The Wendy's Company Q4 FY2025 earnings call

Management Statement and Operational Highlights

• Fourth Quarter and Full Year Results: Fourth quarter global system-wide sales fell 8.3%, U.S. same-restaurant sales dropped 11.3% due to marketing spend and prior year SpongeBob comp, while international sales grew 6.2%. Full year global system-wide sales declined 3.5%, driven by U.S. same-restaurant sales, but U.S. company-operated restaurants outperformed the system, and international sales grew 8.1% with 159 new openings.
• Project Fresh Pillars:
  • Brand Revitalization: Conducted consumer segmentation study to target growth segments, implemented new marketing and menu approach, launched Biggie Deals as everyday value, and focused on quality of hamburgers and chicken with new products launching.
  • Operational Excellence: Implemented people activation, enhanced training, performance management, restaurant technology improvements, and modernized restaurant architecture to improve customer experience.
  • System Optimization: Closing 5%-6% of underperforming U.S. restaurants and aligning operating hours to demand to improve franchisee economics.
  • Disciplined Capital Allocation: Redeploying resources for profitable AUV growth, investing in field teams, technology, and digital infrastructure, and returning cash to shareholders.
• Other Highlights: U.S. digital sales growth, international expansion, and improvements in customer satisfaction scores.

Segment Performance

• U.S.: Fourth quarter system-wide sales declined significantly; global system-wide sales dropped 8.3% due to marketing spend reduction, prior year SpongeBob comp, and shift of new chicken sandwich launch to 2026. However, chicken tenders and new sauce lineup had strong customer satisfaction. Full year U.S. same-restaurant sales declined, but company-operated restaurants outperformed the broader U.S. system by 310 basis points. U.S. digital sales grew 12.4% in 2025, with digital mix reaching an all-time high of 20%.
• International: Fourth quarter system-wide sales grew 6.2% (21st consecutive quarter of growth), opening 59 new locations in key markets like Canada, Mexico, Armenia, and Scotland. Full year international system-wide sales increased 8.1% with 159 new restaurant openings and entry into 7 new markets, including Australia and Romania.

Guidance

• Global system-wide sales expected to be flat to prior year.
• International net unit growth anticipated to be similar to 2025.
• Adjusted EBITDA range: $460M-$480M.
• Adjusted EPS range: $0.56-$0.60 per share.
• Free cash flow: $190M-$205M.

Risks

• Weather disruption impacting sales.
• Consumer trends affecting traffic and value consciousness.
• Dependence on franchisee buy-in for successful turnaround.
• Execution risks of Project Fresh initiatives.

Q: Lots of great detail on this call. I guess when it comes to operations at digital, you have a lot of initiatives there. But I feel like when it comes to turnarounds in this space, it really comes down to that initial jolt around marketing and menu. And you had a pretty good idea towards the end of this last year with the tenders and it felt like a pretty good product. And so I'm just wondering how you're thinking about this year, the approach, the ideas, the execution on the marketing side. Help us imagine how things are going to evolve there in ways that you think might be more effective?

A: Yes. Great question, David. So I'll start by talking a little bit about what gives us confidence that the turnaround plan will work. The results that we delivered are well below our potential for sure. But we have all the ingredients needed to be successful. We have an iconic brand, determined employees, passionate franchisees, better data visibility and capabilities than we've ever had. We have great food, and we're approaching that all with a One Wendy's mindset. Secondly, we understand the problem. We got away from what made us great. We allowed ops to drift, and we focus too much on sales overnight and discounting versus brand over time. We made some decisions that optimize the short term, but we're changing all that. We now have a clear North Star, which is our brand essence, and that will help us reestablish Wendy's as the highest quality hamburger in QSR. Also, we're executing the right plan, Project Fresh. In terms of revitalizing the brand, we know who drives our business, and we know how to bring them in. We do have a new approach to both menu and messaging that you've already seen take hold in 2026. And we're focused on ops, deploying the playbook that we use to improve operational excellence in our company restaurants to the system. Additionally, we're making the right long-term decisions in terms of system optimization, optimizing our restaurant footprint, which will help improve franchisee economics. So turnarounds take time. We'll see the ops metrics change first, followed by brand metrics and then traffic and sales. In terms of the calendar approach, which you mentioned, what's going to be different, there's going to be a lot of things that are going to be different. We have a new menu calendar framework. We've divided the year into 8 periods to make sure we provide sufficient new news throughout the calendar. We're marrying that up with top-of-mind culture events to make sure we stay socially and culturally relevant to our customers. And we're focused on the target segments. We did a lot of customer segmentation work. We now know who drives our business and we know who to focus on, and we know who not to focus on. So both those pieces are important. One learning from 2025 around value, we swung the pendulum too far towards limited time price promotions instead of everyday value. We had this fantastic Biggie platform that we've now made even better with our Biggie Deals platform around $4, $6 and $8, multiple price points, giving consumers more choice. And we will continue to upgrade the quality on our menu across the board. We have new chicken sandwiches rolling out. We're going to do some things on the hamburger side and a lot more hamburger innovation. If you look back at 2025, we had 0 hamburger innovation in 2025. That is changing in 2026, starting actually next week with the launch of our new Cheesy Bacon Cheeseburger. So a lot of things are different. We're learning a lot and applying those learnings as quickly as possible.

