Archive for March, 2011

NRA: Restaurant Operators See Gains in Traffic

Thursday, March 31st, 2011

Continued gains in same-store sales and customer traffic helped to boost optimism among foodservice operators and fuel an increase in the National Restaurant Association’s monthly Restaurant Performance Index for February.

The RPI, a monthly composite index that tracks the health of and outlook for the foodservice industry, climbed to 100.7 in February, a 0.4-percent increase from its January level. February’s results mark the fifth time in the past six months the index stood above 100, a trend the NRA says reflects expansion in the index of key industry indicators.

“February’s RPI gain was driven by solid improvements in the same-store sales and customer traffic indicators,” said Hudson Riehle, senior vice president of the NRA’s Research and Knowledge Group. “Restaurant operators reported positive same-store sales and customer traffic results in February, after January’s results were dampened by extreme weather conditions in many parts of the country.”

The RPI slipped to 100.2 in January, down 0.8 percent from December.

Riehle also said operators’ outlook for capital spending hit a 40-month high in February and their expectations for staffing growth climbed to the highest level in almost four years.

The Restaurant Performance Index comprises two components: the Current Situation Index, which measures current trends in same-store sales, traffic, labor and capital expenditures; and the Expectations Index, which measures restaurant operators’ six-month outlook in the same areas.

The Current Situation Index was 99.4 in February, a 0.9-percent increase over January. The Index remained below the 100 mark for the fourth consecutive month, a result of the softness in labor and capital expenditure indicators, the association said.

Operators were generally upbeat about same-store sales in February, with 49 percent reporting gains between February 2010 and February 2011. That reflects an increase over the 39 percent of operators who reported higher same-store sales in January.

Operators also reported a net increase in customer traffic in February, with 41 percent tallying gains between February 2010 and February 2011. By comparison, 35 percent of operators reported higher traffic in January.

The Expectations Index for February stood at 101.9, reflecting a slight uptick over January’s level of 101.8. The Expectations Index stayed above 100 for the seventh consecutive month, the NRA said, adding that operators remain “solidly optimistic that their sales will improve in the months ahead.

Fueled by an improving sales outlook, operators’ plans for capital spending increased to the highest level in more than three years, with 52 percent of restaurateurs saying they expected to make a capital expenditure for equipment, expansion or remodeling over the next six months, the NRA said. That figure is up from 48 percent who reported similarly in January.

In addition, restaurateurs reported an optimistic outlook for staffing gains in the months ahead, with 26 percent saying they plan to boost staffing levels in six months. Only 10 percent said they anticipated lowering staffing levels during that period.

Yet, while operators told the NRA they were bullish about their sales prospects for the future, they sounded less upbeat about the state of the general economy. Thirty-four percent said they expect economic conditions to improve in six months, down from 42 percent last month, while 14 percent said they anticipate economic conditions will deteriorate.

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A Garden Grows on Top of Ruth’s Chris

Thursday, March 31st, 2011

It has become fairly commonplace for independent restaurants, and even hotels, to start rooftop gardens to provide local, seasonal flavors.

But in Myrtle Beach, S.C., a chain restaurant is joining the trend. Mike Marques, executive chef of the local Ruth’s Chris Steak House has been growing basil, thyme and mint in bus tubs on his roof since the spring of 2009.

“We tried tomatoes for one year, and I got enough for about two weeks in the restaurant, but with these herbs I grow enough for us to use from the middle of April to the first frost or real cold night in October,” Marques said.

At the peak, he has enough left over that he offers it for free to independent chefs in the area.

Marques picks the herbs in the afternoon, right before opening for dinner.

He uses the thyme in his stuffed chicken breast dish. He puts the fresh herb on dinner plates heated to 500 degrees Fahrenheit and then tops it with lemon butter.

“It sizzles, gives a great aroma and is just delicious,” Marques said.

That dish is finished with a double-lobed, skin-on chicken breast stuffed with a garlic-herb cheese spread.

At the bar, the mint goes into citrusy mojitos and the basil goes into basil strawberry mojitos.

Marques runs the garden himself, which makes the cost minimal, and the restaurant ends up spending between $900 and $1,100 less on herbs each year than it normally would.

