Your local Wendy’s may soon disappear as a result of the company’s Q3 2024 financial performance. Wendy’s store closure plans for 2024 will affect 140 restaurants by the end of the year. With only two months left to accomplish this, the stores that are identified as “outdated” or underperforming “well below the system average” will see a quick demise.
Still, despite the closing of numerous Wendy’s stores, the reduction in the number of outlets is not expected to be permanent. The company is still well on track to build new restaurants at other locations to maintain the number of functional outlets in the US.
Wendy’s Store Closures for 2024 to Target “Outdated” Restaurants
Wendy’s CEO Kirk Tanner addressed the company’s financial performance and the subsequent decision to shut down stores in an earnings call last week. He explained that the company “conducted a robust review of individual restaurants to ensure they meet [their] expectations for sales, have the profitability to fuel growth, and deliver the Wendy’s brand experience for customers.”
Upon review, they found the overall system and functioning to be “incredibly healthy,” but there does appear to be room for individual outlet improvements. Certain Wendy’s stores were found to be performing well below the system average, with no indication that its results could be expected to improve.
“They’re just in locations that don’t build our brands,” the CEO explained. “You look at a brand that’s 55 years old and some of those restaurants are quite out of date.”
Understanding Wendy’s Q3 2024 Results
Looking at Wendy’s Q3 2024 results, the total revenue stood at $566.7 million, which marked a 2.9% increase from the same period last year, where it stood at $550.6 million. The company also saw a 13.4% decline in net income, going from $58.0 million last year to $50.2 million this year.
Wendy’s operating profits declined by 6.8% to $94.7 million. A 2.9% decline in EBITDA brought numbers down from $139.2 million in Q3 2023 to $135.2 million in Q3 2024. The diluted EPS decreased by 10.7%, falling from $0.28 to $0.25.
Following the release of the Q3 financial results, the CEO of Wendy’s explained that the closure of outdated restaurants was a part of the strategy to move the business to locations where they could expect better performance.
Tanner did not specify how many restaurants will be closed and which specific outlets are to be affected, however, CFO Gunther Plosch confirmed that the closure of about 140 Wendy’s stores could be expected in 2024.
Wendy’s is Opening at New Locations to Combat Closures
Wendy’s is reported to have approximately 6,011 stores in the US and another 1,281 stores at international locations, bringing the total up to 7,292. Wendy’s 2024 store closures are expected to affect outlets in the US primarily, but they will be counterbalanced by new stores in the immediate future.
Between 250 to 300 new Wendy’s locations will open this year. These new restaurants will likely follow the company’s 2022 redesign plans emphasizing “convenience, speed, and accuracy.” The fast-food chain had announced its intention to create more technologically enhanced systems and services, and now the new restaurants will provide an opportunity to set up these systems from scratch.
This redesign is said to include new grills, a more efficient kitchen layout, a dedicated pick-up window for delivery orders, etc. So far, the company has not revealed where these upcoming burger restaurants are to be located.
For the rest of the year, the company predicts global systemwide sales growth of around 3%, with cash flows from operations between $365 and $385 million. This is paired with expectations of capital expenditure falling between $90 to $100 million.
Wendy’s closing of stores isn’t all bad considering the company still has a positive outlook for the rest of the year with expectations of expansions that will bring in more business. However, changing consumer habits and mounting expenses have hurt the food and beverage industry quite significantly.
Restaurant chain TGI Fridays is dealing with its own large-scale store closure and recently filed for bankruptcy protection. Denny’s announced its plans to close 150 restaurants by the end of 2025.
In addition to this, competitor McDonalds also faced a downturn in business after an E. coli outbreak was linked to its services, pushing customers away from its doors. This slump in reputation is expected to be temporary but the business will have to work hard to bring customers back in.
