WEN

New Leadership & Business Diagnosis

• New CEO Bob Wright (a 28-year veteran of Wendy's, with prior turnaround experience at Potbelly Sandwich Works alongside CFO Steve Cirulis) has publicly acknowledged the company is underperforming its potential, with eroded quality differentiation, a weakened value proposition, inconsistent operations, and ineffective marketing driving persistent traffic declines and pressure on franchisee economics.
• After extensive field visits and stakeholder meetings, Wright confirmed core strengths include an iconic, quality-focused brand rooted in Dave Thomas' founding principles, a committed franchise and employee base, and strong underlying assets that provide a solid foundation for a turnaround.

Core Strategic Focus Areas

• Strengthen the menu: Rebuild the menu at the ingredient, item, and category level to restore quality differentiation, while updating price architecture to deliver compelling value across all offerings, not just a dedicated value menu.
• Improve branding and marketing: Shift from over-reliance on one-off promotions and collaborations to a consistent, cohesive brand narrative grounded in Wendy's core quality equity to drive recurring customer traffic.
• Deliver operational excellence: Establish clear performance standards, update processes and training, and align organizational structure to deliver consistent customer experiences, with a priority on improving drive-thru performance during peak demand.
• Elevate digital experience: Upgrade customer-facing digital assets, analytics, integrated restaurant technology, loyalty programs, and third-party aggregator integration to build customer frequency.
• Optimize restaurant portfolio and growth: Prioritize improving four-wall franchisee economics and high-return investments in existing locations, while ensuring the franchise system is well-capitalized, before resuming domestic market expansion.

Operational & Capital Updates

• The company cut its quarterly dividend to increase financial flexibility for turnaround investments, and suspended share repurchases for 2026.
• Organizational restructuring and capability building are underway, with outside strategic and brand advisors engaged to accelerate strategy development. A full detailed turnaround plan will be released at the next quarterly update.
• U.S. customer satisfaction scores improved in the quarter, and company-operated restaurants outperformed the franchise system. 48 total new restaurants were opened globally during the quarter.

• The new leadership team withdrew all prior 2026 full-year financial guidance, as it conducts a comprehensive business review and develops a full turnaround plan.
• Management expects the weak sales trend seen in the first half of 2026 to continue through the second half of the year, which will pressure adjusted net income as the company invests in turnaround initiatives.
• Net leverage is expected to remain elevated in the near term, and is projected to trend lower as operating performance improves over time.
• A full detailed strategic turnaround plan with updated financial projections will be released at the next quarterly earnings update, with transparent progress updates to follow tied to measurable operating metrics (traffic, customer satisfaction, franchisee economics, and investment returns).

U.S. Segment: System-wide same-restaurant sales declined 7.0% year-over-year in Q2 2026, driven by a 12.5% traffic decline (partially offset by a 5.6% average check increase). Sequential same-restaurant sales improved 80 basis points from Q1 to Q2. Company-operated U.S. restaurants outperformed the overall system by 280 basis points, with a 13.8% operating margin, which declined year-over-year due to 9% commodity cost inflation, 4% labor rate inflation, and traffic declines. A total of 21 new U.S. restaurants were opened, with 289 closures in the first half of 2026.

International Segment: Total system-wide sales grew 3.4% constant currency, while same-restaurant sales declined 2.3% overall. Excluding Canada (which faced challenging consumer and competitive conditions), international same-restaurant sales grew 8.6%. A total of 27 new international restaurants were opened in the quarter, supporting overall system sales growth.

Overall Company: Total adjusted revenue was $443.2 million, down 1.4% year-over-year, driven by lower franchise royalty and rental income (partially offset by higher company-operated sales from 2025 Q3 acquisitions). Global company-operated restaurant margin was 13.6%. Adjusted EBITDA was $124.1 million, down $22.5 million year-over-year. Adjusted earnings per share was 18 cents. Free cash flow through the first half of 2026 was $120.3 million, up $10.8 million year-over-year. Capital expenditures totaled $26.0 million in Q2, including $8.3 million for technology initiatives and $12.8 million for restaurant development.

• Persistent double-digit traffic decline in the U.S. has pressured franchisee profitability, creating fragility in the franchise system that may require targeted support or additional restaurant closures.
• Recent product launches (new chicken sandwich platform) and promotional collaborations (Minions/Monsters movie tie-in) failed to deliver the expected traffic growth, despite delivering average check increases, highlighting execution and positioning risk.
• The company faces sustained cost pressure from 9% commodity inflation (especially beef prices) and 4% labor rate inflation, which compress margins even as the company invests in quality improvements.
• Approximately $430 million in debt maturing in March 2028 will require refinancing in late 2026 or early 2027, at a time of elevated leverage, creating refinancing risk.
• Quality degradation and inconsistent operational execution have eroded customer trust, which may take time and significant investment to reverse.

Q: With three CEOs in as many years, what makes a successful turnaround possible now under your leadership? What is the current state of the innovation and marketing pipeline, and are there near-term opportunities to bend the traffic trend? / A: Wright has 40 years of restaurant experience, deep knowledge of the Wendy's brand from his 28-year tenure at the company (including working with founder Dave Thomas), and proven turnaround experience alongside CFO Steve Cirulis at Potbelly. The core brand, franchise commitment, and employee culture remain fully intact, so all issues are performance-related and within management's control. Current marketing overrelies on one-off promotions and lacks a consistent connected brand narrative. Management is rebuilding the menu from the ingredient up to deliver meaningful innovation tied to Wendy's core quality identity, and will focus on rebuilding consistent brand messaging rather than chasing temporary promotional lifts.