The Pivot

Better Than Fast Food

How Wendy’s 1980s turnaround changed the fast food business.

Pedestrians walk past a Wendy's restaurant in 2011 in Chicago, Illinois.

Pedestrians walk past a Wendy’s restaurant in 2011 in Chicago, Illinois.

Photo by Scott Olson/Getty Images.

According to Wendy’s mythology, the chain’s founder, Dave Thomas, had a particular meal that he liked to order. He would get a single cheeseburger with pickles, onions, and mustard, a cup of chili, a side salad, and a small Frosty. Then he would wash it all down with a diet soda. The tastes of Jim Near, Wendy’s president from 1986 to 1995, were more variable. “He liked the hamburgers,” recalls Denny Lynch, senior vice president of communications at Wendy’s and one of the few employees remaining at the company whom knew both men personally, “but I think he switched it around.”

Near was a master of the switch-around. Thomas may have soaked up more media attention as the public face of Wendy’s, but Near, his friend and colleague, proved at least as influential in reversing the company’s faltering fortunes in the mid-’80s, one of the most successful turnarounds in American business history. Near grew up in the restaurant industry: As a teenager in Columbus, Ohio, in the early ’50s, he worked as a short-order cook at the White Castle his father owned. He met Thomas when the Burger Boy Food-A-Rama store he bought at age 23 began to lure customers away from Thomas’ nearby Kentucky Fried Chicken franchise. It was the beginning of a beautiful friendship.

But years would pass before the two men’s paths converged to produce fast food genius. In 1969, Thomas parted ways with KFC in order to launch his own franchise, which he named for his daughter, Melinda Lou. The young girl had struggled to pronounce Melinda as a toddler, so her family called her “Wenda.” Thomas’ new chain, Wendy’s, prided itself on fresh, high-quality ingredients and sandwiches made to order. In a fast food landscape dominated by an assembly-line mentality and low-grade meats and greens, it blew past the competition. Meanwhile, Near became vice president of Burger Boy, then accepted an executive position at the food-and-beverage company Borden Inc. He worked at Borden for five years before defecting to his old rival. In 1974, Near purchased the first of 39 Wendy’s stores he would franchise.

If McDonald’s represented drive-through’s hyperactive clown, Wendy’s was its wholesome little sister. The chain defied convention by using fresh meat instead of frozen (despite a shorter shelf life and higher costs) and cooking its patties at less-than-blasting temperatures, to preserve the beef’s natural juices. Wendy’s popularity exploded in 1984 when it launched a wildly successful ad campaign, “Where’s the Beef.” WTB “was our grand-slam, homerun, bottom-of-the-ninth-in-the-World-Series,” Lynch remembers.

The growth quickly undermined the company. Wendy’s pulled in a record $76.2 million in sales in 1985 but got complacent from success. “In retrospect, we were reading our own news clippings maybe a little too much,” says Lynch. Management started cutting corners. The chain rolled out a misguided breakfast menu that tested well in trials but ultimately failed to turn a profit: Its elaborate, made-to-order French toast and omelets didn’t mesh with a fast food audience, many of whom wanted to eat on the go. The cumbersome breakfast effort marked a turning point in the Wendy’s narrative. By December, 20 percent of the company’s stores teetered on the edge of bankruptcy.

All businesses go through boom-and-bust cycles, and the management team at Wendy’s could have hunkered down and waited for their fortunes to change. Instead, though, Thomas tapped his friend Jim Near to run the company as president.

Near brought immense restaurant experience to his new role: He’d worked grills and cash registers, opened and closed stores for the day, managed payrolls, and hired and trained employees. He was, in the words of Peter Romeo, author of Restaurant Reality Check, “a ketchup-in-his-veins type of guy.”

Near fine-tuned and standardized the Wendy’s operations. Floors were going to sparkle, and greeters would welcome customers at the entrance. Every meal would be prepared according to precise specifications that were carefully tested in control groups and uniform across franchises. Near also seemed to excel at placing the right people in the right jobs. For instance, a friendly, talkative type might go behind the register, while a quick-handed pro would be assigned to man the grills.

