LOS ANGELES Wendy's/Arby's Group Inc WEN.N said higher prices for fresh beef will contribute to a 2 percent to 3 percent increase in commodity costs at its Wendy's hamburger chain this year.
"Beef remains our largest risk," Chief Financial Officer Stephen Hare said on a webcast from the company's investor day on Thursday.
Beef and chicken each represent 20 percent of Wendy's food and paper costs.
Wendy's uses fresh beef and the price for it is expected to rise 10 percent to 15 percent this year. Some of that extra expense will be offset by chicken prices, which are expected to be down year over year, Hare said.
Menu price increases also should help the company cover the higher food costs, said executives.
Management also outlined plans to step up growth of U.S. units and international expansion -- an area where Wendy's trails rivals like McDonald's Corp (MCD.N) and KFC owner Yum Brands Inc (YUM.N).
The company also plans to boost sales with extended hours, restaurant renovations and new menu items.
Wendy's will introduce a new line of high-margin premium cheeseburgers across the United States in the second half of this year and offer breakfast in 1,000 restaurants by the end of 2011.
Breakfast is a fast-growing business for fast-food chains, and the upcoming launch will mark Wendy's third attempt to get it right.
Wendy's/Arby's last week said it planned to sell its struggling, 3,700-unit Arby's roast beef sandwich chain to focus on Wendy's.
Analysts have estimated that the company could fetch between $335 million to $600 million for Arby's.
The two companies married when billionaire investor Nelson Peltz's Triarc Cos, the parent of Arby's, bought Wendy's for $2.2 billion in 2008 to create the world's third-largest publicly held fast-food chain.
Peltz was the force behind that merger and now is the company's nonexecutive chairman and its biggest shareholder.
He told investors that Wendy's still has significant growth potential and said the company would deliver results over time.
"Be forewarned you must stay on this train until the last stop," said Peltz.
Trian Fund Management, whose principals are Peltz, Peter May and Ed Garden, and its affiliates beneficially own 101.7 million share of Wendy's/Arby's Group, representing about 24.3 percent of the total shares outstanding, a company spokesman said.
Wendy's/Arby's operates more than 10,000 restaurants, mostly in the United States.
Shares of the No. 3 U.S. fast-food restaurant operator were up 9 cents, or almost 2 percent, at $4.71 in afternoon trading, one day after the company reported preliminary fourth-quarter results that topped Wall Street's view.
(Reporting by Lisa Baertlein; Editing by Maureen Bavdek and Steve Orlofsky)