Wendy's Cuts 5-6% of U.S. Restaurants to Spur Turnaround

Date of Call: Feb 13, 2026

Financials Results

• Revenue: $439.6 million, a decrease of $19.7 million compared to the prior year
• EPS: $0.16 per share (adjusted)
• Gross Margin: 12.1% for global company-operated restaurants; U.S. company-operated margin was 12.7%, down compared to prior year

Guidance:

• Global system-wide sales expected to be approximately flat for the full year.
• U.S. same-restaurant sales expected to improve sequentially throughout 2026.
• Adjusted EBITDA expected in the range of $460 million to $480 million.
• Adjusted EPS expected in the range of $0.56 to $0.60 per share.
• Free cash flow expected between $190 million and $205 million.
• International net unit growth anticipated to be approximately the same as in 2025.

Business Commentary:

System-Wide Sales Decline and Project Fresh:

• Wendy's reported a global system-wide sales decline of 8.3% in Q4 2025, driven by a significant decrease in U.S. same-restaurant sales, which fell 11.3%.
• The decline was due to reduced marketing spend, a tough comparison with the prior year's SpongeBob collaboration, and a strategic shift in launching new chicken sandwiches in 2026. Project Fresh was initiated to address these issues.

International Growth and Expansion:

• Wendy's international business showed strong performance with system-wide sales growth of 6.2% in Q4, marking the 21st consecutive quarter of growth.
• The growth was driven by new restaurant openings in key markets such as Canada, Mexico, and new markets like Armenia and Scotland, as well as a robust development pipeline.

Operational Improvements and Customer Satisfaction:

• U.S. company-operated restaurants outperformed the broader U.S. system by 310 basis points, with significant improvements in customer satisfaction scores.
• Operational enhancements, including people activation and enhanced training, were implemented, leading to better accuracy, friendliness, and overall satisfaction.

Marketing and Menu Strategy:

• Wendy's introduced new marketing strategies, including a balanced approach across core, innovation, and value offerings, supported by improved messaging.
• The company launched new Biggie Deals as an everyday value platform and focused on quality upgrades, such as new chicken sandwiches and hamburger innovations.

System Optimization and Franchisee Economics:

• Wendy's plans to close 5% to 6% of U.S. restaurants and optimize operating hours, particularly for the morning daypart, to improve franchisee economics.
• This decision is based on store-by-store evaluations, aiming to enhance the customer experience and focus on high-potential growth areas.

Sentiment Analysis:

Overall Tone: Neutral

• Management acknowledges a challenging year and quarter but expresses confidence in the turnaround plan. Statements include: '2025 was a challenging year, but it was also an important year as we began laying the foundation to rebuild' and '2026 will be a rebuilding year... I am confident that we will execute on our Project Fresh initiatives to strengthen our foundation and position Wendy's for long-term success.'

Q&A:

• Question from David Palmer (Evercore ISI Institutional Equities): Could you elaborate on the marketing and menu approach for the year and how it will be more effective?
  Response: Management emphasized a new menu calendar framework divided into 8 periods, improved messaging targeting core customer segments, and a permanent Biggie Deals value platform, with increased hamburger innovation starting next week.

• Question from Jake Bartlett (Truist Securities, Inc.): What did the customer segmentation study reveal about target customers, and what changes have been made based on that?
  Response: The study validated the importance of everyday quality upgrades (like hamburgers and fresh beef) and snacking occasions, leading to new hamburger innovations, a Biggie Deals platform, and a focus on core segments, moving away from limited-time promotions and extreme innovation for a small audience.

• Question from Margaret-May Binshtok (Wolfe Research, LLC): Can you provide color on the cadence of comps through November/December 2025 and expectations exiting into January 2026?
  Response: October was the trough; November and December were better. January 2026 saw an 8% decline due to weather, but early improvements were seen, with the full Q1 expected to be better as new initiatives take hold.

• Question from Brian Mullan (Piper Sandler & Co.): Can you detail the system optimization process for closing 5-6% of U.S. restaurants and its impact on rental income?
  Response: The process involved a restaurant-by-restaurant evaluation with franchisees, focusing on underperforming locations. The closures are expected to have a $15-20 million drag on adjusted EBITDA for the year, with rental income in 2026 expected to be relatively flat.

• Question from Jeffrey Bernstein (Barclays Bank PLC): How are franchisees aligned with the turnaround strategy, and what is their current sentiment?
  Response: Franchisees appreciate the flexibility and partnership approach; communication has been increased significantly. The focus is on improving franchisee economics through system optimization and operational excellence.

• Question from Danilo Gargiulo (Bernstein Institutional Services LLC): Did the segmentation study reveal lost institutional knowledge, and is the current organizational structure sufficient to support turnaround initiatives?
  Response: The study validated core brand strengths while providing new insights. A new marketing framework and increased investments in field teams and international development are planned to support execution.