The herbs grow in about six inches of soil that is watered constantly, mostly with a combination of rainwater and water from condensation on the air conditioners. Those supplies are augmented by tap water during drier periods.

“They’re constantly in water,” Marques said, adding that he poked holes in the bus tubs so they stay drained.

“In the beginning we weren’t too sure how it was going to work, but I think the water helps keep the plants from getting fried,” in the hot South Carolina sun.

Marques said customer feedback has been good.

“I’ve noticed in the summertime our customers say the drinks taste better,” he said. “And in the dining room they say how wonderful it smells.”

It’s also good marketing, Marques said, noting that passersby often wonder what a chef is doing on the roof of a Ruth’s Chris Steakhouse.

“It’s really brought some good PR to us,” Marque said, “and the chefs at the local Sheraton and Marina Inn are starting their own rooftop herb gardens.”

Ruth’s Chris is owned by Heathrow, Fla.-based Ruth’s Hospitality Group Inc., which operates or franchises more than 150 restaurants under four brands.

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U.S. Brands Sssess Damage in Japan

Monday, March 21st, 2011

U.S. restaurant companies operating in Japan are taking a hit in the grim aftermath of a devastating earthquake and tsunami last week.

Analysts reportedly are predicting the larger U.S. public companies, such as McDonald’s, Yum Brands Inc. and Starbucks, will experience low-single-digit exposure to profits as a result of the earthquake. For those chains, most locations in Japan are operated by franchisees.

Others, like chef David Myers of Los Angeles-based David Myers Group, who recently opened two restaurants in Tokyo’s chic Ginza district, say they are struggling to remain open amid difficulties finding food supplies and rolling blackouts that shorten operating hours. The disaster also has spawned fears of rising radiation levels after nuclear facilities were damaged.

“Tokyo is a ghost town,” said Myers, who left Japan two days before the earthquake. “The people who could leave left.”

Myers said his restaurants suffered only small-scale damage and they remain open. The staff there is struggling to find basic ingredients from the less-affected southern regions of Japan, but the company lost no employees.

“As soon as it’s clear from a radiation standpoint, we want to dig in and figure out how we can help,” he said.

Other companies also said they are working day-by-day with franchise operators to offer support.

“It’s a fluid situation,” said Jonathan Blum, spokesman for Louisville, Ky.-based Yum Brands Inc., which has about 1,530 locations in Japan, most of them KFC restaurants, representing about 4 percent of the global system.

Blum said about 150 Yum’s franchise locations in Japan are closed as a result of the disaster.

Burger King Holdings Inc. said the chain has 48 locations in Japan, of which only one has closed. Company officials said they are working with the Red Cross and the chain’s Asia-Pacific counterparts to “identify both short-term and long-term support needed to aid local efforts.”

Seattle-based Starbucks Corp., reportedly has about 900 coffeehouse locations in Japan, and about 100 of those have closed since the earthquake.

McDonald’s, based in Oak Brook, Ill., has 3,302 locations in Japan, and company officials say 200 have closed as a result of the disaster.

Heidi Barker Sa Shekhem, McDonald’s senior director of global external communications, said, “We are very thankful that nearly all of our people have been accounted for and are safe.

“We remain concerned for everyone coping with the aftermath,” she added. “Our crisis team on the ground is working around the clock to address the needs of our employees and their families, our restaurants, and to help support all of the local communities affected by this devastation.”

Wendy’s/Arby’s Group Inc. recently announced a joint venture partnership that would give Wendy’s a presence again in Japan, though no restaurants have opened yet.

Bob Bertini, a spokesman for the brand, said, “We do not anticipate this current crisis will impact our future development plans.”

Domino’s Pizza has about 180 franchise locations in Japan, but none has closed, said Tim McIntyre, the company’s vice president of communications.

“None are in the north, so all are still intact and operating,” he said. “The country is facing rolling blackouts, so business gets interrupted in that sense, but nothing of note. In the face of this tragedy, we are so grateful all our team members are safe and accounted for.”

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Restaurants Score During March Madness

Monday, March 21st, 2011

March Madness, the annual men’s and women’s college basketball tournament to decide the national championship, can be a slam dunk for restaurateurs.

