Can Wendy's reverse its sales slide? It may need more support

In March of 2025, Wendy’s under then-CEO Kirk Tanner revealed a set of aggressive targets that it expected to reach by 2028. They included 1,000 net new restaurants, 5% to 6% annual system sales growth and 7% to 8% annual growth in adjusted EBITDA, or earnings before interest, taxes, depreciation and amortization.

A lot has changed since then. Tanner would be out by August and the company has yet to announce a permanent replacement. Same-store sales fell off a cliff in the fourth quarter and have remained in the abyss. It announced a new round of store closures. Nelson Peltz, Wendy’s top shareholder, then announced that he may buy the chain. And indeed, according to a report this morning from Reuters he is looking at financing to take the brand private.

Current struggles

Suffice it to say, those targets are a little further off now. “We still plan on getting there,” Ken Cook, Wendy's interim CEO, told analysts last week. “It’s a question of when.”

“Obviously,” he added, “2025 did not play out as expected.”

Wendy’s same-store sales have declined each of the past five quarters, including the 7.8% decline in the first quarter. They will almost certainly fall again next period, given that its April results were down 6.4%. Yet even before then, the company was underperforming its competitors more often than not.

Since the first quarter of 2023, Wendy’s same-store sales have averaged a decline of 0.7%, compared with 3.6% at Burger King and 3.7% at McDonald’s.

From 2019 through the end of 2022, Wendy’s quarterly same-store sales outperformed Burger King by 410 basis points, on average. Since then, it has underperformed Burger King by 430 basis points. By the end of this year, Burger King will likely surpass Wendy’s to regain its status as the country’s second-largest burger chain.

Competitor growth

It’s easy to see why this has happened. Burger King in those earlier years struggled, prompting the company to pump nearly $2 billion in investment into the chain to finally end its years-long status as an underperformer. That has included years of efforts to improve the way its restaurants are run.

Those efforts have had some real results, as my Technomic colleague Robert Byrne described on our most recent episode of The Week in Restaurants. Burger King’s consumer metrics have improved markedly. And its performance is taking customers back from Wendy’s that it had previously lost.

Wendy’s has a fix-it plan of its own, Project Fresh, that copies some of the same strategies.

That includes “system optimization” effort allowing franchisees to close about 350 unprofitable stores to improve their overall economics. The closures are costing the company $15 million to $20 million a year in lost revenue, notably royalties.

The company is also working to improve operations. At company locations, those restaurants that have implemented those changes have outperformed the system by 310 basis points. Cook also noted that restaurants with the highest customer satisfaction scores have outperformed the system by 400 to 500 basis points.

Wendy’s has added new field staff to improve operations. It has also hired a new marketing firm and is spending the year improving its products, starting with its chicken sandwiches.

But in something of an ominous sign, when we first went to try the sandwich, ours was made without pickles—a crucial improvement—and it didn’t come in the proper packaging. (The sandwich was delicious and I didn’t need the pickles, but nor did I get the intended product, so.)

Oh, and the restaurant was so understaffed that day that it would take nearly 10 minutes for me just to put my order in at the drive-thru, even though there was just one car ahead of me.

Operations improvements are good investments for brands, especially these days. Yet only 25% of the company’s franchisees, who run the bulk of the chain’s 6,000 restaurants, have adopted the performance improvement. Another 25% are in the process of adopting it. But that leaves 50% that have yet to do so.

Turnaround efforts

“The better food enhancements that we’re making give marketing something to talk about,” Cook said. “More effective marketing is going to help bring more customers in the door. And better operations is going to help bring them back.”

There are clearly a group of franchisees that are struggling. The 350 closures, set to be complete over the next few weeks, represent the second time in just more than a year that Wendy’s is undergoing a closure program. And the company is also giving some operators the opportunity to stop serving breakfast, because they lose too much money.

We’re all about franchisee profitability and if that’s necessary so be it. But that is a tough thing to do for a brand that not all that long ago touted its breakfast introduction as a raging success. Brands that historically give franchisees the right to stop serving the daypart will eventually walk further away from it.

As we said recently, it’s difficult to turn around struggling, legacy franchised brands, arguably the most difficult thing for a management team to accomplish.

It’s not simply a matter of saying the restaurants should improve operations and marketing and food and then execute. You have to convince franchisees to do so. And when they’re not making money, which is clearly the case for a large number of Wendy’s operators, then it’s that much more difficult.

All of which suggests that Wendy’s is missing the kind of corporate investment that can ensure that a revitalization requires.

When an analyst asked whether Wendy’s would provide some sort of investment to ensure that Project Fresh is successful, Cook referred to the lost revenue from the closures. “I consider that an investment in the system to help improve franchisee economics,” he said.

And then he mentioned the company’s work on operations and the investment in menu label printers to ensure people know what sandwich is what. But many of Wendy’s rivals already have them in place.

Wendy’s is a great brand. And its downfall has been shocking.

Whomever ultimately runs and owns the chain will need to put some real money into the system. Without it, Wendy's will have a much harder time reaching those EBITDA targets.