Wendy's Retreats in Breakfast War

In 2007, Wendy's International announced big plans to take on McDonald's in the mornings. The company began adding breakfast offerings in hundreds of its fast-food outlets across the country, describing it as a necessary step to stay competitive. At the time, USA Today declared that fast-food chains were engaging in a "breakfast war."

Since then, though, Wendy's has been acquired in a $2.2 billion deal by Triarc Cos., which already owned the Arby's chain, and the economy, then merely weak, has imploded. The new owners are rolling back the company's breakfast plans, CEO Roland Smith announced on Monday. The number of outlets selling breakfast will be cut from 850 to between 450 and 475.

Triarc is now known as Wendy's/Arby's Group and trades publicly. The force behind Wendy's/Arby's is activist investor Nelson Peltz, who had been agitating for major changes at Wendy's before the merger. His company, Trian Fund Management, in December boosted its stake in Wendy's/Arby's to 21.6 percent.

Which means he probably likes what the company has been doing since the September merger, despite its struggles to control costs. It also means he probably thinks it would be better to hunker down and wait until 2011 to make a major push into breakfast—which is what Smith on Monday said would happen.

In November, Wendy's/Arby's reported losses in all of its businesses, due mainly to the cost of the acquisition. The company is working to boost margins before it commits to major new initiatives. In the meantime, costs will likely continue to drift lower, making the rollout much less expensive than it would be now.