New research conducted by the National Restaurant Association said 20 percent of American adults expect to involve restaurants and bars in their March Madness plans this year.

Consumers surveyed said their top choices for watching games, which begin Tuesday evening, would be eateries that offer special-price deals, such as happy hour, 34 percent, and have the best selection of televisions, 25 percent.

Nineteen percent said they would choose the restaurant or bar with the best food and drink choices. Seventeen percent said they would just visit their favorite restaurant or bar.

“Sports-themed establishments are not the only ones catering to college basketball fans — many restaurants and bars will attract a crowd during the upcoming games,” said Hudson Riehle, senior vice president of the NRA’s Research and Knowledge Group.

“More than half of guests are looking for happy-hour specials and high-quality television options when selecting a restaurant or bar to cheer on their favorite team. But about one-fifth also look to menu options when choosing where to go.”

According to the NRA, 16 percent of consumers said they plan to order takeout or delivery from a restaurant to be eaten at home or at a friend’s while watching tournament games. Another 8 percent said they would watch games at a local restaurant or bar, and 4 percent of respondents plan to do both.

The nation’s biggest restaurant chains will be ready to press their offers when games tip off.

Domino’s Pizza, which began a multiyear sponsorship of the NCAA this year, rolled out its Domino’s Pizza Bracket on Facebook and a March Madness Pizza Tracker on Monday, which it calls “National Bracket Day” in honor of the millions of people wagering on the tournament’s outcome.

The pizza bracket will pit the chain’s popular menu items against one another in a similar tournament, and different pizzas will advance based on Facebook fans’ votes. The winning menu item will be announced during the weekend of the Final Four. The Pizza Tracker online application also will carry March Madness video and audio upgrades throughout the tournament.

“We are confident that each pizza is ready for the challenge, will play hard and show good sportsmanship,” said spokesman Chris Brandon. “But, seriously, this is a very cool way to interact with our fans, and we can’t wait to follow the action and see the results.”

Pizza Hut also will be following the tournament games closely, and will offer free pizza to the nation if a No. 16 seed upsets any No. 1 seed in this year’s tournament. The offer — similar to the gamble Papa John’s Pizza made in this year’s Super Bowl, promising free pizza if the game went into overtime — should engage fans and produce positive public relations for the chain, Pizza Hut officials said.

“If a No. 16 seed wins, America wins,” said chief marketing officer Kurt Kane. “An upset of this magnitude would be an unmatched sports moment, which deserves an unmatched celebration from Pizza Hut.”

Kane added that if the ultimate Cinderella story came true, Pizza Hut would take its mobile kitchen to their 48 contiguous states and hand out free pizza at specified locations.

Other brands, like Buffalo Wild Wings and Pizza Inn, will try to get people to follow March Madness via their websites, each using a “pick ’em” challenge for which prizes are awarded to customers with the greatest number of correct picks on their brackets. Pizza Inn’s first-ever Pick ’Em will award free pizza for a year to the first-place winner, and $100 gift cards for second through fifth place. Meanwhile, the “BWW Bracket Challenge” at the chicken wing specialist will reward the top finisher with an Apple iPad.

Casual-dining brand Applebee’s Neighborhood Grill & Bar will attempt to drive traffic with advertising that disparages watching tournament games on a computer or mobile device, as a way to emphasize the restaurant’s sports-loving atmosphere and bar specials.

“The tournament is one of the most exciting sports events of the year, and if you’re watching it from your office or cubicle, we say there is a better way,” said Mike Archer, president of Applebee’s Services Inc. “College basketball is an American pastime meant to be enjoyed with friends over great food and drinks, and there is no better place for that than Applebee’s.”

Applebee’s also will be the exclusive sponsor of ESPN’s online Round by Round Pick ’Em. The chain is offering different specials on game days within its 1,850 restaurants, and information is available at

Wing chain Quaker Steak & Lube will be updating its “Munch Madness” special offers and fan contests on its Facebook page throughout the tournament. The brand also has an on-site restaurant and several kiosks at one of the official tournament locations, Quicken Loans Arena in Cleveland.

The men’s Final Four will take place April 2 and April 4 in Houston, while the women’s Final Four will be held April 3 and April 5 in Indianapolis.

