The double burger becomes Wendy’s best seller without changing the price or the size.  It is a profit growing lesson for any business.

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Dave Young:
Welcome to the Empire Builders podcast. Dave Young, alongside Stephen Semple. And Stephen, you told me we’re going to talk about Dave Thomas and Wendy’s. And man, that takes me back. I remember when it was like all of a sudden there was this third thing. There was McDonald’s and then there was Burger King and then all of a sudden, what the heck? It’s a square hamburger.

Stephen Semple:
It’s a square hamburger.

Dave Young:
It’s a square hamburger. Who’d thought of that? Brilliant.

Stephen Semple:
Dave Thomas, that’s who.

Dave Young:
So where are we going with this?

Stephen Semple:
Well, before we go into Wendy’s, we really need to talk a little bit about Dave Thomas, because Dave Thomas actually had a big impact on another restaurant chain before he started Wendy’s. And that was KFC.

Dave Young:
Oh, okay.

Stephen Semple:
Dave Thomas, started at KFC and actually owned four franchises at KFC, and they were KFCs most successful franchises.

Dave Young:
Oh, no kidding.

Stephen Semple:
Yeah. And look, the man’s brilliant. So here’s the things that he brought to KFC. He created the whole idea of the standardized menu at KFC. Remember, KFC in the early days was an item that was added to the menu. He was really the first to go, no, there should be this standardized thing where all you serve is Kentucky fried chicken because for many of the franchises it was a product to add on. He was the first to make it a store, make it a thing. Kentucky Fried Chicken was a store. He created the red and white look that we have today. You know those striped banner sort of look on the roof? That was Dave Thomas who created that. You know the bucket which had the chicken and it was a whole meal?

Dave Young:
Yeah.

Stephen Semple:
Dave Thomas invented that.

Dave Young:
Okay.

Stephen Semple:
Best complete idea of a complete meal that you could take home which went on to become a best seller, Dave Thomas created the bucket and that whole concept. The bucket being put on the pie line outside the restaurant, that iconic thing, Dave Thomas came up with that idea.

Dave Young:
So Colonel Sanders was just basically the chicken and the little outfit in the tie.

Stephen Semple:
Yeah. And even that, him becoming the spokesperson for it, Dave Thomas’ idea.

Dave Young:
Really?

Stephen Semple:
Yap. All the stuff that makes KFC KFC, Dave Thomas.

Dave Young:
Wow. That’s amazing.

Stephen Semple:
Yeah. He was so successful at KFC, when KFC was bought… Because if you remember the Colonel sold KFC, when KFC was bought, the new owners immediately promoted Thomas into head office to help them standardize the brand. And then it’s a long story, they then really him off and he quit. So Dave Thomas quits and now he’s unemployed, 37 years old with five kids. And he decides to open a burger joint in this, as you said, saturated market because not only was there Burger King and McDonald’s, every Tom, Dick, Harry and celebrity had a burger joint.

Dave Young:
Oh yeah. There’s Tasty Freeze, and Tasty King, and Dairy Queen and there were loads of them.

Stephen Semple:
Yeah. So how do you stand out? Well, one of the first things he looked at was everyone was doing frozen patties, so he said he would do fresh, that’s where he was going to start. Fresh never frozen as a differentiator. And he puts his life savings into the restaurant. But also because he is doing fresh, he’s got some flexibility. He decides to do the square burger.

Dave Young:
Yeah, because you can make it any shape you want.

Stephen Semple:
Yeah. Square burger gave him three things, a unique look, efficiency, you could put more burgers on the grill and the burger looks so big, sticks out of the bun. Where’s the beef?

Dave Young:
Those corners, there they are.

