Wendy's to Grow in East Europe

The Wendy’s Co. (WEN - Analyst Report) recently announced the signing of a deal with The Wissol Group. Per the deal, Wissol Group will set up 25 Wendy’s restaurants in Georgia and the Republic of Azerbaijan over the next 10 years. The terms of the deal were not disclosed. The first Wendy’s unit is slated to come up in Tbilisi, Georgia’s capital city, in 2013.

The above mentioned deal affirms management’s intent to make East European countries among the prime markets for international expansion considering the vibrant Georgian market. Management sees Georgia as the gateway to Wendy’s east European expansion. Additionally, Azerbaijan is also a strategic fit for new openings given the destination boasts of abundant natural resources like petroleum. The company seeks to fully capitalize on the country’s potential.

Wissol, one of the largest business groups in Georgia, boasts of superior local market knowledge and has a proven track record of venturing into industries as diverse as food supermarket chain, petroleum, supply of jet fuel and retailing of CNG gas within its domain.

In an attempt to strengthen its international presence, Atlanta-based Wendy’s consistently enters into long-term development agreements with franchisees in the Middle East and North Africa, Singapore, Turkey, Russia, Japan, Argentina, the Philippines and the Eastern Caribbean. Additionally, the company is exploring growth opportunities in China, Brazil and other key international markets. Fulfillment of the company’s current expansion plans would widen its global presence considerably.

However, the company will likely face intense competition in Georgia and Azerbaijan from its peer McDonald’s Inc. (MCD - Analyst Report). McDonald’s is a prominent name in Georgia with a much wider scale of operation.

Wendy’s currently retains a Zacks #4 Rank, which translates into a short-term ‘Sell’ rating. We maintain our long-term “Neutral” recommendation on the stock.