Wendy’s Plans to Close Hundreds of U.S. Restaurants to Boost Profitability
Wendy’s, the Dublin, Ohio-based fast-food chain, announced plans to close hundreds of U.S. restaurants over the next few months as part of an effort to enhance profitability and make its remaining locations more appealing. During a conference call with investors on Friday, the company revealed it would begin closing restaurants in the fourth quarter of this year.
The company expects a “mid-single-digit percentage” of its U.S. stores to be impacted but did not provide further details. As of the end of the third quarter, Wendy’s operated 6,011 U.S. restaurants. If approximately 5% of these locations close, it would amount to about 300 store closures.
This new round of closures follows the shutdown of 240 U.S. Wendy’s locations earlier in 2024. At that time, Wendy’s cited that many of its restaurants, part of the 55-year-old chain, were outdated and no longer meeting customer expectations.
Ken Cook, Wendy’s interim CEO, explained that the company aims to improve traffic and profitability by closing underperforming restaurants, whether due to financial issues or subpar customer service. Cook stepped into the CEO role in July after Kirk Tanner left to become president and CEO of Hershey Co.
“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. The goal is to address and fix those restaurants,” Cook stated during the investor call.
In some cases, Wendy’s plans to revamp struggling stores by adding new technology or equipment. In other instances, the company may transfer ownership to different operators or close the restaurant altogether.
U.S. fast food chains have faced challenges attracting lower-income consumers in recent years as inflation has pushed prices higher. Cook anticipates continued pressure on this demographic for the remainder of the year.
Financial Performance Update
Wendy’s reported a 4% decline in U.S. same-store sales (sales at locations open at least one year) in the first nine months of this year compared to the same period last year. Revenue fell 2% to $1.63 billion over the same timeframe, while net income declined 6% to $138.6 million.
Cook noted that $5 and $8 meal deals, which have also been adopted by competitors like McDonald’s, have helped bring some traffic back to Wendy’s U.S. stores. However, he admitted the chain has struggled to attract new customers.
To address this, Wendy’s plans to shift its marketing strategy, emphasizing value and the freshness of its ingredients to resonate more effectively with consumers.
Market Reaction
Following the announcement, Wendy’s shares dropped 7% on Friday. On Monday, the stock continued to decline, falling 5% in afternoon trading.
As Wendy’s moves forward with these closures and strategic changes, the brand hopes to strengthen its position in the competitive fast-food market while improving profitability for its franchisees and shareholders.
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