Stephen Semple:
Yeah. But he had a challenge with this because fresh beef’s really expensive. It’s a higher price. So he brands Wendy’s as authentic burgers because he’s literally three times the price of his rivals. This burger’s expensive. So on November 15th, 1969, he opens the first Wendy’s old fashioned burgers. So there’s Wendy’s old fashioned burgers and he starts with a really simple menu, because this is what he did at KFC, single, double, fries, drinks and Frostys. And Frostys was also kind of a unique thing, was the blend of chocolate and vanilla ice cream. But again, a pretty innovative idea. And he’s off to a good start, he’s busy but he’s got a problem. And the problem is spoilage because of the fresh beef and he’s losing money. So the fresh beef is a challenge and he could abandon that and he could have gone to frozen, but instead he thinks I’ve got to figure out an idea for this. And that’s when he adds chili to the menu, because you can take that fresh beef, bake it in the chili…

Dave Young:
I never put two and two together that the chili was a result of the you use the ground beef before you lose it.

Stephen Semple:
So it creates for him yet another unique item. So he’s got the square burgers, he’s got the frosty and he’s got chili. So for in that day, chili was a really unique item. But here is where I really start loving Dave Thomas and his understanding of consumer psychology and we can all learn from. So his other challenge is the double burger’s not selling well. So at the time the market is used to small burgers. Wendy’s single burger is a quarter pound. So it’s the size of the biggest burger out there. The quarter pounder, so the double is huge. So what do you do to solve this? How do you sell more of the double burgers?

Dave Young:
I think I know.

Stephen Semple:
What do you think you do, Dave?

Dave Young:
You sell the triple.

Stephen Semple:
You come out with a triple.

Dave Young:
And people go, oh I don’t think I can eat a triple but I’ll have one of those doubles.

Stephen Semple:
Right? Bingo. Gold started Dave, this shows how brilliant a marketer you are. You went right to the solution. This is how you solve it. Not selling the doubles, add one that’s even larger. And think about it, and adding the triple costs nothing. It was the same bun. It was the same fixin’s, it was just another pattie. So if it didn’t sell it didn’t matter.

Dave Young:
Well, and especially if you’re not making it before it sells anyways, just another line on the menu.

Stephen Semple:
Correct. So he adds a larger one. He adds the triple pattie. And guess what ends up becoming the best selling burger the moment he adds the triple pattie?

Dave Young:
The double.

Stephen Semple:
The double. Yeah, in six weeks-

Dave Young:
I remember as probably a teenager eating a triple and it’s like, man, this is just too much. This is too much for me. So I always went back to doubles from then on, but I ordered one. It’s like, that’s just… I can’t unhinge my jaw like that.

Stephen Semple:
Right. So within six weeks of him putting triple on the menu, double becomes the best selling burger.

Dave Young:
I love it.

Stephen Semple:
Yeah. So within the first year he opens the second store, but what he discovers is it’s working really well and he’s getting these long lines at the store. And Thomas wants to increase capacity and he looks out the window and he says, I should offer drive through. Now, he wasn’t the first to do drive through. The first was in 1921, a pig stand on a busy highway in Texas was the first to do-

Dave Young:

A pig stand?

Stephen Semple:
Like barbecue pig, but none of the leaders are doing this. McDonald’s, Burger King, KFC, none of the leaders have drive through. So he’s really-

Dave Young:
Oh, wow. Okay

Stephen Semple:
While he’s not the first to drive through, he’s pretty close to the first. And it’s five years after he introduces drive through that the others do. But sees this as a way as adding new customers but becomes a logistical nightmare, because you pull up to the window, you order, pay and wait for the food all at one window. And it’s a huge mess. Long lineups, service is slow. There’s no way to make the line faster because the pinch point is making food. So what does he do to make it successful?

Dave Young:
Did he invent the speaker where you order?

Stephen Semple:
Really close. He invented the whole idea of the three stops, pull up and you order, pull up and you pay, pull up and pick up your food. But here’s where he understood the psychology, people think that’s faster, it’s not. No faster, same amount of time but the line’s moving. When you see the long line and it’s moving, you’re cool with it, the line is moving.

Dave Young:
That’s just great marketing psychology because nobody wants to sit still. Even if you had to drive 20 minutes out of your way to get home, you’d rather drive 20 minutes out of your way than sit for 15 minutes on a gridlock freeway.

