Nov. 1 (UPI) — Wendy’s Restaurants will close 140 underperforming outlets during the final months of 2024 while opening a similar number of new fast-food eateries in better locations, company officials say.
Wendy’s Company Chief Financial Officer Gunther Plosch told reporters during an earnings call on Thursday the closures will help the $4 billion fast food provider reach its goal of “significantly accelerated unit growth rate of 3% to 4%” for next year and beyond.
“The additional closures are about 140 additional units,” Plosch said. “So, basically, we are closing overall as many units as we are opening. That’s why we are ending up overall slightly flat [for 2024].”
Wendy’s CEO Kirk Tanner said he has made a “strategic decision to close additional restaurants this year that are outdated and located in underperforming trade areas. These restaurants have [average unit volumes] of approximately $1.1 million and operating margins well below the system average.”
He added that by the end of the year, Wendy’s will have opened more than 500 new restaurants over the preceding 24 months and remains on pace to “deliver an elevated growth in 2025 and the years to come.”
“As we shared last quarter, we have development commitments in place to meet our 2025 new build goal, which supports our previously stated outlook for 3% to 4% net unit growth,” he said.
The company reported adjusted earnings per share of 25 cents for the third quarter, compared with 27 cents during the same quarter in 2023. Revenues were reported at $566.7 million, up 2.9% year-over-year, thanks mainly to increased revenues from advertising funds, franchise royalties and franchise fees.
But, reflecting an industrywide slowdown in demand due to cost-conscious consumers cutting back on restaurant visits, Wendy’s growth was somewhat countered by a decline in sales from company-operated restaurants.
Profit margins for those restaurants was 16.5% in the third quarter, essentially flat year-over-year. Tanner said the reduced customer counts and higher labor costs are providing headwinds, which are being largely offset by an increased average check and “labor efficiencies.”