If you’re a fan of Wendy’s, the company announced some bad news when reporting its third-quarter 2024 financial results yesterday: The burger chain will close around 140 stores by the end of the year. However, there’s a silver lining of sorts to these closures, too. Here’s what you need to know.
Wendy’s is closing a lot of restaurants
On Thursday, Wendy’s announced its Q3 2024 results and revealed it would be closing 140 locations by the end of 2024. Wendy’s president and chief executive officer, Kirk Tanner, described these locations as “outdated” in an earnings call (transcript published by the Motley Fool).
Tanner said the decision to close the stores was made after the company “conducted a robust review of individual restaurants to ensure they meet our expectations for sales, have the profitability to fuel growth, and deliver the Wendy’s brand experience for customers.”
“Following this review,” Tanner continued, “I have made the strategic decision to close additional restaurants this year that are outdated and located in underperforming trade areas.”
Tanner said the locations marked for closure have an average unit volume (AUV) of approximately $1.1 million. Wendy’s considers an AUV of $2 million to be healthy.
While Tanner himself didn’t specify the number of store closures, later on the financial call, Wendy’s chief financial officer, Gunther Plosch, said they will total “about 140.”
Why this news is not as bad as it sounds
While fans of Wendy’s may be disheartened to hear that the burger chain is closing stores, there is a silver lining of sorts: The company revealed that its overall footprint won’t decrease despite the closures.
“We have designed this initiative to ensure that over time, many of these units will be replaced by new restaurants at better locations with significantly improved sales and profitability,” Tanner revealed. “We anticipate that total closures in 2024, including additional closures in the fourth quarter, will be offset by new restaurant openings this year, leaving our net unit growth approximately flat compared to the prior year.”
As of its most recent quarter, Wendy’s reported having 6,011 stores in the U.S. and another 1,281 internationally, for a global total of 7,292 locations.
Of course, while Wendy’s expects its net unit growth to remain flat despite the closures, there is more uncertainty for the employees at the closing locations. Wendy’s has not said if it will try to relocate employees at closing locations to other stores.
Which Wendy’s locations will close in 2024?
Wendy’s has also not said which locations will be closing. When asked about the geographic locations of the closures, Tanner replied, “[If] you look across the entire U.S., these are really spread out. It’s not one geography, in particular . . . It’s across the board.”
How is Wendy’s performing as a company?
Wendy’s is the the second largest quick-service burger chain in the United States based on revenue, according to data compiled by Statista. In 2023, the company generated $12.2 billion in revenue—a distant second place to McDonald’s $53.1 billion, but still ahead of third-place Burger King’s $10.9 billion.
But 2024 has been a more difficult year for Wendy’s than the year prior. According to its latest earnings report, systemwide sales growth in 2024 so far is just 2.3% globally compared to the 7.2% growth it saw in 2023.
Same-restaurant sales growth is also way down: So far in 2024, it’s just 0.7% globally compared to 5.2% in 2023. Same-restaurant sales growth in the United States is even lower. So far in 2024, it’s just 0.5%, compared to 4.7% in 2023.
Yesterday, Wendy’s stock price (Nasdaq: WEN) fell 5.91% to $19.11 per share. Year-to-date, it is down 1.9%. In the previous five years, WEN shares have fallen 9.65%.