Sales Fall During Third Quarter as Wendy’s Declines Buyout, Defines ‘Dave’s Way’ Turnaround Plan

Wendy's is bringing back breakfast—again—but voluntarily, offering restaurants the choice on whether it makes sense. Wright suggested doing so could add $200 million in restaurant-level EBITDA, or earnings before interest, taxes, depreciation and amortization, for franchise and company restaurants.

The company is building a new team, appointing Tariq Hassan as chief marketing and customer growth officer, notable for his having most recently been U.S. chief marketing and customer experience officer at McDonald's. That followed the hire in June of Steve Cirulis as chief financial officer and chief strategy officer. He'd previously held the same role for Potbelly.

Wendy's also is creating a chief operations officer role centered on focus and accountability in restaurant execution and it has established a Strategic Activation Office to coordinate and accelerate initiatives across the system. That office will include participation from franchisees.

It's investing in better food, menu boards that emphasize signature offerings, and a refreshed experience in 2027. It's partnering with a new media agency and recently introduced a $7.99 Dave's Single Combo promotion.

"Going forward, a longer-range marketing calendar will help us tell a more consistent brand story," Wright said.

The company is working to align staffing with demand, especially during peak hours. Focusing on the fundamentals around pleasing customers is key. And it's improving its technological and delivery offerings, which have improved performance in test markets.

"This is where the brand promise comes to life," he said. "Taking care of the customer every visit in every restaurant every day."

Wendy's introduced the plan to franchisees during a September meeting and has been communicating frequently, said Wright, who indicated the system is on board and the company, despite its challenges, has the financial resources to succeed.

Saying 'No' to a Buyout

The "Dave's Way" plan and its potential for turning Wendy's around was the chief reason the company cited for turning down a $1.4 billion offer from a group of investors led by Nelson Peltz's Trian Fund Management.

The group, which included Blue Fifth Capital, Sixth Street Partners and Flynn Group, one of Wendy's largest franchisees, owns just over 16 percent of the company.

"Our confidence rests firmly in Bob Wright's proven track record of seasoned industry leadership, including restaurant business turnarounds," said Board Chair Art Winkleblack in a statement.

Wright reiterated the company felt its "Dave's Way" turnaround plan would put the company on the right track.

"We're confident that we have the right strategy, execution and resources to restore Wendy's to its full potential and drive meaningful shareholder value," Wright said. "During our second quarter call in August, we provided a candid assessment of our business, the opportunities in front of us and the priorities we needed to address. Since then, we have developed a strategic plan, we are executing it with urgency and it is producing early results across many important measures of success."

Addressing the Meritage Struggles

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While management is on board, the company still has many struggling franchisees. It announced on the call that it believes it has reached an agreement to settle one of those situations.

Meritage Hospitality Group, one of its largest franchisees with more than 300 locations, filed bankruptcy in September. Wendy's agreed this week to acquire up to 163 of the restaurants from Meritage concentrated in areas where the company already has a presence.

"We expect the other Meritage markets that we do not plan to acquire to be sold and transitioned to other franchisees through a bankruptcy-facilitated process," Wright said. "These additional markets offer similar geographic concentration and represent attractive acquisition opportunities to franchisees. As this process moves forward our portfolio optimization team will support the transition of these restaurants to new franchise ownership."

Improvements Require Patience

Gordon, the restaurant consultant, believes in Wright's background and experience, though he lamented how long it took for Wendy's to bring him back. He'd been chief operating officer at Wendy's until 2019 when he left to become CEO at Potbelly.

"He was as good a hire as they possibly could have gotten," Gordon said.

But in the meantime, Wendy's struggled through two CEOs whose efforts didn't produce results and then went a year without a permanent CEO.

Wendy's needs patience, Gordon said. He suspects the franchise system will shrink some in the years ahead, as those with stronger balance sheets take over some struggling operators.

"There are other franchisees that have to be in trouble," he said.

The company needs to continue finding international markets, perhaps through partnering with market developers, where it can open up restaurants at lower cost and in areas with greater white space, as its competitors have done.

"That's one of the biggest stock overhangs right now," he said.

Gordon said Wendy's does have some great products, but hasn't marketed them well, nor has it been successful recently at menu innovation. And they face a competitive industry with others such as Burger King starting to do better.

"McDonald's isn't going anywhere," he said. "Burger King is on a run. For so many years, the burger space has been very difficult."