Wendy’s Earns $15.1 Million As U.S. Traffic Weakens — Breakfast Gets A Rethink
The burger chain is pursuing up to 163 Meritage restaurants and making breakfast decisions location by location.
Wendy’s, which operates and franchises hamburger restaurants, earned $15.1 million in the third quarter, down about 66% from a year earlier, according to results released Thursday with an SEC filing. The chain launched its Dave’s Way turnaround strategy to rebuild customer traffic and restaurant profitability, including a location-by-location approach to breakfast.
U.S. Sales And Margins Retreat
The unaudited results put earnings at $0.08 per share, against $0.23 a year earlier. Revenue edged down 0.5% to $547.0 million, while adjusted earnings fell to $0.13 per share from $0.24.
The small revenue decline masks a larger retreat at the restaurants themselves. Sales across company-run and franchised locations fell 5.9% excluding currency movements, with the U.S. down 7.6% and international markets up 3.5%. Those measures exclude Argentina. Sales at established restaurants dropped 5.7% in the U.S. and 2.2% internationally on the same currency-neutral basis.
Wendy’s attributed the global sales decline primarily to weaker established-restaurant sales in the U.S. and fewer domestic locations. The chain ended the quarter with 5,711 U.S. restaurants, versus 5,979 a year earlier; worldwide, the count was 7,194, against 7,363.
Wendy’s earns revenue from its own restaurants, franchise royalties and fees, advertising contributions and franchisee rents. Franchisees’ restaurant sales are not company revenue, but lower sales directly affect the royalties Wendy’s collects.
At company-operated U.S. restaurants, margin fell to 11.7% from 13.1%. Lower traffic and higher labor and commodity costs hurt results, partly offset by larger average checks and more efficient staffing. Operating profit dropped 39.3% to $55.8 million from $92.0 million as administrative expenses, doubtful-account provisions, lower royalties and restructuring costs weighed on earnings.
Breakfast Changes And Meritage Plans
The breakfast rethink follows tests that Wendy’s said produced significant profit improvements. Dave’s Way also includes menu tests, changes to marketing execution and efforts to accelerate digital sales.
Steve Cirulis, Wendy’s chief financial officer and chief strategy officer, said: “We also anticipate our decision on the breakfast daypart could unlock up to $200 million in restaurant-level EBITDA across the system.” That estimate concerns restaurants’ earnings before interest, taxes, depreciation and amortization across both company and franchise locations—not Wendy’s net income.
Wendy’s is also pursuing ownership of up to 163 Meritage Hospitality Group restaurants through a nonbinding agreement with the franchisee and its lenders. Court approval is still needed for the purchase. Meritage is exploring sales and recapitalization in its other markets.
The wider restaurant plan includes transferring franchised locations to well-capitalized, high-performing operators. Tariq Hassan now leads marketing and customer growth at Wendy’s.
Cash Supports The Turnaround
Operating cash flow for the first nine months totaled $239.0 million, down 13.2% from $275.3 million a year earlier. Free cash flow fell 10.9% to $174.2 million from $195.6 million; Wendy’s measure deducts capital spending and franchise-development investment and adjusts for advertising funds unavailable for general business needs.
Cirulis said Wendy’s had the financial capacity to fund Dave’s Way, citing approximately $413 million in cash and about $174 million in year-to-date free cash flow. Lower investment spending partly cushioned the decline in operating cash generation.
Wendy’s made no share repurchases during the third quarter or in the fourth quarter through Thursday, the company said. Approximately $35.0 million remained under an authorization expiring in February 2027.
WEN shares rose about 3% to $8.16 in Friday trading.
Wendy’s declared a $0.07-per-share quarterly dividend, payable December 15 to shareholders of record December 1.
Sources
- 8-K Filing — Wendy's Co (WEN) — SEC EDGAR
- Exhibit d129346dex991.htm — Wendy's Co 8-K exhibit — SEC EDGAR
- Wendy’s Rejects Trian Partners-Led Takeover Bid, Adopts Limited-Duration Rights Plan For ‘Fair And Equal Treatment’ Of Shareholders — Yahoo Finance
- Here’s a deep look at Wendy's turnaround plan — restaurantbusinessonline.com
- How Wendy’s CEO plans to revive beleaguered burger chain | Restaurant Dive — restaurantdive.com
- Wendy's outlines breakfast optionality with up to $200M restaurant-level EBITDA impact as Dave's Way turnaround advances (NASDAQ:WEN) | Seeking Alpha — seekingalpha.com
- THE WENDY'S COMPANY REPORTS THIRD QUARTER 2026 RESULTS — prnewswire.com
