Wendy's Faces Challenges After Founder's Death - TheStreet

With the death of its founding father early Tuesday morning, the

Wendy's International

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fast-food family faces some difficult decisions regarding its corporate identity.

The nation's third-largest hamburger chain announced the death Tuesday of its founder and senior chairman Dave Thomas from liver cancer. Beyond initiating a period of mourning for Thomas's family, friends and colleagues, the passing of the 69-year-old Thomas also raises thorny issues over how Wendy's will proceed in the absence of a man whose folksy persona was so integral a part of the company's marketing campaigns.

Thomas, who named the burger chain after his daughter Wendy, appeared in more than 800 television ads for Wendy's since 1989, creating one of the longest-running advertising campaigns starring a company founder.

It's not immediately apparent how Wendy's intends to replace Thomas in its advertising. The company didn't respond to a message left Tuesday morning.

The news of Thomas' death follows a recent upturn in sentiment for Wendy's among Wall Street analysts, with Lehman Brothers last month upgrading the company from market perform to strong buy, and U.S. Bancorp Piper Jaffray initiating coverage on the company on Dec. 19 with an outperform rating (neither Lehman Brothers nor U.S. Bancorp have any investment banking relationship with Wendy's).

At midday Tuesday, shares in Wendy's were up 73 cents to $30.92, putting the company at the top of its 52-week price range.

'Like a Next-Door Neighbor'

Much of Wendy's success over the past few years has been attributed to the folksy charm Thomas displayed in the hundreds of television commercials he did for the company.

"People just look at him and kind of think he's their next-door neighbor, as opposed to being the CEO of a company," says Barbara Lafferty, an assistant professor of marketing at the University of South Florida who studies corporate reputations and endorser credibility. "I think he's going to be sorely missed."

Lafferty says that Thomas meshed well with Wendy's efforts to distinguish itself from rival hamburger chains

McDonald's

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and

Diageo-owned

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Burger King by focusing on an adult audience rather than children.

In contrast to advertising featuring the clown Ronald McDonald, for example, "the whole Wendy's approach

is a real person talking to you," Lafferty says. "You could almost visualize Dave Thomas back there in the kitchen flipping hamburgers."

As with other restaurant chains and national brands, consumer advertising is a key component of operations at Wendy's. The company said in November that it expected its national ad spending to grow 30% in 2002. Franchisees, who operate most U.S. Wendy's, voted to increase the national ad spending budget from 2.5% of restaurant sales to 3%.

Of course, advertising has been only a part of the Wendy's restaurants' appeal to consumers. Wendy's has been particularly good at creating an attractive menu with a certain amount of variety and novelty, says Ronald Goldsmith, professor of marketing at Florida State University. "That sort of makes them stand out," he says.

Wendy's Not Alone

The challenge facing Wendy's, which also operates the Canada-based Tim Hortons coffee shops, is reminiscent of those faced by such consumer brands as Kentucky Fried Chicken and Orville Redenbacher following the deaths of high-profile founders who served as their company's public faces.

Before the death of Orville Redenbacher, who started the popcorn brand that bore his name, the product's advertising started including Redenbacher's grandson Gary, apparently as tall, skinny and popcorn-loving as his grandfather.

And years after the death of Kentucky Fried Chicken founder Harland Sanders (a former boss of Thomas' whom he credited as a mentor), that fast-food chain, now known as KFC and owned by

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, continued to use images of Col. Sanders in its advertising, eventually creating an animated character based on the late restaurateur.

Though Lafferty says that consumer research is the best foundation for making decisions about advertising, she's skeptical about the wisdom of trying to bring back Thomas as some sort of animated character. Col. Sanders worked as a cartoon in part because Sanders' appearance already was almost cartoonlike when he was alive, while the same was not true of Thomas, she says. "For

Wendy's to shift to a cartoon or animation -- my gut feeling is that might not go over too well," Lafferty says.