Marriott will add about 58,000 to 69,000 hotel rooms in North America through 2009, driven by conversions and ground-up select service hotel construction.
(msn.com, 10/19/2006)
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