Clueless Wendy's Franchisees Surprised Their Company is a Takeover Target

Here's something you don't see every day: Franchise owners so out of touch with how their chain is doing, they have no idea their corporate parent is a takeover target. After Wendy's/Arby's Group (WEN) chairman and major shareholder Nelson Peltz announced earlier this week he'd been contacted about a possible sale of the struggling company, the head of Wendy's biggest franchise-owner association told Nation's Restaurant News members were shocked and dismayed at the news.

Really? The chain's franchise owners haven't read Wendy's red-ink-filled financial statements? They missed all my previous posts about the struggles of the Arby's chain? They don't know their company's low stock price makes Wendy's a takeover bargain? They are unaware that billionaire investor Peltz obviously bought in order to sell?

As the International Association of Franchisees and Dealers Association notes, the franchisees' complete ignorance of Wendy's situation spotlights a massive communication failure at Wendy's corporate. Franchise-owner buy-in will be important for any deal that might get done, so leaving the restaurant owners in the dark doesn't help the chain find a new buyer.

But there's enough blame to go around. Ultimately, each franchise owner is responsible for understanding the health of their business. Outside of asking Wendy's, there were plenty of other resources these owners could have used to get a sense of the scope of Wendy's problems, to figure out that buyers might come calling, and to plan accordingly.

As it happens, they may not have much to worry about. The New York Post reports an anonymous banking source says Peltz isn't interested in a partner -- PEHub reports it's likely veteran restaurant player Thomas H. Lee Partners -- as he wants to take the company private himself. Then he could either clean up or spin off Arby's away from the glare of public scrutiny Wendy's currently faces. Wrenching changes such as major store closures would be painful to Arby's share price if it stays public.

It sounds like a great theory, except for one thing: shareholders are notorious for opposing take-private deals where an existing shareholder-investor type wants to buy them out. They wonder what that investor knows that they don't about the value that could be realized.

So franchisees can consider this their wake-up call. Wendy's will likely change hands again soon, and in the meanwhile owners who're out on the front lines, standing in stores all day trying to sell burgers, will have to deal with the uncertainty of whether that'll turn out to be a good thing or not.

Photo via Flickr user El Gran Dee