(Wendy's/Arby's sale to private-equity group Roark Capital Group report updated with further analysis and background.)
NEW YORK ( TheStreet) -- Wendy's/Arby's ( WEN) sale of its struggling Arby's chain to private-equity group Roark Capital Group shows that the fast-food restaurant operator is looking to deleverage its balance sheet and finally divest a brand that's been dragging on its financials for years.
The merger of Wendy's and Arby's occurred in 2008 under Peltz's leadership, and the company has tried to reinvigorate the brand -- most recently with a new advertising campaign labeling Arby's menu as "good mood food" -- but a meaningful turnaround has yet to materialize. Some efforts have paid off; in its recent quarterly report, Wendy's/Arby's said that same-store sales -- or sales at stores open at least one year, a closely watched metric in the restaurant industry -- jumped 5.5% at Arby's, while ticking up just a 0.3% at its namesake Wendy's restaurants. Even so, Rostan suggested that investors should think separately about Wendy's, a well-respected burger chain, and Arby's, an underperformer. He expected that Arby's would be targeted by private-equity firms, noting that it previously had private-equity ownership.
"You just have a lot more competition from the fast-casual space and from Subway," Saleh said. Roark certainly faces headwinds as it takes on the Arby's brand, perhaps most notably in the area of rising ingredient costs which have hit a roster of food and beverage companies across the sector from McDonald's ( MCD) and Starbucks ( SBUX) to Jack in the Box ( JACK) and Panera Bread ( PNRA).
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