Wendy’s(WEN) - 2024 Q4 - Annual Report

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].