Wendy's bacon cheeseburger lineup gets bun with a twist

Wendy's (WEN) may be close to the wide launch of a new burger built on a pretzel bun, taking a product that's been test-marketed for several months to its stores nationwide later this year.

Wendy's Pretzel Bacon Cheeseburger The Pretzel Bacon Cheeseburger should be available sometime during 2013 at Wendy's locations across the country. That's according to Janney Capital Markets restaurant analyst Mark Kalinowski, who offered positive comments on the company's stock following what he says has been a sterling showing for the sandwich in its limited release.

"Our industry sources inform us that when the Pretzel Bacon Cheeseburger was in test, its performance ranked amongst the best of any Wendy’s test items from the last 20 years," the analyst wrote in a research report dated May 24. Kalinowski isn't certain of the timing, though he's expecting a roll-out in the third quarter. When it does go on the menu, he's looking for "meaningful acceleration in Wendy's same-store sales," a key indicator of health at any retailer.

Images of the burger show it to be a pretzel-ish roll with a beef patty, cheese, lettuce, tomato, onions and bacon. The beef, bacon and cheese combination has become a staple at Wendy's, where the menu also features the Baconator, Son of Baconator and the Jr. Bacon Cheeseburger. With the new item, the bread is the clear differentiator. Nutrition information for the sandwich isn't yet available on the Wendy's website, but the contents of other bacon cheeseburgers are. The Jr. Bacon Cheeseburger is listed at 390 calories, while the Baconator comes in at 970 and the Son of Baconator is 690.

For Dublin, Ohio-based Wendy's, the pretzel-bunned hamburger would be the latest development in a continuing remake. Last fall, it altered the logo it had been using for decades in order to go with a fresh design. The chain also has launched new ad campaigns, including one designed to appeal to Hispanic customers. Additionally, the value menu has gotten changed up, and on the dessert side, Wendy's started making the Frosty available in waffle cones.

Talk of a pretzel sandwich from Wendy's had been around since at least last summer, and it showed up in Miami in January in the form seen here. A Wendy's representative didn't respond to an email request to discuss the burger.

At the end of 2012, a total of 6,186 Wendy's restaurants were in operation in North America, according to filings with the Securities and Exchange Commission. Of those, 1,427 were run by the company and 4,759 were managed by franchisees. In addition, another 374 franchised stores were elsewhere. Factoring in franchise fees, Wendy's had revenue of $2.51 billion last year.

The chart below shows how the big three U.S. hamburger chains — Wendy's, McDonald's (MCD) and Burger King (BKW) — measure up in terms of sales recorded at company-owned locations only:

Burger sales, U.S.

Source: SEC filings. Wendy's 2009 sales are for Wendy's/Arby's Group. Arby's was sold in 2011.

While new to Wendy's, the pretzel bun isn't itself a new invention. Other restaurants, either independents or chains, can be found that offer or have offered pretzel-type buns. One of those is Red Robin Gourmet Burgers (RRGB), based in Greenwood Village, Colo., which previously has sold a limited-time Oktoberfest Burger on a pretzel roll. It's also not the only case of baked pretzel dough being used to house meat: Pretzel chains Auntie Anne's and Pretzelmaker, for instance, carry pretzel dogs.

Brian Miller, the owner of Miller Baking in Milwaukee, started making pretzel buns for burgers back in the spring of 2007. In his view, the fact that so many people in the U.S. grow up with pretzels, and often having them during a leisure activity such as a trip to the ballpark or the county fair, helps the prospects for this type of bun.

"Americans have a really strong emotional connection with pretzels, soft or hard pretzels," he says. "There was just a natural progression to turn it into a bun."

Miller, who sells his products under the Pretzilla brand to individuals and retailers, including Whole Foods, sees an "absolute positive" with Wendy's move into pretzel buns, in that it helps make consumers aware that they exist as sandwich options. Various other types of pretzels, such as hard varieties, have of course been around for much longer than the rolls. "I'd like to believe that the interest level for a burger bun or a sausage bun is also going to have that kind of staying power," he says.

Should the Pretzel Bacon Cheeseburger carry a high price, and it very well may, it would be another entrant to the "barbell" strategy employed at fast-food restaurants, including Wendy's much larger rival McDonald's. By this, the chains offer a number of low-priced items with the aim of getting diners in the door, then hope they decide to buy a bigger-ticket item once there. For example, Carl's Jr. and Hardee's, both owned by CKE Restaurants, carry higher-cost fare such as the Super Bacon Six Dollar Cheeseburger. McDonald's, however, recently dropped its more expensive Angus burgers.

Beyond its direct competitors, the hamburger might enhance Wendy's position against the so-called better burger chains, names such as Smashburger, Five Guys and Shake Shack, that have entered the sector in recent years. Though much smaller in number than the giants, their growth indicates consumers want more variety than the national brands alone provide.


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