Wendy's Chili: A Costing Conundrum

Total Words: 2327

 

Spreadsheet Calculations

Chili 8 ounce Cost

Total cost of Ingredients

Cost of 57 Chilis

Cost of one 8 ounce Chili

Other Direct costs

Cost of a packed 8 ounce Chili

Time taken for Chili Preparation


Abstract

Wendy’s International Inc. is a hamburger quick-service restaurant which was founded in 1969 in Columbus, Ohio, by David Thomas. By 1972, Wendy’s had seven restaurants, seven company operated stores and two franchised restaurants were opened.  Over the years, Wendy’s continued to grow and expand geographically. The success of Wendy’s is attributed to the efforts of Thomas who used product differentiating strategies to make Wendy’s stand out from its competitor. He aimed to provide good quality hamburgers quickly at a suitable price. Wendy’s served hamburgers the traditional “old fashioned” way. Its limited menu items were popular. However, when the company saw declining profitability, Wendy’s had to seriously consider changing its traditional ways by expanding the product line and discontinuing the production of products which result in losses e.g. the chili.

 

Questions Covered

  1. How was Wendy’s able to achieve its initial success and to grow so rapidly at a time when the quick service hamburger business appeared to be saturated?
  2. What benefits might have resulted from Wendy’s’ “limited menu” concept? What were the disadvantages of such a concept?
  3. Why was the concept eventually discontinued?Why was Wendy’s’ drive through window successful when other quick-service- restaurant chains had been unsuccessful at implementing the same concept? 
  4. How much does a bowl of chili cost on a full cost basis? An out-of-pocket basis?
  5. For determining the true probability of chili, how much does a bowl of chili really cost?
  6. Would you recommend dropping chili from the menu? Why or why not?
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