• Question from Dennis Geiger (UBS Investment Bank): What is the timing for rolling out operational capabilities to franchisees, and how will that impact comp performance?
  Response: Approximately 20% of franchisees have fully adopted the operational excellence program; broader deployment is underway, with significant improvement expected to take hold in the second half of 2026.

• Question from Gregory Francfort (Guggenheim Securities, LLC): How will the flexible breakfast changes impact store numbers and late-night strategy?
  Response: Breakfast remains important for the majority of the system; adjustments are made to reallocate labor to higher-potential dayparts like lunch and late night, which performed best in 2025.

• Question from James Salera (Stephens Inc.): Is the LTO framework aimed at gaining share in a pressured QSR industry or pulling back lapsed consumers?
  Response: Given the challenging consumer environment, the focus is on gaining share. The new Biggie Deals platform provides reliable value, and operational improvements are expected to enhance the customer experience and support comp improvement.

• Question from Andrew Charles (TD Cowen): What levers exist to sustain the dividend if sales improvement is slower than expected?
  Response: The company has a balanced capital allocation policy with strong cash flow, a revolving credit facility, and flexibility from its cash position to support the dividend, which remains a priority.

• Question from Lauren Silberman (Deutsche Bank AG): What are the underlying trends and expected magnitude of sequential comp improvement through the year?
  Response: January was down 8% due to weather, but early improvements were seen. The Q1 comp is expected to be better than January, with sequential improvement throughout the year as Project Fresh initiatives take hold.

Contradiction Point 1

Project Fresh Timeline and Impact

Inconsistent timeline for operational benefits and comp improvement from Project Fresh initiatives.

What are your thoughts on the company's recent financial performance? - Margaret-May Binshtok (Wolfe Research)

2025Q4: Positive momentum is expected as Project Fresh initiatives take hold throughout 2026... Significant improvements are expected to start taking hold in the second half of 2026... - Ken Cook(CFO & Interim CEO)

What is the comp trend from November through January? - Dennis Geiger (UBS)

2025Q3: Scaling these actions is underway and is expected to deliver benefits in 2026. Combined with brand revitalization... should create a virtuous cycle... - Ken Cook(CFO)

Contradiction Point 2

Franchisee Economic Outlook and System Optimization

Contradiction on the financial impact and timing of system optimization closures.

Could you provide your thoughts on the recent earnings report? - Brian Mullan (Piper Sandler)

2025Q4: The program is expected to have a ~4% impact on global system-wide sales and a $15M-$20M drag on adjusted EBITDA for the full year... Rental income for 2026 is expected to be relatively flat... - Ken Cook(CFO & Interim CEO), Suzanne Thuerk(CAO)

How does the system optimization closure process with franchisees affect 2026 rental income? - David Palmer (Evercore ISI)

2025Q3: Project Fresh's system optimization will help by... unlocking capital for reinvestment... The intent is to strengthen the system, not to charge fees. - Ken Cook(CFO)

Contradiction Point 3

Breakfast Offering Strategy

Inconsistent messaging on breakfast as a national mandate versus flexible option.

How has the recent supply chain disruption impacted your Q3 revenue projections? - Gregory Francfort (Guggenheim Securities)

2025Q4: Breakfast remains important for the majority of the system. The company is working with franchisees to finalize specific store numbers... The decision to offer more flexibility is a common-sense move... - Ken Cook(CFO & Interim CEO)

How many stores offer breakfast, and how will flexible changes and late-night hour shifts impact this number? - Danilo Gargiulo (Bernstein)

2025Q3: Breakfast remains a nationwide commitment. However, the company will work with franchisees on a case-by-case basis for those with very low breakfast sales... - Ken Cook(CFO)

Contradiction Point 4

Marketing Calendar Framework and Execution Philosophy

Shift from a simplified, focused calendar to a complex, multi-period framework.

What is your outlook for revenue growth in the current quarter? - David Palmer (Evercore ISI)

2025Q4: Key changes include a new marketing calendar framework divided into 8 periods for consistent news. - Ken Cook(CFO & Interim CEO)

What's your approach to marketing and menu execution this year, and how to enhance its effectiveness? - David Palmer (Evercore ISI)

2025Q2: For H2, the calendar has been significantly simplified, focusing on chicken innovation and new beverage lineup. - Ken Cook(Interim CEO)

Contradiction Point 5

Value Platform & Price Points

Contradiction on the structure and emphasis of the value platform.

What were the company's earnings results for the quarter? - David Palmer (Evercore ISI)

2025Q4: A permanent Biggie Deals value platform at $4, $6, and $8 tiers... - Ken Cook(CFO & Interim CEO)

What is your strategy for marketing and menu execution this year, and how can it be more effective? - Margaret-May Binshtok (Wolfe Research)

2025Q2: Will continue leveraging Biggie Bag and use data analytics to understand and optimize value offerings... - Kenneth Cook(CFO)