The burrito appears to be unraveling. After nearly four years of tinkering with Baja Fresh, Wendy's International Inc. is ready to unload the struggling Thousand Oaks-based Mexican food chain.

Like its rivals, the nation's third-largest restaurant chain is shedding assets and giving up on a business beyond burgers.

But Dublin, Ohio-based Wendy's apparently had to be convinced to put Baja Fresh on the block. Nelson Peltz, the billionaire investor known for selling Snapple for $1.2 billion more than he bought it, filled the role of persuader. At the end of last year, Peltz's Trian Group bought a 5.5 percent stake in Wendy's and pushed the company to rid itself of subsidiaries.

Facing Peltz's pressure, Wendy's spun off Canadian coffee chain Tim Hortons Inc. last week and is pulling back from a long campaign to resuscitate Baja Fresh. The race is now on to see who will snatch up Baja Fresh's roughly 300 units. Nearly half are in California, where the first restaurant opened in Newbury Park 15 years ago.

Regardless of the suitor, interest is high in Baja Fresh because it remains one of the largest chains in the fast-casual dining segment and has the potential to recapture consumers it has lost as competitors entered the market. The segment includes restaurants with higher quality food than fast-food joints, but with quicker service than sit-down counterparts.

"I think they are going to regroup," said Stuart Morris, president of QSR Consulting Group Inc. in Coronado. "I wish I had the money to purchase it because I do think the payoff for whoever buys it, assuming they do things strategically, is big."

Fresh future
Exactly how the future parent of Baja Fresh will rejuvenate the chain is unclear. When Wendy's bought the chain in 2002 for $275 million, Baja Fresh was at the forefront of the fast-casual scene. Since then, the landscape has become crowded, making it harder for Baja Fresh to distinguish itself.

Ron Paul, president of food industry consulting firm Technomic Inc., said Chipotle has presented the greatest challenge to Baja Fresh. Chipotle added 80 units last year to Baja Fresh's four.

"It seems like Chipotle has a little more cache and is a little bit more like the Starbucks," Paul said. "They are convincing the consumer that they care about the consumer, (and) they care about the product. They have done a good job building the brand and building a great deal of loyalty."


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