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Wendy’s reported a seventh straight quarter of declining sales, prompting the company to unveil a turnaround plan while rejecting a massive buyout offer.
Thursday’s results cap a tumultuous period for the 56-year-old chain, marked by hundreds of closures, management changes and falling sales. Wendy’s faces a number of issues that are hurting its bottom line, including consumers cutting back on dining out, rising beef prices and value offerings that aren’t appealing to people.
U.S. same-store sales fell 5.7% for the third quarter ended September 27. Wendy’s sales are lagging those of its major competitors, including McDonald’s, which fell 0.2%, and a reinvigorated Burger King, which saw an 8.4% increase.
The multi-year turnaround plan, dubbed “Dave’s Way” after Wendy’s founder Dave Thomas, will include improvements to food, better marketing and expanded delivery. CEO Bob Wright said Thursday that his “goal is clear: increase customer traffic and market share while strengthening restaurant profitability.”
At the same time, the chain’s board of directors announced that it had “unanimously rejected” a $1.4 billion offer from a group of investors, including former chairman and major shareholder Nelson Peltz, to buy Wendy’s and take it private.
The company said the offer undervalued Wendy’s and its potential.
“Our confidence rests firmly on Bob Wright’s proven track record of seasoned leadership in the industry, including in the turnaround of the restaurant business,” Art Winkleblack, Wendy’s Chairman of the Board and member of the Independent Committee, said in a statement.
Wendy’s new plan will improve the food, with a “completely refreshed menu” rolling out in 2027. Wright has previously criticized the chain for prioritizing cost savings over food quality.
The chain starts with the ingredients – thicker bacon, larger pieces of lettuce for sandwiches, creamier Frosty’s and improved salads. Wright said the chain is also “removing low-volume items that add complexity to our kitchens.”
One major part of the menu that could disappear is breakfast, which Wendy’s launched in 2020. The company is now making it optional for franchisees. Locations that stopped selling it report better results at other times of the day.
“This option directly supports a stronger restaurant economy, improves the employee experience and most importantly allows operators to focus on food offerings and time slots,” Wright said.
In recent months, Wendy’s has closed nearly 300 of its 6,000 restaurants across the United States that were “consistently underperforming.” It was the second wave of significant closures in two years, part of the chain’s efforts to boost profits at nearby locations.
In May, Wendy’s named Wright as CEO, ending a nearly year-long leadership drought after former CEO Kirk Tanner left for Hershey after just 18 months with the chain.
Wright’s file Growing sandwich chain Potbelly was likely seen as attractive to the Wendy’s board, given that same-store sales have fallen for six straight quarters.
The new CEO was blunt during his first earnings conference call in August, saying the chain was “not performing to its potential.” Notably, Wendy’s let rival Burger King surpass it in U.S. sales this year, relegating it to the third-largest burger chain in the country.
“Our value proposition has slipped and the franchise economy is under pressure,” Wright said previously. “I’ve seen this brand at its best and I know we can solve these problems.”
Wendy’s struggles also affected a major franchisee, Meritage Hospitality Group, which operates more than 300 locations in the United States and which partially blamed its bankruptcy on Wendy’s falling sales.
The franchise group said profits at its stores fell almost 50% last year, due to rising beef costs, increased discounts and low traffic. Wendy’s said it plans to acquire “up to” 163 locations from the group unless they receive a better offer.
Wendy’s has revealed transformation plans in the past, prompting one analyst to wonder how this version was different. Wright said that, compared to previous plans, the franchisees are behind this one.
“The restaurant business is deceptively simple to understand,” Wright said. “Writing a strategy that makes sense is the easy part. It’s incredibly difficult to execute, and it requires that strength of execution across all disciplines.”
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