Stephen Semple:
Totally true. But this is where Dave Thomas was so brilliant, understanding the psychology of all of this. The triple burger, the three stop drive through which is the standard today. And there’s one more interesting thing that he did.

There’s one more interesting thing that he did. But before we get to that, at this time, Jack Massey, who he knew through KFC and was the finance guy at KFC, they pissed him off as well. And he quits KFC, and he comes to join Dave Thomas and they look to expand. And here’s what they noticed, at this point again, saturated market, the fast food joints are all in suburban locations. At this point in the United States in the ’70s, downtown cores are in decline. Crime infested, poor, abandoned and he has the most expensive burger. So when you have the most expensive product, what’s the temptation everybody does. Oh, I have to be in the affluent community because I have a premium priced burger. He looks at the downtown and he says, there’s no competition downtown. So where’s he going? Downtown. Has the most expensive burger joint and he goes downtown where it’s run down and poor, no competition.

Dave Young:
No competition. And you’re actually providing some halfway decent jobs to some people as well, in a place where there aren’t very many opportunities.

Stephen Semple:
And it turns out these become his most lucrative stores. So by 1976, he’s got 600 locations. By 1978, 1000 locations in two years, almost doubles. And Dave Thomas becomes the pitchman and he did over 800 commercials as the pitchman for Wendy’s. So more I read about Dave Thomas, it was one of those ones, if the man was still alive and if I could sit down and have dinner or lunch with him, I totally would because boy did this guy understand consumer psychology like it was nobody’s business.

Dave Young:
His daughter was Wendy. Right?

Stephen Semple:
His daughter was Wendy. Yes.

Dave Young:
I’ve actually seen some Wendy’s that seem a little worn out and down on their luck lately. There’s a couple near me in Austin and it’s like I’ve actually gone to them in the last year. And it’s like, oh, that wasn’t terrific. But you talk about innovative ways of building an empire, man did he do it.

Stephen Semple:
And when he was alive and involved, absolutely.

Dave Young:
Yeah. He’s been gone for 20 years.

Stephen Semple:
And there’s a bunch of lessons here. And one of the lessons is… And I share this with all sorts of customers, this whole idea of three choices. Give people three choices and that third choice is not about selling that third choice. That third choice is about selling the middle choice and it works over and over and over again. We’ve even done it with a renovator where what he does is he has these packages for renovating bathrooms. And what do we do? We took a third one and made it God awful, super unbelievably fancy. And it’s made more people upgrade stuff. And what actually often happens with that one, they go, well, I don’t want all of that but how about this and this, right?

Dave Young:
Yeah.

Stephen Semple:
They upgrade themselves because you’re not pushing on, oh here’s all the upgrades. It’s like here’s three options, you can do this at this price, this at this price or this at this price, what would you like to do?

Dave Young:
I think the three station drive up is also so brilliant. Just because if I at least tell you what my order is, I feel like I’ve got some momentum. I haven’t even paid yet, but it’s like, well they got my order. They got to be cooking it.

Stephen Semple:
And they are.

Dave Young:
I think about the Star Wars episode that we did where they sold the stupid certificate for toys.

Stephen Semple:
Right.

Dave Young:
You didn’t even get the toys at Christmas time. You just got the stand and a certificate that said the action figures are coming. Yeah, at least you’re in the game. You feel like, well I’ve got momentum. They better deliver on these. But guess how many they would’ve sold if they didn’t have any at Christmas time? Zero

Stephen Semple:
Zero goose egg.

Dave Young:
And you think about how many people just back out of a busy drive through and turn away because they haven’t even ordered.

Stephen Semple:
Absolutely right. So Dave Thomas, if you think about it, he saw two problems. One is I’m not selling enough of the double burgers. And he came up with a solution that cost nothing and changed nothing. It was just an addition of a pattie that they were already making. How many businesses would go, oh I got to do this or that, or drive through, oh my God, we got to change our cooking techniques. He was like changed nothing. He just basically said, okay, well what I’m going to do is I’m going to put a radio out there and I’m going to put a second stop where they pay. That cost nothing to do super simple solutions to complex problems that worked because he understood how we think. Brilliant.

