Major fast-food chain Wendy's has announced plans to shutter hundreds of its American restaurants over the coming months as part of a strategic effort to enhance profitability and improve the appeal of its remaining locations.
Significant Store Closures Planned
During a Friday conference call with investors, the Dublin, Ohio-based company revealed that restaurant closures will begin in the fourth quarter of this year. Wendy's expects a "mid-single-digit percentage" of its U.S. stores to be affected by this restructuring initiative.
With Wendy's ending the third quarter with 6,011 U.S. restaurants, a 5% closure rate would translate to approximately 300 locations shutting down. This new wave of closures follows the shutdown of 240 U.S. Wendy's locations earlier in 2024, highlighting the chain's ongoing efforts to modernize its 55-year-old brand.
Leadership Explains Strategic Rationale
Ken Cook, who became Wendy's interim CEO in July following Kirk Tanner's departure to Hershey Co., emphasized that the closures target underperforming locations that negatively impact both brand perception and franchisee financial performance.
"When we look at the system today, we have some restaurants that do not elevate the brand and are a drag from a franchisee financial performance perspective," Cook stated during the investor call. "The goal is to address and fix those restaurants."
The company plans to approach struggling locations through multiple strategies: implementing technological and equipment upgrades, transferring ownership to different operators, or closing restaurants entirely when necessary.
Industry Challenges and Financial Performance
The fast-food sector has faced significant headwinds in recent years, particularly with inflation-driven price increases alienating budget-conscious consumers. Cook acknowledged that lower-income customers are likely to remain financially pressured throughout the remainder of the year.
Wendy's financial results reflect these challenges. During the first nine months of this year, the company reported a 4% decline in U.S. same-store sales compared to the same period last year. Overall revenue fell 2% to $1.63 billion, while net income dropped 6% to $138.6 million.
Cook noted that value-focused offerings, including $5 and $8 meal deals that mirror McDonald's strategy, have helped drive some customer traffic back to Wendy's locations. However, the chain continues to struggle with attracting new customers, prompting plans to revamp marketing efforts to emphasize both value and ingredient freshness.
The market responded negatively to the announcement, with Wendy's shares falling 7% on Friday and declining an additional 5% during Monday afternoon trading, indicating investor concerns about the company's restructuring plans and overall performance.
