Core Points - Wendy's is promoting its $1 Jr. Bacon Cheeseburger and $1 Double Stack as part of its March Madness campaign, running until April 13, 2025, emphasizing the freshness of its beef offerings [1][2][4] - The campaign includes various promotional deals through delivery partners like DoorDash, Uber Eats, and GrubHub, enhancing customer engagement during the tournament [5] Company Overview - The Wendy's Company operates over 7,000 restaurants globally and is known for its commitment to fresh, made-to-order food, including its signature square hamburgers [6] - Wendy's supports the Dave Thomas Foundation for Adoption, aiming to increase adoptions from the foster care system in North America [6] Marketing Strategy - The marketing campaign leverages the excitement of March Madness to attract customers, with endorsements from sports commentators Ian Eagle and Clark Kellogg highlighting the quality of Wendy's hamburgers [4] - Wendy's is utilizing its mobile app to facilitate promotions, encouraging customers to engage with the brand digitally [1][8]

Core Viewpoint - Wendy's Company is experiencing growth driven by strong same-restaurant sales, particularly in U.S. breakfast and digital sales, while facing challenges from high commodity and labor costs [1] Growth Drivers of WEN - The company reported a 4.9% year-over-year increase in same-restaurant sales at international locations (excluding Argentina) during Q4 of fiscal 2024, compared to 4.3% the previous year [2] - Global same-restaurant sales increased by 4.3% year-over-year, up from 1.3% in the prior-year quarter, with U.S. sales growing 4.1% compared to 0.9% a year ago [2] - Innovative offerings and value propositions are expected to enhance customer satisfaction and sustain margins throughout 2025 [3] - Breakfast sales grew over 6% year-over-year in 2024, outperforming the QSR burger category, driven by brand awareness and product innovation [4] - The company plans to maintain breakfast momentum through product innovation, strategic partnerships, and targeted promotions in 2025 [5] Expansion and Unit Growth - Wendy's opened 276 new restaurants globally in fiscal 2024 while closing underperforming units, expecting new locations to deliver double the average unit volumes (AUVs) of closed restaurants [6] - The company anticipates net unit growth of 2% to 3% in 2025, with plans to open 150 to 200 new units, primarily in international markets [7] Factors Hurting WEN - General and administrative expenses rose 2.3% year-over-year to $67.2 million in Q4 of fiscal 2024, driven by increased incentive compensation and employee benefits [8] - Inflationary pressures on commodities and labor are impacting costs, with projected commodity inflation of about 1% and wage inflation of approximately 4% for fiscal 2025 [9] - Total costs and expenses are expected to rise 1% year-over-year to $1.9 billion in 2025 [9]

Summary of Key Points Core Viewpoint - Wendy's has been rated as a hold, with concerns about its limited growth and unsustainable dividend yield, leading to a decline in stock price since the last analysis [1]. Company Analysis - The company has experienced relatively little growth, which raises concerns about its future performance [1]. - The dividend yield is viewed as not particularly sustainable, contributing to the cautious outlook on the stock [1]. - The stock price has dropped since the last evaluation, indicating potential investor dissatisfaction or market challenges [1].

Core Insights - The Wendy's Company is hosting its 2025 Investor Day to outline growth plans and long-term financial goals [1] - The company aims to leverage its brand strength and enhance customer experience through innovation and technology [2] Growth Strategy - The growth strategy is built on three pillars: enhancing food quality, improving customer experience, and accelerating global unit growth [4] - The company plans to invest in new restaurant openings globally and technology to boost profitability [2][4] Financial Projections - The long-term financial algorithm includes annual net unit growth of 3-4%, systemwide sales growth of 5-6%, and adjusted EBITDA growth of 7-8% [3] - By 2028, Wendy's targets a restaurant count of 8,100 to 8,300, global systemwide sales of $17.5 to $18.0 billion, and adjusted EBITDA of $650 to $700 million [3] 2025 Outlook - For the full year 2025, the company expects global systemwide sales growth of 2-3% [3] - Adjusted earnings per share are projected to be between $0.98 to $1.02, with adjusted EBITDA of $550 to $560 million [5] Customer Experience Focus - Wendy's is committed to delivering an exceptional customer experience through operational intensity and digital integration [4] - The company emphasizes convenience and hospitality to enhance the in-restaurant and digital experience [4] Expansion Plans - Wendy's plans to add 1,000 net new restaurants globally by 2028 [3] - The company is focusing on key markets and globalizing its supply chain to support growth [4]

