Dave Thomas Built Wendy's With KFC's Own Money

Most people know Dave Thomas as the folksy founder of Wendy's who appeared in thousands of TV ads. Far fewer know how he got the money to start it - and who, in a roundabout way, paid for it.

A Mentor Named Colonel Sanders

Thomas got his first restaurant job as a teenager in Fort Wayne, Indiana, working for Phil Clauss, who owned the Hobby House restaurant. When Clauss became one of the first Kentucky Fried Chicken franchise owners in the mid-1950s, Thomas worked alongside Colonel Sanders himself and absorbed everything he could about the fast-food business. Sanders became one of his strongest early mentors.

Four Stores Nobody Wanted

By the early 1960s, Clauss owned four KFC franchise locations in Columbus, Ohio - and all four were losing money. He offered Thomas a deal: rescue the stores, and earn a 45% ownership stake if he could make them profitable.

Thomas accepted. He simplified the menu, focused on signature fried chicken, and came up with the revolving red-and-white striped bucket sign that became a KFC trademark recognized worldwide. One by one, the stores turned around.

The $1.5 Million Exit

In 1968, Thomas sold his 45% stake back to KFC corporate headquarters - not to Colonel Sanders, who had already sold the company to investors in 1964. The payout came to more than $1.5 million. Thomas was 35 years old.

He had already decided what he was going to do with it.

The Burger Chain He Built Next Door

On November 15, 1969, just over a year after cashing out, Thomas opened a hamburger restaurant in Columbus, Ohio. He named it after his daughter, Melinda Lou - a girl everyone called Wendy. Her pigtailed face went on the sign, the bags, and the cups.

The company he built using KFC's money is now one of the largest fast-food chains in the world - and a direct competitor to the brand that made him. The colonel's student had built KFC its biggest rival.