BAJA FRESH LAGS IN FAST-FOOD WORLD.

Byline: Candice Choi Staff Writer

Baja Fresh is getting some much-needed freshening up and family-friendly fare these days from its parent company Wendy's, the Ohio fast-food giant that has also seen its fortunes go stale in recent months.

Baja Fresh, based in Thousand Oaks, has struggled since it was acquired by the fast-food company in June 2002 for $275 million. Same-store sales were down 6.3 percent last year and 20 underperforming restaurants were shuttered.

The quick-service chain even pulled out of three markets - Atlanta, Charlotte and Tucson.

Wendy's International, meanwhile, lowered its first-quarter profit forecast Wednesday, citing higher beef prices, expensing stock options and an earlier Easter holiday this year.

Since the acquisition, a team of new executives was installed at Baja Fresh and a number of changes are continuing to roll out.

Some recent examples include easy-to-read menu boards, expanded salad and kids meal options and the curtailing of expansion to focus on existing stores.

Warmer lighting and lower tables and chairs are replacing high tables and stool-like seats. The new in-store design, which is being introduced in select stores, is intended to create a more family-friendly feel.

``There's a very aggressive plan under way,'' said Bob Bertini, Wendy's spokesman.

Baja Fresh wasn't always struggling, however.

The popular Southern California chain was enjoying a string of upward same-store sales right up until its acquisition by Wendy's, said Richard Martin, managing editor of Nation's Restaurant News. Almost immediately after the acquisition, sales started to nose-dive.

The biggest problem was overdevelopment; so many locations sprouted up that the stores began to cannibalize themselves.

``If you saturate a market like that, you dilute the potential of each store,'' Martin said.

Other problems plagued Baja Fresh.

Though it falls into the category of a quick-service restaurant, many of the dishes require some preparation time. McDonald's owned-Chipotle Mexican Grill, in contrast, has a quicker process and simpler menu offerings, Martin said.

Wendy's executives are examining how to streamline the food-preparation process. Wendy's supply chain group also recently assumed responsibility for purchasing ingredients at Baja Fresh, a move that is cutting back on food and labor costs, Bertini said.

New menu items such as tortilla soup, high-protein dishes and salads were introduced over the past several months as well. One of the executives leading the charge is Cathy Chestnut, who was formerly head of research and development at Wendy's. She now occupies the same position at Baja Fresh.

``The emphasis is really on broadening the menu options,'' Bertini said.

Wendy's International so far has sustained more than $100 million in losses through Baja Fresh, Martin said. Still, Baja Fresh represents a small fraction of Wendy's business - about 5 percent. Other flagship properties include Pomodoro, Cafe Express and Tim Horton's.

In March, same-store sales at flagship Wendy's locations slipped 5.1 percent, compared with an increase of 9.9 percent the previous year. At franchised locations, sales dropped between 3.9 percent and 4.2 percent versus a year-ago gain of 7.9 percent.

Despite its struggles, Wendy's maintained expectations for a rebound in the second half of 2005 and reiterated its projected full-year earnings.

Wendy's shares fell 39 cents, to $38.86, in trading on the New York Stock Exchange, in the middle of its 52-week range of $31.74 to $42.12. Baja Fresh will report first-quarter earnings later this month.

Candice Choi, [phone]

candice.choi(at)dailynews.com,

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Photo:

(color) Baja Fresh's performance has tanked since being acquired by Ohio- based Wendy's more than a year ago.

Michael Owen Baker/Staff Photographer