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Wendy’s profit rises 39 percent on brand-revamp, streamlining strategy

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Brand transformation efforts played a key role in sales and profit gains made at Wendy’s restaurants during the second quarter, The Wendy’s Company said Wednesday.

Same-store sales at the quick-service company grew 2.2 percent when compared to the same period last year and 5.4 percent when taken on a two-year basis.

Net income increased 38.6 percent year over year, from $29 million to $40.2 million, despite a $20.2 million fall in revenues—a paradox execs attributed to the shedding of 141 company-owned restaurants during the quarter.

Wendy’s will continue its effort to reduce company-owned restaurants to just 5 percent of the system, CEO Emil Brolick said. Earlier this year, Wendy’s announced that it would sell 540 domestic company-owned restaurants to franchisees in an effort to cut costs and refocus the company.

"We believe our system optimization initiative will drive future growth by providing opportunities for expanded restaurant ownership to strong operators who have demonstrated a commitment to image activation and opening new restaurants," Brolick said. "Interest in the domestic restaurants that we intend to sell is extremely strong from existing and prospective franchisees, and we are confident that we will strengthen our system as a result of these transactions.”

As part of its revamp strategy, the company has made recent efforts to recast its image and gain clout with the desirable milliennial demographic. Tailoring a more-professional look on social media has been central to its strategy, Digiday reports, with the brand taking special care to craft a tasteful presence on Instagram.

“Instagram is the under-34 powerhouse platform at the moment, so we feel it deserves special attention,” Brandon Rhoten, Wendy’s vice president of digital, told Digiday. “Our testing has shown Instagram, when we have the right creative, improves people’s perceptions of the brand. Earlier, it wasn’t really differentiating us from anyone else. You couldn’t tell it was us.”

Menu changes have been another component, with the chain adding items such as Baconator Fries, a riff on its popular Baconator burger, and testing antibiotic-free chicken.

Future menu fluctuations are in the works as well, as Brolick said the company lost some sales momentum during Q2 due to weakness in its value menu. Wendy’s is testing new value “bundles” in the $4 to $6 range, he said, noting that today’s consumer is less interested in individual value items than in bundled meals. 

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