The NRA surveyed 1,010 American adults on March 10-13 about their plans for the 2011 men’s college basketball tournament.

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Crisis in Japan

Monday, March 14th, 2011

On Friday, Japan experienced the worst earthquake in its history and a tsunami. The death toll is at least 1,800 and concerns over nuclear reactors continue.

The majority of the 3,300 McDonald’s locations in Japan are open, but a few hundred are closed because of damage or staffing issues, said Bridget Coffing of McDonald’s Global External Communications. “Our thoughts are with everyone affected by the disaster in Japan. Like other global businesses, McDonald’s is working to gather information on our people and our operations in Japan. Our primary concern is the well-being and safety of our employees, their families, and our valued customers.”

Ebisu in San Francisco will donate 10% of its profits from its four stores to disaster relief for two weeks. The 30-year-old restaurant is one of the Bay Area’s oldest Japanese restaurants, and the owners and staff were trying to reach family and friends in Japan, according to an ABC affiliate.

Over the weekend, chefs including Richard Blais, Jose Andres and Tom Colicchio put out calls to action on Twitter for their followers to text “REDCROSS” to 90999 to donate $10 to Japan earthquake and Pacific tsunami relief.

Groupon is raising funds for the International Medical Corps’ emergency relief efforts through its website. Fundraising is nothing new to the daily deal site, which started as “The Point,” a fundraising and collective-action site. Today’s deals in Hong Kong and Australia are among those that are donations from $5 to $50 that will be matched.

Website Lets Couples Register for Restaurant Meals

Monday, March 14th, 2011

A website allowing engaged couples and other people to register for restaurant gift cards in Chicago is expanding to other cities. launched in Chicago in February 2010, and last week expanded to include restaurants in San Francisco. Within the next two months, the service will be in Denver and New York, said Ben Reid, who founded the registry with his wife Jennifer Reid.

The online registry allows couples to register for gift certificates from a selection of participating local restaurants.

In Chicago, for example, the registry has grown to include 65 restaurants, from N9NE Steakhouse to Spiaggia, with more than $200,000 in gift cards purchased so far. San Francisco is starting out with eight, but Reid said he expects that number to grow.

The registry offers restaurants to share in the estimated $19 billion Americans spend on wedding gifts every year, Reid said.

It’s an idea that came from the Reids’ own experience after their wedding more than two years ago. At the time, friends and family were begging them to register for wedding gifts, though the couple already lived together.

“We went to a department store and registered, but we felt it was wasteful,” he said. “We already had our spatulas and toasters.”

What they really loved to do was eat out, though at the time money was tight because they were paying for a wedding. So they made a list of restaurants they wanted to try and asked friends to give them gift cards, which inspired the creation of the online registry.

The Foodie Registry is part of a growing online marketplace for restaurant gift cards and coupons, including Groupon and DealOn. Many restaurant chains also sell their own gift cards online.

Reid notes that his site is not a discount provider. Restaurant partners that sign on agree to allow the registry to be third-party sellers of their gift cards or certificates, a relationship they can opt out of at any time, he said.

There are no fees for participating restaurants, but the registry takes 18 percent on each gift sale, an amount that includes the 3 percent credit card fee the restaurant would have had to pay, Reid said, as well as 15 percent that covers the marketing costs and their margin.

Restaurants get paid the day the purchase is made. So if a gift-giver buys a $100 card, the restaurant is paid $82 that day, regardless of when or whether the gift card is used.

The gift certificates are printed on folded card stock with the restaurant’s logo on the front and the opportunity for the giver to include a short message. Restaurants can also offer swipe cards. The Foodie Registry does not allow restaurants to limit the gift cards to certain days or include expiration dates.

Reid said the registry is focusing on building the site’s offerings with high-end restaurants, which would make for good “date night” opportunities for food lovers.

Gift buyers have the option of contributing a portion of the amount for which the couple has registered. If the couple requests a $300 gift to an expensive fine-dining restaurant, for example, guests can purchase as little as $25 toward the goal, and the restaurant is paid with each installment. A “progress bar” indicates how much has been contributed.

Once the gift amount is reached, the registry “grays out” the gift option, so guests don’t all contribute toward the same concept.

