WEN Q4 Deep Dive: Turnaround Strategy, U.S. Challenges, and International Expansion

Fast-food chain Wendy’s (NASDAQ:WEN) reported Q4 CY2025 results topping the market’s revenue expectations, but sales fell by 5.5% year on year to $543 million. Its non-GAAP profit of $0.16 per share was 10.4% above analysts’ consensus estimates.

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StockStory’s Take

Wendy’s fourth quarter saw a positive market reaction despite continued sales pressures, with management attributing the performance to strong international expansion and operational improvements at company-operated restaurants. Interim CEO Ken Cook acknowledged that while system-wide sales declined, efforts like launching chicken tenders and expanding digital offerings drove higher customer satisfaction and digital engagement. Cook described the quarter as one where "results were well below our potential," but stressed the operational progress made, especially in U.S. company stores, which outperformed the broader system by over three percentage points. These operational gains, combined with new menu items and digital investment, helped offset some weakness in core U.S. sales.

Looking ahead, Wendy’s guidance reflects a rebuilding year, with management expecting sequential improvement as its Project Fresh turnaround plan takes hold. The company’s focus is on revitalizing the brand through targeted value offerings, menu innovation, and more disciplined marketing. Cook emphasized, “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.” Management is prioritizing operational excellence, franchisee economics, and international growth, but also cautioned that system optimization—including restaurant closures and adjusted operating hours—will weigh on near-term results.

Key Insights from Management’s Remarks

Management linked fourth quarter results to reduced U.S. marketing spend, a tough comparison with last year’s collaborations, and strong execution in international markets.

• U.S. marketing and menu shifts: Management reduced front-loaded advertising spend and delayed key menu launches, such as new chicken sandwiches, to ensure stronger execution in 2026. The launch of chicken tenders and new sauces, however, received positive customer feedback and drove improvements in satisfaction scores.
• International growth momentum: The international segment continued to deliver robust results, marking its 21st consecutive quarter of growth and opening 59 new locations in key markets, including expansions into Armenia and Scotland. Management views international expansion as a core growth engine, supported by local market investments.
• Digital engagement gains: U.S. digital sales grew 12.4% year over year, pushing the digital sales mix to 20%. Upgrades to the Wendy’s app and the rollout of gamification features led to record conversion rates and higher customer engagement.
• Operational improvements in company stores: Company-operated restaurants in the U.S. outperformed the broader system, driven by enhanced training, new performance management frameworks, and technology investments like digital menu boards and automated ordering. These efforts led to higher customer satisfaction in accuracy, friendliness, and taste.
• System optimization and closures: Wendy’s began a system-wide optimization initiative, closing underperforming U.S. restaurants and adjusting operating hours, particularly in the breakfast segment. Management indicated that 5-6% of U.S. locations are expected to close, aiming to improve franchisee profitability and overall system health.

Drivers of Future Performance

Wendy’s outlook is shaped by its Project Fresh turnaround plan, focusing on brand revitalization, operational improvements, and strategic system optimization amid a cautious consumer environment.

• Project Fresh priorities: Management is centering its turnaround efforts on four pillars: brand revitalization, operational excellence, system optimization, and disciplined capital allocation. The plan includes a shift to permanent value offerings like the new Biggie Deals platform, menu innovation with new burgers and chicken items, and a refined marketing strategy targeting core customer segments.
• Franchisee engagement and operational rollout: Wendy’s is expanding operational best practices from company-operated stores to the franchise network, backed by investments in training and field support. Management expects broader adoption of these initiatives to improve both customer experience and same-store sales as 2026 progresses.
• System optimization risks: The decision to close 5-6% of U.S. restaurants and adjust operating hours, especially for breakfast, is expected to weigh on near-term sales and EBITDA. However, management believes this will strengthen franchisee economics and set the stage for more sustainable growth, while international expansion continues to offset domestic headwinds.

Catalysts in Upcoming Quarters

Over the next few quarters, the StockStory team will monitor (1) the pace at which franchisees adopt operational best practices seen in company stores, (2) sequential improvement in U.S. same-store sales as Project Fresh initiatives roll out, and (3) the impact of system optimization, including closures and operating hour changes, on franchisee profitability. Progress in international expansion and the effectiveness of new menu and marketing strategies will also be key signposts.

Wendy's currently trades at $7.49, up from $7.27 just before the earnings. In the wake of this quarter, is it a buy or sell? Find out in our full research report (it’s free).

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