Q: Yes. I'm hoping you can expand on that a little bit and some of the learnings, your work with Creed UnCo, the segmentation study that you did. What did you learn maybe a little more specifically that you didn't know before in terms of who your target customer is and who you thought it was before and who it actually is and how that's informing the approach going forward? Ken, you mentioned that we've already seen some of the changes to the approach. I just -- maybe just remind us what we've seen so far on that front? Or are you kind of referring to what's going to -- what we're going to see next week with the launch of the new burgers and the wrap?

A: Yes. Thanks for the question, Jake. In terms of the customer segmentation study, that was the first phase of the Creed UnCo engagement. So first phase and foundational in terms of a proven playbook. We completed that study in December. And the good news is Wendy's does have a very strong brand perception, very strong. But from a customer perspective, this -- the needs-based approach helps us move beyond the what to the why. So segmenting customers based on need, why they are coming to Wendy's. Is it the quality of our food? Is it the price? Is it the abundance, convenience, snacking, what occasion are they coming in for? Is it for a dinner with family? Is it for a frosty to celebrate a kids game, all of those things, better understanding the why. Then that allows us to value the segments and divide them up into who is our primary target, who is our secondary and who should we not focus on at all because they represent very small pieces of our overall customer base. This validated some things we already knew and did provide some new insights. But it helped us put the spotlight on so what? What are we going to do about these things? A couple of learnings and validations from the study where a big segment of our customers come to Wendy's for an everyday quality upgrade, especially hamburgers and our fresh never frozen beef. When we look back at 2025, we had 0 hamburger innovation. We didn't talk about our hamburgers and we didn't innovate on those. So that's changing this year. We're going to have several hamburger -- premium hamburger LTOs starting next week with the launch of our Cheesy Bacon Cheeseburger. So -- that's a learning. That's a big difference. We also will be making quality upgrades across the menu. In a couple of months, we'll launch our new and improved chicken sandwich lineup, so both classic and spicy. Really excited about that, giving customers this everyday upgrade compared to what they can get from the competition. Another learning was a big segment of our population comes to Wendy's for our sides, the sweet and savory aspect, our sides, our Frosty's and this snacking occasion. So again, reflecting backwards, that helps explain why Girl Scout Thin Mints was such a success in 2025. We also have a new and improved collaboration with Girl Scout Thin Mints Frosty launching next week. So really excited about that. And we will incorporate some of the sweet and savory dynamics in our March Madness campaign here next month. And then 468, that snacking behavior did help inform the construct of our new Biggie Deal platform, putting that $4 price point in there. So if you're coming to Wendy's and you don't want a full meal, you want to get a quick snack, you can do that through that $4 price point, but also having a $6 and $8 for people who want more abundance, more value was really important. Another confirmation was really a large percentage of visits to Wendy's are on plant. When somebody leaves the parking lot or their driveway, they don't know where they're going to eat. And so that highlighted the importance to us to keep Wendy's top of mind and make sure we're in the consideration set. So you've seen us significantly increase our social activity to help drive awareness, so we stay in the consideration set when people are coming to Wendy's. As importantly as who we are going to focus on, then we look at where we're not going to focus. So there's a very small portion of our customers are considered what I would call it adventurous heaters. So these people want very unique flavor profiles, kind of extreme innovation. And again, they represent a very, very small percentage of our total. We shouldn't focus on them. When we look backwards at 2025, some of the collaborations we did were focused on this segment of the population and weren't broadly appealing enough to significantly move the needle for us. So we're going to move away from that. So I guess, in summary, what we've learned helps us target the customer segments we want to win with and it helps us be more relevant to them in terms of the menu choices we make, the messaging and the operations and is foundational to the brand essence that we've developed.