Wendy’s plans to close hundreds of U.S. restaurants in the coming months as revenue and profits decline, with the company citing cutbacks by lower-income consumers that it expects will persist through year’s end.
On a Friday investor call, Ken Cook, Wendy’s interim CEO, didn’t disclose the exact number or locations of restaurants that it plans to shutter. But he said the Dublin, Ohio-based company is likely to close in the “mid-single digit percentage” of its 6,011 U.S locations, or roughly 300 store closures if it shuts 5% of its existing restaurants.
Wendy’s said the closures will start in the fourth quarter this year. Closing underperforming locations will improve traffic and profitability at its remaining U.S. restaurants, Cook added.
Fast-food chains have been struggling to lift sales as lower-income consumers feel increasingly squeezed by rising food costs. Both Wendy’s and McDonald’s have introduced value meals to entice diners, but Cook said he doesn’t expect the financial strain on these households to ease soon.
“We do see more pressure on the lower-income consumer,” he said Friday. “We continued to see that in [the third quarter] and we expect that to continue into the fourth.”
The new round of closures comes on top of the closure of 240 U.S. Wendy’s locations in 2024. At the time, Wendy’s said that many of the 55-year-old chain’s restaurants are simply out of date.
Cook became Wendy’s CEO in July after the company’s previous CEO, Kirk Tanner, left to become the president and CEO of Hershey Co.
Cook said in some cases, Wendy’s will make improvements to struggling stores, including adding technology or equipment. In other cases, it will transfer ownership to a different operator or close the restaurant altogether.
“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 said during a conference call with investors.
In the first nine months of this year, Wendy’s said its U.S. same-store sales, or sales at locations open at least a year, fell 4% compared to the same period last year. Wendy’s revenue fell 2% to $1.63 billion in the same period, while its net income fell 6% to $138.6 million.
Cook said $5 and $8 meal deals — which have been matched by McDonald’s — have helped bring some traffic back to its U.S. stores. But Wendy’s isn’t doing a good job of bringing in new customers, Cook said, so the company plans to shift its marketing to emphasize its value and the freshness of its ingredients.
Wendy’s shares rose 10 cents, or 1.1%, to $8.63 in early Tuesday trading, but remain down 46% for the year.
