The Wendy’s Company reported on November 5 that same-restaurant sales at its American locations fell 5.7% in the third quarter, while net income dropped 65.9% to $15.1 million. The quarter ended September 27, and the figures show a burger chain still working to bring customers back.
The picture was not all negative, though. The sales decline was smaller than the previous quarter’s, and the company is betting on a new strategy and a rethink of breakfast.
The Numbers Behind the 5.7% Drop
According to the company’s third-quarter release, American same-restaurant sales fell 5.7%, and systemwide sales in the United States fell 7.6%. Globally, systemwide sales slid 5.9% to about $3.3 billion. International systemwide sales rose 3.5%, even though international same-restaurant sales slipped 2.2%.
Total revenue was $547.0 million, down 0.5%. Net income of $15.1 million was down 65.9%, and diluted earnings per share came to $0.08. Adjusted earnings per share of $0.13 fell 45.8%, and adjusted EBITDA dropped 17.8% to $113.4 million.
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Traffic Is Still Falling, but More Slowly
On the company’s earnings call, CEO Bob Wright said American same-restaurant sales improved 130 basis points from the second quarter. CFO Steve Cirulis put American traffic down 11.9%, partly offset by 6.2% growth in the average check.
Cirulis credited promotions such as a $1 Frosty and $1.99 10-piece nuggets for helping sales. Wright said lunch through late-night sales held up better than the reported figure, and that breakfast weighed on the total. Wendy’s release attributes a 140-basis-point decline in margins at company-operated American restaurants partly to lower traffic.
Net leverage stood at 5.2 times, according to Cirulis, and roughly $430 million of debt matures in March 2028 and is expected to be refinanced. Management declined to provide guidance, and the fourth quarter includes a 53rd week. Readers new to company earnings can find a primer in this guide to investing $1,000 in the stock market.
The decline is also part of a longer shrinking trend. The release counts 7,194 restaurants worldwide at the end of the quarter, down from 7,363 a year earlier. Of those, 5,711 are in the United States and 1,483 are international.
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Closures and a Struggling Franchisee
Wendy’s has closed a net of more than 300 locations since 2024, according to Nation’s Restaurant News. The trade publication also reported that Meritage Hospitality Group, a Grand Rapids, Michigan, operator, filed for Chapter 11 on September 17 with $155 million in secured debt.
Court documents cited in that report said up to 60 more Meritage restaurants could close through mid-November. If so, the operator will have shut 120 of the 374 locations it once ran, many with annual sales under $900,000.
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Wright cautioned on the call against using closures as the main path to franchise health. Net American restaurant count fell only 13 in the quarter, and a portfolio optimization team works with franchisees on royalty deferrals, lender workouts and targeted closures. Local restaurant owners who hit similar trouble are the subject of this story about an Ogden diner closing after 18 years.
Dave’s Way and the Breakfast Decision
The company introduced a multi-year strategy called Dave’s Way, which it says is aimed at growing customer traffic and market share while strengthening restaurant profitability. CEO Bob Wright said in the release that the plan brings the company’s areas of focus together in one integrated strategy.
Breakfast is one of the first moves. Wendy’s will now handle the morning daypart location by location, after tests showed significant profit improvement. CFO Steve Cirulis said the decision could unlock up to $200 million in restaurant-level EBITDA across the system.
The chain has a long history with the morning meal. According to Wikipedia, Wendy’s first served breakfast in 1985, but the effort did not succeed. It returned in mid-2007 at United States locations and some in Canada, and the company did not offer breakfast chain-wide until 2020.
Wright also said delivery tests produced sales lifts from the low double digits to 20%, and that more than 90% of American franchise restaurants now take part in delivery promotions. A $7.99 Dave’s Single Combo is the first step toward value across the menu, he added.
A Buyout Offer Rejected
The earnings arrived alongside a boardroom fight. Another Nation’s Restaurant News report says former chairman Nelson Peltz proposed buying the company for $7.35 per share, about $1.4 billion, with a group that includes mega-franchisee Greg Flynn.
An independent board committee rejected the offer, saying it substantially undervalues Wendy’s standalone prospects and long-term earnings potential. The company also adopted a shareholder rights plan that issues additional shares if anyone acquires 15% or more without approval.
Chairman Art Winkleblack expressed confidence in Wright’s turnaround plan. Wendy’s was founded by Dave Thomas on November 15, 1969, in Columbus, Ohio, per Wikipedia.
What Comes Next
Wendy’s kept its quarterly dividend at $0.07 per share, payable December 15, and made no share repurchases in the quarter. Cash on hand was about $413 million, and year-to-date free cash flow was $174.2 million, down 10.9%.
For customers, the near-term changes are likely to show up at the counter and in the morning. Breakfast availability may differ from one restaurant to the next, and the closures could thin out the map in some markets.
For the company, the test is whether a 5.7% decline narrows further in the fourth quarter. Wright said in the release that management is moving forward with focus and urgency, and the numbers from the next report will show how far that has gone.
This article was produced with AI assistance and edited for accuracy against the sources linked above.
