Wendy’s said this week that it plans to shift some of its information technology functions to a third-party company, a move that will result in layoffs but will also enable the company to invest more in technology in the coming years.
The Dublin, Ohio-based chain said that its realignment plan will cost as much as $15 million, including $8 million to $9 million in severance payments. Most of the impact will be felt in its Restaurant Support Center in Dublin.
Wendy’s said that it would work with a global IT consultant, which it says will “enable a more seamless integration between” digital and corporate IT.
The company said it plans to reinvest any savings on employee compensation and other costs back into IT.
The move is designed to allow Wendy's to invest in more technology as its primary competitors push the envelope on digital and other strategies.
McDonald’s has been investing heavily in technology, spending $300 million to buy Dynamic Yield and then buying Apprente, an artificial intelligence company that will also give the Chicago-based burger giant a beachhead in Silicon Valley.
Yum Brands has reorganized its management in part to bolster its own technology efforts. Burger King owner Restaurant Brands International, meanwhile, has focused more on its own technology investments as it works to keep pace.
Sara Senatore, analyst with Bernstein Research, said in a note Tuesday that Wendy’s needs to increase its IT spending “as it plays catch-up with its larger competitors, and this is a step along that path.”
But it’s not the last, she wrote, noting that “the magnitude of the investments” is still small when compared with competitors such as McDonald’s or Yum.
Wendy’s has spent much of the past year working to bolster its technology capabilities. Digital sales this year are up more than 300%, company executives said in October.
“We’re just starting to close the gap,” Chief Digital Experience Officer Laura Titas said on the company’s Analyst Day presentation, according to a transcript on financial services site Sentieo. “We still have a lot of work to do. But if you think of the fundamentals that we’ve put into place this year, we have a lot of reasons to be excited about how we cannot just have consistent growth but this type of accelerated growth moving forward.”