But here’s the other thing and I see this over and over again, as I know you do is just because… And I see this so many times, oh, our whatever is premium priced. So therefore our market is the affluent. Now, that’s like Dyson. We heard the same thing from Dyson, right? Dyson started… Their product was two to three times the price just like Wendy’s, and they started selling it through mail order catalogs.

Dave Young:
Yeah. You can’t make assumptions about things like that. And even if your burger is the most expensive burger out there, it’s still a burger and it’s not a filet mignon. It’s not a sit down restaurant. In fact, as I think about it over the past, my lifetime, our decision as a family that we made about fast food never really involved price. It was like you feeling McDonald’s, or Taco Bell, or Wendy’s or what are we thinking?

Stephen Semple:
What are you feeling like, yeah?

Dave Young:
And yeah, was there some difference in what we would spend one versus another. Sure. But that wasn’t part of the decision making process.

Stephen Semple:
Really wasn’t.

Dave Young:
Yeah. In many cases, like you said with the inner cities, the decision making process is, do you want to eat Wendy’s or do you want to drive 15 minutes to get something else?

Stephen Semple:
I’m doing work in the craft brewery industry. And it’s funny sitting talking to these craft brewers because they all start off with, oh, well, our market is the affluent and it’s like your product costs 50 cents more a can, shut up. But the interesting thing is the marketing companies that worked with them before us who were unable to grow their brand actually presented that to them saying, because you’re premium priced, here’s your market, the affluent, it’s like, no, your market’s people who like beer.

Dave Young:
Yeah, even if it’s more expensive, as long as it’s not like hit me with a wet towel in the face expensive.

Stephen Semple:
Right?

Dave Young:
Right. I don’t care because what I want is a beer.

Stephen Semple:
It’s not $1000 bottle of beer.

Dave Young:
Yeah, exactly.

Stephen Semple:
Right. It’s not like the way some whiskeys are. And here’s the thing that’s also weird about that. A departure I wasn’t planning on talking about, but I think is important given when this is publishing. Is the businesses that are recession proof are actually the businesses that are slight premiums. The special beer, there was a lady called faith popcorn who back in the ’70s wrote a book, The Popcorn Report. And I met Faith Popcorn, really amazing lady. And she came up with this idea of small indulgences. So what happens is yes, you’re not going to go to the fancy steakhouse and drop up 100 bucks a plate on steak. But what you might do is pick up Haagen-Dazs ice cream, or what you might do is pick up that really fancy craft beer. Or that nice bottle of wine, not the $1000 bottle of wine, but that little nice bottle of wine that suddenly makes cutting back in the other areas feel okay.

People will do these things that they call small indulgences. And so if you’re a retailer, if you can create these small indulgences, those are the things that will actually take you through recessionary times. But for it to be an indulgence, it has to be premium and value low price point.

Dave Young:
Yeah.

Stephen Semple:
So it’s not about being cheap.

Dave Young:
And the message is about you deserve this, right?

Stephen Semple:
You deserve this.

Dave Young:
Times are tough, you deserve this.

Stephen Semple:
Correct. Yeah, without saying the words times is tough and without saying you deserve this, but just making a person feel it. Yeah. This is a treat.

Dave Young:
Pretty cool.

Stephen Semple:
Treat yourself.

Dave Young:
Well, I learned some cool things about Dave Thomas today that I did not know.

Stephen Semple:
Remarkable. Isn’t he just like, I would love to have met this man?

Dave Young:
Yeah. Well, thank you for sharing his story, Steve.

Stephen Semple:
Thanks, Dave.

Dave Young:
Thanks for listening to the podcast. Please share us. Subscribe on your favorite podcast app and leave us a big fat juicy five star rating and review. And if you have any questions about this or any other podcast episode, email to questions at the empirebuilderspodcast.com.

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