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What Rising Gas Prices Mean for Restaurants

Monday, March 14th, 2011

With gas prices on the rise, many restaurant operators are bracing for a replay of 2008, when sustained high fuel prices cut into consumers’ discretionary spending.

The national average price for gas rose to $3.471 a gallon Friday, according to AAA, and a gallon of gas hit $4 in Chicago and California this week.

Uncertainty over the world’s oil supply, made worse by ongoing conflict in Libya and the Middle East, probably will drive prices higher in the near term, said David Portalatin, motor fuels analyst with The NPD Group. However, he said, the national hand wringing at the prospect of $5-per-gallon gasoline is overblown, as consumers respond to high prices by moderating their driving habits.

Until that balance is achieved, restaurants that target on-the-go consumers like quick-service chains and eateries located near shopping centers will feel the pinch acutely, Portalatin said. He spoke with Nation’s Restaurant News on Friday about how consumers react when they start feeling pain at the pump.

What do spikes in gas prices do to consumer behavior?

The consumers have already shown us their tolerance for $4-per-gallon gas: There isn’t one. Supply and demand will flex its muscle at some point, and we’re likely to start seeing that now. Consumers change their behavior at $3 a gallon, and we’re 12 weeks beyond that point now. It’s real money, and it adds up very quickly. We estimate that consumers have shifted $14 billion more into the gas tank so far this year, compared with a year earlier.

It has to come from somewhere, and it’s coming from savings, or from discretionary spending from other places, or from a credit card. But consumers have been paying down their revolving-credit debts while they’re going to work and trying to survive. If they’re putting gas on their credit cards, that has longer-term implications [on their ability to spend].

In 2008, the last time we saw this rise from $3 gas to $4 gas, consumers reduced their driving by 34 billion miles. Forty-nine percent did so by canceling or consolidating shopping trips, 29 percent canceled or modified vacation plans, and 25 percent found different transportation like mass transit, walking or car-pooling.

What does that mean for restaurant operators?

The implications are big for quick-service restaurants and more convenience-oriented retail outlets directed for consumers on the go. If [consumers] are on the go less, those occasions are at risk. The more dollars going in the tank is fewer dollars to go to other places. Something has to give, so consumers will reduce their driving or reduce their spending in other areas.

We cover the consumer more than we do the commodities market, but higher fuel costs certainly affect the entire supply chain.

What if Americans just reduce their driving?

Our entire retail infrastructure is dependent upon Americans driving alone in their vehicles to work and home every day. Spending less time in the car means fewer retail trips for a variety of shopping channels. Retail locations of any kind where the key driver in the value proposition is location and convenience won’t have customers on the go as much, so there’s a direct impact to restaurants.

Can anything stop the runaway fuel cost inflation?

You cannot discount the effect of good old-fashioned supply and demand. Look what happened in 2008: $4-per-gallon gas didn’t last long. We reduced our driving, fuel demand fell dramatically and prices went with it. You hear people talking about $5 gas, but we won’t get there this year, because the consumers wouldn’t tolerate that. Most people don’t stop their driving altogether, but they find ways to moderate their travel.

Does having a psychological barrier like $4 for gas back in the headlines make it harder to get supply and demand back to equilibrium?

In 2008, prices peaked in the last week of June, at an average of $4.15 nationally. But by Nov. 1, we were back below $2.50, a pretty dramatic decline. Similar declines are possible, but we no longer have the initial shock of $3 gas we had then, and consumers may be more conditioned to that level and more accepting of it.

Whatever the psychological price points are, they change and evolve over time. If you go back to the recessions of 1979 and 1982, the big barrier there was $1-per-gallon gasoline, which if adjusted for inflation, is about $3 a gallon today. Sometimes we make too much of that barrier, when the reality is there are real economic effects if it’s costing you 20 percent more to fill up your car than a year ago.

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Restaurants Ready to Grow Again

Monday, March 7th, 2011

Looking to take advantage of attractive rents, hit markets with lower-than-average unemployment rates and develop larger brand footprints, restaurant chains, especially those in the burger and Asian segments, are set up for growth in 2011.

ChainLinks Retail Advisors, a real estate services and brokerage organization, debuted this week a National Retailer and Restaurant Expansion Guide, which suggests that many companies in the retail world are shifting into growth mode after the stagnant years of the recession.

