Wendy’s is closing 140 lower-volume restaurants in weaker markets through the end of the year as part of a strategy the company says will strengthen the system’s overall health and prepare it for a more rapid pace of growth in the coming years.
The closures are of restaurants that have lower profit margins and generate $1.1 million or less in revenue per year, just over half the system average. The closures will include both company and franchised locations. Most will be in the U.S., but some will be in international markets. About six out of seven Wendy’s locations are in the U.S.
Wendy’s revealed the closures during the company’s third-quarter earnings call on Thursday.
The closures will be offset by new-unit growth, and so Wendy’s will finish the year with flat overall restaurant growth, far below the 2% that the Dublin, Ohio-based company expected for the year.
Yet executives said on Thursday that the closures will help lead to a more aggressive pace of development in the coming years. Many if not all the restaurants slated for closure were likely to be closed sometime in the next few years, anyway.
The closures followed a review of Wendy’s individual restaurants to ensure its locations “meet our expectations for sales, have the profitability to fuel growth, and deliver the Wendy’s brand experience for customers,” CEO Kirk Tanner said Thursday.
“We have designed this initiative to ensure that over time, many of these units will be replaced by new restaurants at better locations with significantly improved sales and profitability,” Tanner told analysts.
The closures could also ensure that the company is deploying its capital to restaurants with better potential.
Wendy’s and its franchisees are nearing the end of a massive, multi-year remodel project. Nearly nine out of 10 of the global system’s restaurants have been reimaged. But spending money to spruce up low-volume restaurants in difficult markets might not make sense. “We want to further improve our restaurant footprint and overall system health,” Tanner said.
Wendy’s revelation on closures followed a largely mixed quarter and earnings call. Same-store sales increased 0.2% in the U.S., driven by strong sales in the morning and late at night, but with some implied weakness at lunch and dinner.
Sales have improved considerably thus far in October, driven largely by Wendy’s Krabby Patty Kollab Menu, a marketing effort in which the chain is selling a burger patterned somewhat on the Krabby Patty from the Nickelodeon program Spongebob Squarepants. There is also a Pineapple Under the Sea Frosty.
The promotion performed better than the company expected. “It’s really built off our core menu,” Tanner said. “The Krabby Patty burger is built off that square, fresh, never frozen burger. And of course leveraging our Frosty is always a game changer.”
Yet the year has been “a bit more challenging than we anticipated coming into the third quarter,” Tanner said, as consumers shift away from fast-food chains, frustrated over prices.
That, and the closures, led the company to lower sales guidance for the year. Wendy’s now expects systemwide sales to grow just 3%, down from a projection of 3% to 5%. The result sent the company’s stock down more than 6% on Thursday.
Nevertheless, Wendy’s executives believe the chain has more potential for growth in the coming years.
By closing stores now, rather than in 2026 or 2027, Wendy’s can reduce closure offsets in those future years while ensuring that the remain system is more profitable overall. That’s a tactic frequently deployed by major chains. Both Burger King and Jack in the Box closed stores in preparation for system improvements in the past three-plus years.
Wendy’s expects unit growth to be 3% to 4% in 2025, a substantial acceleration compared with the pace the company had been on, and executives said they have commitments to meet that goal.
“These are closures that would have happened in 2025, 2026 and 2027,” CFO Gunther Plosch told analysts. “It gives us longer-term visibility on accelerated new openings to come.”
Most of Wendy’s unit growth will come from international markets, where the chain has about 1,000 locations. But executives also believe they have plenty of room for growth domestically. They expect that to pick up in the coming years.
Wendy’s introduced upgraded incentive programs in July, and Tanner said those programs “are resonating with franchisees and are expected to support continued progress on our new restaurant pipeline.” The company has since introduced incentive programs in Canada and Latin America.
And Wendy’s said that new stores feature higher employee satisfaction and more efficient labor, with $2 million average unit volumes and higher-than-average operating profit margins.
“The overall strategy and initiative here is to build on an already strong system,” Tanner said. “This initiative makes us even stronger.”
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