Core Insights - Wendy's has achieved a significant milestone by opening its 500th restaurant in the Asia Pacific, Middle East, and Africa (APMEA) region, located in Nagano, Japan [1][2] - The brand is experiencing strong momentum outside the U.S., with recent openings including the 160th restaurant in India and the first of 200 planned restaurants in Australia [2][3] - Wendy's commitment to quality and freshness, along with its ability to tailor menu innovations to regional tastes, distinguishes it in the competitive quick-service restaurant (QSR) industry [3] Company Expansion - The opening of the 500th restaurant in APMEA reflects the brand's growth strategy and the support of franchise partners like Wendy's Japan K.K. [3] - Wendy's Japan K.K. has celebrated the opening of its 75th Wendy's First Kitchen restaurant, contributing to the overall milestone in the region [3] - The company is actively recruiting new franchisees across multiple markets to further enhance its global presence [4] Brand Positioning - Wendy's is recognized as one of the world's iconic QSR brands, known for its made-to-order square hamburgers and a menu that includes premium chicken sandwiches, fries, and the Frosty dessert [3][5] - The brand's focus on exceptional hospitality and modern restaurant experiences caters to evolving customer expectations, reinforcing its market relevance [3] - Wendy's employs hundreds of thousands of people across more than 7,000 restaurants worldwide, with over 1,300 located outside the United States [5]

Core Insights - The article discusses the expertise of a specialized equity analyst in the restaurant sector, focusing on various dining segments in the U.S. market [1] Group 1: Company Overview - The company, Goulart's Restaurant Stocks, is dedicated to analyzing restaurant stocks across multiple segments, including QSR, fast casual, casual dining, fine dining, and family dining [1] - Advanced analytical models and specialized valuation techniques are employed to provide detailed insights and actionable strategies for investors [1] Group 2: Industry Engagement - The analyst actively participates in academic and journalistic initiatives, contributing to institutions that promote individual and economic freedom [1] - Previous contributions include columns on monetary policy, financial education, and financial modeling aimed at making these subjects accessible to a broader audience [1]

Core Viewpoint - JPMorgan analyst John Ivankoe has given Wendy's Co a Neutral rating and lowered the price forecast to $17 from $20, emphasizing the need for improved cash returns from new U.S. units to accelerate growth [1] Group 1: Financial Performance - Wendy's U.S. units have experienced a growth of 1.4% since 2019 but a decline of 2.9% since 2014 [1] - Despite a dividend cut from $1 to 56 cents, the stock still offers an attractive 4% dividend yield, with over $135 million in payments expected in FY25 [1] Group 2: Capital Expenditure and Growth Strategy - Capital intensity is projected to rise from $170 million in FY24 to $206 million in FY25, driven by increased contributions for new franchise builds in the U.S., which will increase from $41 million in FY24 to $70 million in FY25 [2] - The analyst forecasts unit growth around 3% from FY25 to FY27, leading to low-single-digit system sales growth, mid-single-digit EBITDA growth, and mid-to-high-single-digit EPS growth [2] Group 3: Technological Advancements - 2025 is expected to see faster adoption of digital menu boards and kiosks in U.S. stores to enhance ordering efficiency [4] - The FreshAI voice-enabled drive-through is currently in over 100 locations, with plans to expand to 500-600 stores by 2025 [4] Group 4: Upcoming Events - Anticipation is building for the March 6 investor update at Wendy's Dublin, Ohio headquarters, which will focus on CEO Kirk Tanner's first year and CFO Ken Cook's new role [3]