Overall, U.S. retail expansion plans are up 40 percent this year over last, including chain stores from 7-Eleven to Walmart, as well as restaurant companies from Auntie Anne’s to Wingstop, according to the guide.

Among restaurant chains, franchise operators appear to be the most active in adding units, said Garrick Brown, research director of Sacramento, Calif.-based ChainLinks. The guide lists franchisor projections, which, he noted are sometimes established as growth targets. The guide does not include companies’ plans for unit closures. ChainLinks said it gathered the data from its brokers, clients, public-company financial reports and industry sources. There are no year-over-year comparisons.

According to Brown, burger concepts and Asian restaurants are planning the most growth this year. “Burger players like Five Guys and Smashburger are each planning at least 100 stores this year,” he said.

Among Asian brands, Panda Express is planning to open 950 units by 2015 and at least 100 units this year. The U.K.-based noodle chain Wagamama is planning 650 units over the next five years.

The guide also makes some bold projections, which Brown said are based in part on input from regional brokers in the field.

The new fast-casual Asian concept being developed by Chipotle is listed, for example. Though it’s not expected to open until summer, and growth plans have not been discussed publicly by the parent company, the guide said, “We would be surprised if Chipotle does not add at least 100 of these into the mix over the next 24 months.”

Another new Asian concept called Sunshine Moon Peking Pub in Scottsdale, Ariz., founded by P.F. Chang’s China Bistro co-creator Rich Sullivan, is projected to open as many as 10 units over the next 24 months.

The guide shows that nearly every region across the country will experience retail growth this year.

“The strongest surge in growth plans has been in those markets where unemployment is lowest,” he said. “Everyone is saying that if unemployment is 10 percent or less, we’re going in strong.”

The Washington, D.C., area, for example is “highly desirable,” with unemployement levels around 6 percent, he said. So is the Eastern Seaboard from Boston to the Carolinas.

“We have also seen a considerable increase in retailer requirements in the Chicago market,” Brown said. “Texas remains extremely popular. And though both have elevated unemployment, both Florida and California have also seen a spike in retailer demand in most markets.”

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Wendy’s to Head Back to Japan

Monday, March 7th, 2011

Wendy’s took another step forward in its plan to expand the hamburger chain in foreign markets, signing a joint-venture deal to re-enter Japan, a country it quickly exited in 2009.

The first of the new Japan-based Wendy’s is slated to open in Tokyo later this year and will be developed with Higa Industries Co. Wendy’s and Higa said in a statement Wednesday that they would develop the brand throughout Japan over the next several years, but would not disclose a targeted unit count.

Wendy’s decided in 2009 not to renew its agreement with the former franchisee in Japan, which led to the closures of 71 restaurants there. The Wendy’s chain totals about 6,600 locations worldwide, including 340 restaurants in markets outside of North America.

Higa Industries is led by Ernest Higa, who owned and operated 180 Domino’s Pizza franchised stores before selling the business in February 2010.

“We are pleased to join with Ernie Higa and Higa Industries to build the Wendy’s brand in Japan,” Roland Smith, president and chief executive of parent company Wendy’s/Arby’s Group Inc., said in a statement. “Japan is the second-largest quick-service restaurant market in the world and represents a significant growth opportunity for the Wendy’s brand. We’re also honored by the tremendous outpouring of support we’ve received over the past year from our customers in Japan urging us to return.”

The deal for Japan is the first joint-venture agreement for Wendy’s/Arby’s, which has identified 8,000 foreign-market restaurants as its long-term goal. Of those 8,000 potential locations, about 9 percent of the capacity would be located in Japan, Smith said in January. Another 30 percent of those projected openings would be targeted in China and Brazil, he said.

Wendy’s also announced last week that its longtime franchisee in the Philippines, Wenphil Corp., has agreed to develop 44 more locations in that country, bringing the total number of units in the Philippines to 75.

In Japan, Wendy’s units would promote not only brand signatures like fresh hamburgers with square patties and Frosty desserts but also premium sandwiches and burgers with gourmet toppings that cater to local tastes, Higa said.

Atlanta-based Wendy’s/Arby’s also owns the 3,700-unit Arby’s brand, which it plans to divest.

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