Wendy’s PESTEL Analysis
Wendy’s is among one of the most well known brands in the fast food industry. It sells mainly in the West. The brand relies on its franchisees for its source of revenue. Around 95% of its restaurant stores are operated by the Franchisees. North America is the biggest source of revenue for the brand where more than 90% of its stores are located. Out of 6,537 total restaurants owned by Wendy’s, there are 6,098 operational in North America. Only 439 restaurants are now operational outside North American region. However, in total the restaurant brand operates in 30 nations. Wendy’s is focusing on great quality, excellent customer service and technology.
The brand’s revenue may have kept falling during the last four years but its operating margin has kept growing. This is a good sign because its profits are rising. International expansion can bring great opportunities for Wendy’s. It must plan for expansion into the Asian countries which are growing at a fast rate. Both China and India are great markets. However, apart from a slim presence in India, Wendy’s is nearly absent from the Asian markets. Technology and quality are the biggest differentiators in the fast food industry. Consumers have grown health conscious and they also want convenience. AI and other technologies can be used to provide them a great experience. Fast food is marked by intense competition and apart from quality, it will need to invest in technology to remain competitive.
[This is a PESTEL analysis of Wendy’s. PESTEL stands for Political, Economic, Social, technological, Environmental and Legal. A PESTEL is useful to understand the situation in the international market. It helps understand what factors are good for a business and what can threaten its revenue and profits. Every international brand faces these barriers and therefore a PESTEL can be a good point for managers planning international expansion for their brands.]
Political factors have become increasingly important in the 21st century. It is because political regulation of businesses has grown higher. The world has grown more connected and globalization brought several changes that led to an increase in government oversight of businesses. The fast food industry is also highly regulated and too much government regulation becomes a hindrance to growth. Wendy’s is present mainly in the North American markets. Political factors can be an important reason behind it. A good political environment proves favorable for businesses. Political stability means stability in the economic environment which is good for international and local businesses. It becomes easier for the international businesses to operate in a friendly nation.
Wendy’s is operational in 30 nations apart from North America. The Chinese market is profitable for the fast food brands but Wendy’s has been unable to penetrate it. US and Canada are its main markets where the environment is more business friendly. Increased political oversight leads to higher costs of compliance and that is not good for the bottom line. Wendy’s is planning to expand faster internationally but there are several hurdles in the way. Political disruption can also disrupt the supply chain and that can result in business disruption and loss of sales and revenue.
Geopolitical events can also affect businesses. Terrorism has had a negative effect on the business environment of the Western nations. Brexit was also an important event that gave rise to severe uncertainties which can harm businesses operating in UK. In this way, political factor including important political events like changing governments can also affect businesses in several ways. A government change can have a negative impact on businesses operating in that nation if the new leadership does not have the right attitude towards trade. Many governments encourage the domestic businesses more than the foreign businesses which is the case with China. So, political factors can both help and Hinder Growth. If Wendy’s has to expand in Asia, it would need to understand the local political environment there and partner with local firms for faster growth and expansion.
Economic forces play a central role in the business industry. They are considered most important forces affecting business’ health world over. The world economy has experienced a recession in the last decade. While the world economy is back on track and economic activity has risen, some fluctuations still keep happening. When economic activity rises, it proves good for the business. US and Canada are doing very well in terms of economic growth. These are the areas where most of Wendy’s business is located. This is good but can also be risky. If economic activity in North America declines for any reason then it can harm Wendy’s business. It is why Wendy must focus on growth in the Asian nations where the economic scenario is stable.
Returning economic activity has also brought the level of employment higher in most regions of the world. In the 21st century, the middle class has seen its income level growing. Growing income level means they can spend more on fun and food. This is why middle class is the most important segment for businesses that quick want growth. Fast food businesses must focus on this group and adopt methods that can attract them. Middle class and millennial consumers are most important consumer segments that businesses need to focus upon. They are at the centre in this century and constitute the largest segment of consumers for electronics, fashion and fast food industry.
Competition is another important factor that fast food businesses have to battle with. Wendy’s primary competitors are McDonalds and Burger King. Other fast food businesses including KFC, Dominos and other fast food and pizza brands locally and internationally are also competing with Wendy’s for market share. Competition is an important economic force that every business faces and has to plan accordingly.
Socio-cultural factors are also affecting businesses in several ways. The key reason is that eating habits differ from society to society and culture. It is why menu innovation becomes important when you are trying to enter a new market. People around the world have different tastes and different eating habits. However, Burger and other similar fast food is very popular in the West. This is a reason that brands like Wendy’s receive a major part of their revenue from the North American markets. Socio cultural factors and social trends are also affecting businesses at another level. Trends are changing and now a larger number of people flock to the social media. It is why most businesses are using social media for attracting and engaging customers. Not just for marketing but social media is connecting businesses with people in many new ways, helping them come together, know each other better and communicate. Social trends keep changing but businesses must notice them and try to shift their strategy so as to benefit from them.
Technology is also a critical factor affecting businesses more than anything else in the 21st century. From marketing to sales, operations and Human resource management, technology is everywhere. Every brand that wants to be competitive invests in technology. Technology’s role is not limited to just operations. It is also required for a better consumer experience. Brands are investing in the latest technology for growth and for better customer service. Wendy’s is also investing in technology for marketing and at Point of Sales. Mobile payments, mobile ordering and interactive web technology, Wendy’s has invested in all these areas for making it convenient for the consumers to order online from Wendy’s. Smart phones have grown highly popular in the 21st century.
Now more and more people are ordering through smart-phones. The millennial generation is a tech-savvy generation and it uses technology at every step and every day. It is why investing in technology is profitable for fast food brands because millennial generation is the most important category of customers for them. A brand that invests in technology to provide the customers a personalized experience wins their hearts easily. It is why Wendy’s is investing in technology to remain competitive and popular.
Sustainability is here to stay. It has been proved that brands investing in environment and community will keep growing and have a better image and higher popularity. Environment is very important and no one is in a better position to invest in it than the big businesses. It strengthens the mutually beneficial relationship between the community and the businesses. Investing in sustainability saves costs and is also known to improve employee morale. It improves the brand image. The brands that are investing in sustainability are more popular among the millennial consumers. Wendy’s focuses on energy management, waste management, packaging and recycling. It uses energy efficient equipment and LED lights to save energy. The brand is a long time member of US Green Building council and also a strong advocate of energy conservation and sustainability. Oil recycling too reduces the carbon footprint of a fast food business. For several years Wendy’s has partnered oil recycling companies. The collected cooking oil can be used for several new purposes like ingredients in truly renewable second use biofuels, animal feed, and other products like cosmetic tires and leather shoes. This is good for the health of the business since it reduces costs and helps improve the bottom line. This is why fast food brands must take care of sustainability. Investment in environment and sustainability helps businesses improve their reputation and bottomline both.
Legal pressure in the 21st century has increased a lot. Oversight and regulation of businesses has increased in the 21st century. There are laws “including franchising laws, payment card industry rules, overtime rules, minimum wage rates, wage and hour laws, government mandated health care benefits, tax legislation, federal ethanol policy and accounting standards” that the brand needs to comply with. (Wendy’s Annual Report, 2016). The brand’s inability to comply with any of these requirements can result in heavy fines and that can result in losses. There are costs related to legal, environmental and administrative proceedings that can be harmful for the bottom line. Changes in the legal and regulatory framework can lead to additional costs and financial pressures. The effect of legal factors on businesses can be deep and this is why legal compliance is essential for businesses. Wendy’s too has been through several legal tussles and this is why it focuses on compliance to avoid any brush with law.