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Wendy's Goes Beyond the Dollar Menu in Japan

In the age of the gourmet hamburger, there’s no shortage of pricey patties. At his Miami and Manhattan eateries, chef Daniel Boulud serves up a $34 burger packed with braised short ribs and truffles. The herb butter-spiked classic at New York’s 21 Club is priced at $32. And at Gordon Ramsay’s Maze Grill in London, the burger will set you back 15 quid ($23).

To that list now comes an unlikely addition: Wendy’s (WEN). The third-biggest U.S. fast-food chain hopes to win over Japan’s trend-driven consumers with the Foie Gras Rossini burger, a 1,280 yen ($16) hamburger topped with truffles and goose-liver pâté. The premium burger debuted at Tokyo’s Omotesando luxury shopping district on Dec. 27 and will eventually be sold in 100 Wendy’s restaurants across the country. “We think the fast-food market here is ready for something different,” says Ernest Higa, chief executive officer of Wendy’s Japan.

This is Wendy’s second run at the world’s second-biggest fast-food market. It quit Japan in 2009 after local partner Zensho Holdings declined to renew an agreement. Its new joint venture is with Higa Industries, which previously operated Domino’s Pizza stores in Japan.

Wendy’s is the most U.S.-dependent of the three major fast-food chains. The Dublin (Ohio) company derives 92 percent of revenues from its home market and has posted losses in six of the past eight quarters. Wendy’s aims to triple the number of restaurants overseas to about 1,000, Chief Executive Officer Emil Brolick told analysts in November. Darrell van Ligten, international division president, says Wendy’s hopes to eventually have 700 restaurants in Japan. That compares with about 3,300 for McDonald’s (MCD) and 42 for Burger King.

While Japan is often portrayed as a tradition-bound culture, its consumers eagerly embrace fads. To feed that hunger, companies often resort to limited-time-only products. For the launch of Windows 7 in 2009, Burger King teamed up with Microsoft (MSFT) to introduce a seven-patty burger. Since 2010, McDonald’s Holdings Japan has been running special promotions under the Big America banner that feature burgers with names such as the Beverly Hills and the Grand Canyon.

The pressure to stand out from the crowd is likely to intensify amid a weak economy. McDonald’s is forecasting sales of 304.5 billion yen this year, a 25 percent decrease from 2008. “With the economic situation, you need to bring something that is unique and exciting,” says Higa, adding that the “new fashion” of high-end fast food will give Wendy’s what it needs to thrive.

The bottom line: Wendy’s is betting that premium fare like its new $16 foie gras burger is the key to unlocking the world’s No. 2 fast-food market.

With Eleanor Warnock
Cheng is a reporter for Bloomberg News in Tokyo.

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