Restaurant Operations - As of December 29, 2024, Wendy's operates 7,240 restaurants globally, with 5,933 in the U.S. and 1,307 in 31 foreign countries[15][16]. - In 2024, Wendy's opened 276 new restaurants while closing an equal number, resulting in a stable total of 7,240 restaurants at year-end[23]. - Company-operated restaurants accounted for approximately 5% of the total Wendy's system as of December 29, 2024[22]. - As of December 29, 2024, Wendy's operated approximately 5% of its total system as company-operated restaurants, with the remainder being franchised[42]. - In 2024, Wendy's completed 50 Franchise Flips, 3 restaurant dispositions, and no restaurant acquisitions, compared to 99 Franchise Flips and 1 restaurant disposition in 2023[45]. - Wendy's U.S. franchisees operated 5,552 franchised restaurants across 50 states and the District of Columbia, while international franchisees operated 1,294 restaurants in 31 countries[46]. - The total restaurant count at the end of 2024 was 7,240, unchanged from 2023, with 381 Company-operated and 5,552 franchised locations in the U.S.[191]. Financial Performance - Revenue increased by 3.0% to $2.25 billion in 2024 compared to $2.18 billion in 2023[181]. - Total revenues for 2024 were $2,246.5 million, an increase of 64.9 million or 3.0% compared to 2023[186]. - Net income decreased by 4.9% to $194.4 million in 2024 compared to $204.4 million in 2023[181]. - Operating profit for 2024 was $371.4 million, a decrease of 10.6% from $382.0 million in 2023[186]. - Franchise royalty revenue increased by $16.3 million to $528.4 million, driven by a 1.7% increase in global franchise same-restaurant sales[194]. - Franchise fees rose by $17.4 million to $97.6 million, attributed to early termination fees and higher IT service fees[195]. - U.S. same-restaurant sales for Company-operated locations were flat at 0.0%, while franchised locations saw a 1.5% increase[188]. - Global same-restaurant sales increased by 1.5%, with U.S. same-restaurant sales up by 1.4% and international same-restaurant sales up by 2.8% compared to 2023[181]. Strategic Initiatives - Wendy's strategic framework focuses on driving same-restaurant sales, accelerating digital growth, improving restaurant profitability, and expanding globally[20]. - The company has invested significantly in technology, enhancing mobile apps and loyalty programs to improve customer experience and operational efficiency[31]. - Wendy's maintains a state-of-the-art research and development facility to innovate and test new products, which is critical for attracting new customers[33]. - The company plans to accelerate restaurant development in new and existing international markets using a franchise model, but may need to invest more in advertising to build brand awareness[105]. Employee Engagement and Welfare - As of December 29, 2024, Wendy's had approximately 14,500 employees, with about one-third being full-time and two-thirds part-time[60]. - Wendy's maintains a focus on employee engagement, measuring effectiveness through annual surveys and tracking turnover rates compared to industry standards[59]. - The company emphasizes a commitment to providing market-competitive pay and benefits, including medical, dental, vision insurance, and 401(k) plans for U.S. employees[65]. - Wendy's prioritizes employee safety and well-being, offering resources such as an employee assistance program and paid sick time to support health[66]. - Wendy's invested in employee training and development programs, including Wendy's University for management skills, enhancing talent across the organization[67]. Competition and Market Risks - Wendy's faces intense competition in the quick-service restaurant sector, necessitating a focus on quality, variety, and customer experience to differentiate itself[35][36]. - The company faces competition from various food outlets, including grocery chains and convenience stores, which could affect customer counts and revenues[78]. - Adverse economic conditions, such as inflation and labor shortages, could lead to declines in consumer spending and negatively impact Wendy's results[80]. - Changes in consumer preferences and discretionary spending could adversely affect Wendy's business and financial condition[81]. Regulatory and Compliance Issues - The company is subject to various federal, state, and local regulations affecting operations, including health, safety, and labor laws, which could impact business[69]. - Wendy's international operations face similar regulations and may be affected by tariffs and foreign investment laws[71]. - The company believes its operations comply with environmental laws, but increased governmental focus on climate change may impact business[73]. - The company is subject to federal, state, and local environmental regulations, which may lead to unforeseen liabilities[102]. Technology and Cybersecurity - The company is heavily dependent on technology for operations, and any failures or interruptions could lead to delays and loss of sales[114]. - Cybersecurity incidents pose risks to the company's operations and reputation, with potential legal and financial repercussions if sensitive data is compromised[117]. - The company maintains cyber risk insurance coverage to mitigate financial impacts from cybersecurity incidents, though there is no assurance it will be sufficient[144]. - The company conducts regular risk assessments as part of its cybersecurity risk management strategy, involving key stakeholders[143]. Financial Obligations and Debt - As of December 29, 2024, the company had approximately $2.7 billion of outstanding debt on its balance sheet, with an additional $300 million available through variable funding notes[121]. - The company's ability to make payments on its debt and fund capital expenditures will largely depend on future operating performance and cash flow generation[122]. - The company is subject to various covenants that limit its ability to incur additional indebtedness, sell assets, or engage in certain transactions, potentially impacting future growth[120]. - Significant contractual commitments and liabilities, including beverage purchases and franchisee leases, could adversely affect the company's liquidity[123]. Shareholder and Governance Matters - The concentration of ownership among certain stockholders, including Nelson Peltz and others, represents approximately 15% of the company's total voting power, influencing corporate decisions[125]. - The company has anti-takeover provisions in its certificate of incorporation, allowing the Board to issue preferred stock without shareholder approval, which could affect capital raising efforts[127]. - The company's subsidiaries' ability to pay dividends is contingent upon achieving sufficient cash flows after meeting their respective cash requirements[124]. Marketing and Brand Management - The effectiveness of marketing and new product development is crucial for maintaining brand value and attracting customers[84]. - Social media risks could harm Wendy's brand and reputation if not managed effectively, impacting customer engagement and revenues[85]. - The company relies on a combination of trademarks, copyrights, and trade secrets to protect its brand, which is critical for business strategy[87]. - Approximately 95% of the restaurants in the Wendy's system are operated by franchisees, which presents risks related to brand image and operational standards[93].

