Wendy’s (NASDAQ:WEN) reported a 5.7% decline in U.S. same-restaurant sales for its fiscal 2026 third quarter, as falling traffic continued to pressure results. The company outlined a turnaround plan that includes making breakfast optional at U.S. restaurants and potentially acquiring up to 163 locations from bankrupt franchisee Meritage Hospitality Group.
Chief Executive Officer Bob Wright said the sales decline improved by 130 basis points from the second quarter and that traffic improved sequentially through each period of the third quarter. Still, he cautioned that the early progress did not amount to a completed turnaround.
Wright also said an independent committee of directors, unaffiliated with Trian Partners and its investor group, unanimously rejected an unsolicited acquisition proposal received on Oct. 28. He said the company would not comment further on the offer during the call.
Traffic Decline Weighs on Results
U.S. same-restaurant traffic fell 11.9% in the quarter, partly offset by a 6.2% increase in average check, Chief Financial Officer and Chief Strategy Officer Steve Cirulis said. Promotions during the quarter included a $1 Frosty and $1.99 10-piece chicken nuggets.
Global systemwide sales declined 5.9% on a constant-currency basis, reflecting weaker U.S. sales and restaurant closures. International systemwide sales rose 3.5%, helped by new restaurant development, although international same-restaurant sales fell 2.2%, primarily because of weakness in Canada.
Adjusted revenue fell 1.6% to $435.6 million, while adjusted EBITDA declined $24.6 million to $113.4 million. Adjusted earnings were $0.13 per share. Cirulis said company-operated restaurant margins were pressured by lower traffic, approximately 4% commodity cost inflation and roughly 4.5% labor rate inflation.
General and administrative expenses rose $15.2 million to $73.1 million, including $11.9 million for the turnaround plan and other strategic and transformation activities. Those strategic initiative costs were excluded from adjusted EBITDA and adjusted earnings per share, Cirulis said.
Breakfast Becomes a Local Decision
Wendy’s plans to make breakfast optional for all U.S. restaurants, allowing franchisees to decide whether the daypart is profitable for individual locations. Wright said the company expects to expand that option later this year.
The company estimates the change could add up to $200 million in restaurant-level EBITDA across franchise and company-operated restaurants. That estimate includes avoiding breakfast losses and improving margins later in the day, Wright said. He added that many restaurants that previously stopped serving breakfast had fully recaptured those sales later in the day.
Wright did not specify how many restaurants might exit breakfast. He said Wendy’s would work with franchisees on their decisions and continue to support operators that remain in the daypart with marketing, innovation and operations assistance.
Menu, Delivery and Franchise Plans
The breakfast decision is part of a multiyear strategy called “Dave’s Way,” which focuses on the menu, marketing, operations, digital channels and restaurant economics. Wendy’s is testing changes including thicker bacon, a creamier Frosty, whole-leaf lettuce and improved salads. Wright said the company expects a fully refreshed menu experience in 2027.
Wendy’s has also shifted its media placement and launched messaging emphasizing its fresh, never-frozen beef, alongside a $7.99 Dave’s Single Combo promotion. Wright said the company is working on a longer-range marketing calendar.
In delivery, tests at company and franchise restaurants produced sales lifts in that channel ranging from low double digits to 20%, Wright said. More than 90% of U.S. franchise restaurants are now participating in delivery promotions, nearly double the level of a few months earlier, he said.
The company has formed a portfolio optimization team to assist franchisees with financial and operational challenges. Potential measures include fee deferrals, targeted closures, transfers to other operators and company acquisitions.
Wendy’s signed a letter of intent to acquire up to 163 Meritage restaurants in markets where it already operates. Wright said other Meritage locations are expected to be sold to franchisees through a bankruptcy-facilitated process. The agreement for the 163 restaurants also permits higher and better offers from approved franchisees. Wright said Wendy’s could eventually sell acquired restaurants but had not made a decision on those locations.
Cash and Outlook
Wendy’s generated $174.2 million in free cash flow through the first three quarters and ended the quarter with approximately $413 million in cash and a net debt leverage ratio of 5.2 times. Cirulis said leverage is expected to remain elevated near term and decline as operating performance improves. Subject to market and other conditions, the company anticipates refinancing approximately $430 million of debt due in March 2028, either later this year or in 2027.
Cirulis said the company was not prepared to provide fourth-quarter guidance, though the sales pace entering October was similar to the overall third-quarter pace. Wright declined to predict when traffic would turn positive, saying the company would report on leading measures as it implements the plan.
About Wendy’s (NASDAQ:WEN)
The Wendy’s Company (NASDAQ: WEN) operates and franchises quick-service restaurants under the Wendy’s brand. Its restaurants are known for hamburgers made with fresh, never-frozen beef, along with chicken sandwiches, salads, fries, breakfast items, desserts, and beverages.
Founded by Dave Thomas in 1969, Wendy’s has grown into an international restaurant chain with locations primarily in the United States and Canada, as well as select markets in other countries. The company’s restaurant system includes both company-operated and franchised locations.
In addition to its restaurant operations, Wendy’s supports customers through digital ordering, delivery, loyalty programs, and mobile applications.
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