Menu tweaks, customer volume impact Wendy's in Q3

by Monica Watrous
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 Wendys
Wendy's new grilled chicken sandwich helped draw customers to its restaurants. 
 
DUBLIN, Ohio – More customers visited Wendy’s restaurants in the recent quarter, drawn in by such deals as 50 cents Frosty frozen treats and a new grilled chicken sandwich.

 

Todd
Todd Penegor, president and CEO of Wendy's 

“Our third-quarter same-restaurant sales for the North America system were driven by strong customer count growth and a slight increase in average check,” said Todd Penegor, president and CEO, during a Nov. 9 earnings call with financial analysts. “The benefits from our brand initiatives, image activation and our system’s continued progress on disciplined pricing have contributed to us bringing in more customers to our restaurants. Conversely, the QSR hamburgers category’s growth was driven by an increase in average eater check, which was largely offset by a substantial decrease in customer counts.

“We believe the healthy and sustainable way to grow is to remain committed to driving profitable customer counts. We are focused on bringing in more customers more often to our restaurants. This is more important than ever, as the gap between food-at-home and food-away-from-home prices in the restaurant industry continues to widen.”

 Wendys
During the quarter, Wendy's featured its summer berry chicken salad and the Baconator sandwich. 
 
Other featured menu items during the quarter included a summer berry chicken salad, a sweet and savory combination of strawberries and blackberries with feta cheese, apple chips and grilled chicken, and the Baconator sandwich, featuring six strips of Applewood smoked bacon. Also highlighted was Wendy’s revamped chicken sandwich, with a new multigrain bun and a new cooking procedure that results in a tender and juicy filet.

 

“On the price value front, our 4-for-$4 offering, which launched a little over a year ago, has been a hit with consumers, and we remain focused on continuing to find ways to provide value across our entire menu,” Penegor said. “Our promotional calendar in the third quarter came together nicely and was successful in refocusing attention on core and price value. And our results benefited greatly.”

Penegor added that the company is on track with its refranchising initiative in which Wendy’s will reduce company owned restaurants to approximately 5 percent of the total system by the end of the year. Additionally, the company plans to reimage approximately 500 North America system restaurants and rebuild 100 restaurants in 2016.

 Wendys
Wendy's and its franchisees plan to reimage approximately 500 North America system restaurants in 2016. 
 
“About 20 percent of the Wendy’s system is now image activated, and we expect that number will exceed 30 percent by the end of this year,”Penegor said. “The evolution of image activation and the improvement in our restaurant economic model is also enabling us to make progress with our new restaurant development goals. We now expect to achieve total net new development in 2016 of 15 to 20 restaurants for the North America system, which is higher than our original plans of 5 to 10. This would be our first year of positive net new restaurant openings since 2010, a great momentum builder for our future development goals.”

 

Revised full-year guidance for Wendy’s includes adjusted EBITDA at the high end of its previous range of flat to up 1 percent compared to fiscal year 2015. Additionally, the company now expects to generate same-restaurant sales growth of approximately 1.5 percent for the North America system.

“We are on track with our 2020 goals,” Penegor said. “For the North America system, we continue to target average unit sales volumes of $2 million, restaurant margins of 20 percent, a sales-to-investment ratio of at least 1.3 times for new restaurants, restaurant development growth of 1,000 new restaurants and approximately 500 net, and image activating at least 60 percent of our restaurants. We also remain committed to our 2020 company goal of delivering adjusted EBITDA margin of 38 percent to 40 percent, and we plan to provide additional details on our roadmap to deliver this margin expansion early next year when we provide updated guidance.”

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