Financial Data and Key Metrics Changes - Global system-wide sales increased by 5.4% in Q4, reaching $3.7 billion, driven by same-restaurant sales growth of 4.1% in the U.S. and 4.9% internationally [38][39] - Adjusted EBITDA increased by 8.6% to $137.5 million, with adjusted earnings per share rising to $0.25, a $0.04 increase over the prior year [41][42] - Full year 2024 total system-wide sales reached $14.5 billion, reflecting over 3% growth compared to the prior year [14] Business Line Data and Key Metrics Changes - U.S. same-restaurant sales growth was 1.4%, while international same-restaurant sales grew by 2.8% [14] - Breakfast sales grew over 6%, outpacing the QSR burger category, driven by increased awareness and impactful innovation [15][28] - Digital sales grew nearly 40% year-over-year, with loyalty member growth up 25% [11][17] Market Data and Key Metrics Changes - The U.S. business maintained or grew dollar and traffic share in the QSR burger category in every quarter [14] - Internationally, system-wide sales grew by 11% on a constant currency basis, led by strong net unit growth [10] - The morning daypart contributed to U.S. growth with sales up over 4% compared to the prior year [10] Company Strategy and Development Direction - The company aims to drive sales and EBITDA growth through three strategic initiatives: Fresh Famous Food, delivering an exceptional customer experience, and accelerating global unit development [25] - Plans to expand in fast-growing categories, including chicken and beverages, while maintaining a focus on value through the Biggie Bag platform [26][27] - The company is committed to increasing operational intensity and enhancing customer experience through technology investments, including digital menu boards and AI voice-enabled ordering [31][32] Management's Comments on Operating Environment and Future Outlook - Management expects Q1 2025 to be the low point for same-restaurant sales, with improvements anticipated as the year progresses [65][66] - The company acknowledges industry traffic headwinds but remains optimistic about regaining momentum through innovative programming and marketing efforts [113][114] - The updated capital allocation policy aims to maximize long-term shareholder value while increasing investments in growth initiatives [45][48] Other Important Information - The company opened 113 new restaurants in Q4 and closed underperforming locations, which is expected to be a headwind to sales growth in 2025 [12][19] - The company plans to increase share repurchases to up to $200 million in 2025, demonstrating confidence in growth plans [48][49] - The company has established a target net leverage ratio of 3.5x to 5x adjusted EBITDA [48] Q&A Session Summary Question: What are the embedded comp expectations for the year? - Management expects positive same-restaurant sales growth for 2025, despite a projected decline in Q1 due to industry traffic headwinds [65][66] Question: Can you elaborate on the unit development outlook? - Management has high confidence in the 2% to 3% net unit growth guidance, with agreements in place for new builds [69][70] Question: What are the big bucket opportunities to drive comps? - Management is focusing on core menu innovation, value propositions, and operational intensity to enhance customer experience [76][78] Question: Why choose share repurchase over reinvestment? - The capital allocation policy allows for both attractive dividends and accelerated growth plans, taking advantage of favorable stock prices [82] Question: What are the early learnings from the voice of the drive-thru pilot? - The pilot has shown improvements in speed of service and sales, with plans to expand to more locations [121][122] Question: How do you expect the breakfast daypart to trend in 2025? - Breakfast is expected to grow faster than the rest of the business, with ongoing investments in awareness and innovation [90][138]

Core Insights - Wendy's reported revenue of $574.27 million for the quarter ended December 2024, marking a year-over-year increase of 6.2% and exceeding the Zacks Consensus Estimate by 1.79% [1] - The earnings per share (EPS) for the same period was $0.25, up from $0.21 a year ago, representing a surprise of 4.17% over the consensus estimate of $0.24 [1] Financial Performance Metrics - Total number of restaurants stood at 7,240, slightly below the nine-analyst average estimate of 7,270 [4] - Same-Restaurant sales in the U.S. increased by 4.1%, surpassing the 3% estimate by analysts [4] - International Same-Restaurant sales rose by 4.9%, compared to the 2.1% average estimate [4] - Global Same-Restaurant sales were up 4.3%, exceeding the 3.4% estimate [4] - U.S. restaurant count was 5,933, compared to the average estimate of 5,963 [4] Revenue Breakdown - Advertising funds revenue was $114.93 million, slightly below the average estimate of $115.50 million, but showed a year-over-year increase of 5.5% [4] - Franchise rental income reached $58.56 million, slightly above the estimate of $58.47 million, with a year-over-year change of 3.2% [4] - Franchise royalty revenue and fees totaled $167.96 million, exceeding the average estimate of $157.88 million, reflecting a significant year-over-year increase of 31.4% [4] - Franchise fees revenue was $34.18 million, significantly higher than the estimated $25.03 million, marking a 67% year-over-year increase [4] - Franchise royalty revenue was reported at $133.79 million, slightly above the estimate of $133.49 million [4] Systemwide Sales - International systemwide sales amounted to $495 million, slightly above the average estimate of $493.44 million [4] - Total systemwide sales reached $3.67 billion, exceeding the estimate of $3.65 billion [4]