Near deepened his credibility with the store owners he managed. He took responsibility for two Wendy’s in his neighborhood, visiting them every morning and every evening. He told employees they reported directly to him and that their new focus would be on the fundamentals of the business. Near liked to stalk through the dining areas of his stores examining people’s trays. If customers were leaving fries, he’d go harass the fryers: Were they serving the potatoes too hot? Too cold? Not using enough shortening? And he would sit in his car in the parking lot, surveilling the activity at the drive-thru window.    

Besides getting elbow-deep in his company’s operations, Near also reworked the Wendy’s menu. He pressed for a skinless chicken breast sandwich and an expanded salad bar. And he revolutionized Wendy’s signature offering: the square burger. When you think about fast food hamburgers today, you probably imagine a small, two-ounce patty (or layers of them) tucked inside a bun. But in 1985, the only burger available to Wendy’s patrons weighed 4 ounces—the equivalent of a McDonald’s quarter pounder. Near believed he could nab more sales by introducing options for people with smaller appetites. So he launched a two-ounce burger initiative (one that, incidentally, also ended up catering to those with larger appetites, as it spawned double sandwiches). The bantam patties, which succeeded in driving up profits and expanding the chain’s customer base, had another important result: a value menu. Selling a quarter-pound burger for 99 cents would have been crazy; selling a 2-ounce version for the same amount translated into business gold. In 1989, Wendy’s was the first fast food restaurant to wholly embrace the cash-strapped young-adult market by offering a constellation of seven discounted items. That year saw a 25 percent increase in sales.

Near’s third and perhaps most brilliant maneuver was to coax Dave Thomas out of semi-retirement and into the national spotlight. At Near’s urging, Thomas became the face of a new Wendy’s advertising campaign. Competing in the fast food ad space with clowns and kings, the founder appealed to potential customers with his blend of endearing squareness and folksy charm. “He’s the Santa Claus of the system,” Near said of Thomas in 1991. Explaining his rationale further, he added, “We got to thinking we’re maybe the only major company in the business that has its own founder available. And [Dave is] just so good, and so genuine.”  

Thomas held Near in equally high esteem. As Rajan Chaudhry reports in a 1992 edition of Restaurants and Institutions, Thomas printed business cards in 1989 that read “Founder and Jim’s Right Hand Man.” The two men would take the mic at company conferences and playfully compete over who fried the better chicken breast. “When you’re in the audience, watching senior executives needle each other, you think, ‘Wow. These guys are joking and having fun,’ ” says Lynch. “It creates a culture where people enjoy their jobs.”  The newly upbeat atmosphere had real consequences for employees: Six years into Near’s presidency, Wendy’s turnover rate had dropped from 55 percent to 20 percent per year.

The favorable numbers kept pouring in. After a $4.9 million loss in 1986, Wendy’s same-store sales began to rise—and continued to increase for 16 consecutive years. Consumer polls deemed Wendy’s food, menu variety, and atmosphere the best in the quick-service burger industry. The chain even snagged the overall top rating from Restaurants and Institutions between 1988 and 1994, beating out Burger King, McDonald’s, and six other competitors.

Near died suddenly of a heart attack in 1996, while attending the Olympic Games in Atlanta. Today, 16 years after his death, Wendy’s is regaining its footing in the wake of the recession and some destabilizing ownership changes. It tails McDonald’s, Subway, and Starbucks as the fourth most popular fast food business in the United States and boasts more than 6,500 stores worldwide, and more than 46,000 employees. Wendy’s ranks third in consumer polls that ask about “the most familiar and best quality quick-service brands” in the country. (The top five in order, in case you’re interested, are Subway, Dairy Queen, Wendy’s, Five Guys, and Chick-fil-A.) “The feeling is beginning to come back,” says Lynch. He says the new CEO, Emil Brolick, was hired by the Wendy’s Dream Team—Thomas, Near, and Gordon Teter, who succeeded Near—in the early phases of the ’80s turnaround.* If Smith learned anything from his predecessors, Wendy’s may be in for another pivot.

*Correction, Oct. 12, 2012: This article originally misidentified the current CEO of Wendy’s as Roland Smith. Smith retired from Wendy’s in 2011.