Thicker bacon and ditching breakfast. Wendy’s hopes a menu shakeup can revive sales

By Jordan Valinsky, CNN

New York (CNN) — Wendy’s reported its seventh consecutive quarter of declining sales, prompting the company to reveal a turnaround plan while rejecting a massive takeover offer.

Thursday’s earnings caps off a tumultuous period for the 56-year-old chain, which included hundreds of closures, leadership changes and slumping sales. Wendy’s has been battling a number of issues that hurt its bottom line, including consumers cutting back on dining out, higher beef prices and value offerings that aren’t bringing people in.

Same-store sales at its US locations fell 5.7% for the third quarter ending on September 27. Wendy’s sales trails its chief rivals, including McDonald’s, which fell 0.2%, and a reinvigorated Burger King, who reported an 8.4% increase.

The multi-year turnaround plan, dubbed “Dave’s Way” after Wendy’s founder Dave Thomas, will include improvements to the food, better marketing and expanded delivery. CEO Bob Wright on Thursday said that its “objective is clear: grow customer traffic and market share while strengthening restaurant profitability.”

At the same time, the chain’s board announced that it “unanimously rejected” a $1.4 billion offer from a group of investors, including former chairman and largest shareholder Nelson Peltz, to buy Wendy’s and take it private.

The company said the offer undervalues Wendy’s and its potential.

“Our confidence rests firmly in Bob Wright’s proven track record of seasoned industry leadership, including restaurant business turnarounds,” said Art Winkleblack, Wendy’s board chair and a member of the independent committee, in a statement.

What’s next

Wendy’s new plan will improve the food, with a “fully refreshed menu” rolling out in 2027. Wright has previously criticized that the chain had prioritized cost savings over the quality of the food.

The chain is starting with the ingredients – thicker bacon, bigger pieces of lettuce for sandwiches, creamier Frosty’s and upgraded salads. Wright said that the chain is also “removing lower volume items that add complexity in our kitchens.”

One major part of the menu that could go away is breakfast, which Wendy’s launched in 2020. The company is now making it optional for franchisees. Locations that have stopped selling it report better results during other parts of the day.

“This option directly supports stronger restaurant economics, improves the employee experience and importantly allows operators to concentrate on the food offerings and day parts,” Wright said.

Wendy’s woes

Over the past several months, Wendy’s has shuttered nearly 300 of its 6,000 restaurants across the United States that were “consistently underperforming. This was the second wave of substantial closures within two years, part of the chain’s efforts to boost profits at nearby locations.

In May, Wendy’s appointed Wright as its chief executive officer, ending a nearly year-long leadership drought after previous CEO Kirk Tanner left for Hershey after just 18 months with the chain.

Wright’s record of growing sandwich chain Potbelly was likely seen attractive to Wendy’s board, considering same-store sales have fallen for six consecutive quarters.

The new CEO was blunt during his first earnings call in August, saying the chain was “not performing at our potential.” Notably, Wendy’s let rival Burger King surpass it in US sales this year, knocking it down to the country’s third-biggest burger chain.

“Our value proposition has slipped, and franchisee economics are under pressure,” Wright previously said. “I’ve seen this brand at its best, and I know we can fix these issues.”

Wendy’s struggles have also adversely affected a major franchisee, Meritage Hospitality Group, which operates more than 300 US locations and partially blamed its bankruptcy on Wendy’s slumping sales.

The franchise group said that its store-level earnings nosedived nearly 50% last year, citing rising beef costs, increased discounting and weak traffic. Wendy’s announced that it was planning acquiring “up to” 163 locations from the group, unless they receive a better offer.

Wendy’s has unveiled transformation plans in the past, prompting an analyst on the call to ask what’s different about this version. Wright said that, compared to previous plans, franchisees are behind this one.

“The restaurant business is deceptively simple to understand,” Wright said. “Writing a strategy that makes sense is the easy part. It’s unbelievably difficult to execute, and it requires that that execution strength across all disciplines.”

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