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FDD Talk: The Wendy’s Franchise Opportunity (Financial Performance Analysis, Estimated Costs, and Other Important Stuff You Need to Know)

by Franchise Chatter on March 23, 2016

in FDD Talk 2017: Food Franchises, Franchise Earnings, Hamburger Franchise

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Wendy's Classic Double Hamburger Photo by _gem_

In this FDD Talk post, you’ll learn the following:

  • Section I – Background information on the Wendy’s franchise opportunity, including relevant news updates
  • Section II – Estimated initial investment for a Wendy’s franchise, based on Item 7 of the company’s 2015 FDD
  • Section III – Presentation and analysis of Wendy’s financial performance representations, based on Item 19 of the company’s 2015 FDD, including information on the:
  • 2014 average, high, and low annual sales volume for the 645 company-owned and 4,526 franchised Wendy’s Restaurants (separately stated) that were open as of the end of the company’s 2014 fiscal year
  • average weekly net sales before and after Image Activation Remodels completed in 2014 for company-owned and franchised Wendy’s Restaurants (separately stated)

Section I – Background Information

Wendy’s is an international fast food restaurant chain that was founded by Dave Thomas in 1969 in Columbus, Ohio. Headquartered today in Dublin, Ohio, Wendy’s is the world’s third largest hamburger fast food chain following McDonald’s and Burger King.

In 2008, the company merged with Triarc, the parent company of Arby’s, after rejecting two buyout offers. After the merger, Triarc became known as Wendy’s/Arby’s Group, but after the spin-off of the Arby’s brand in 2011, it became called The Wendy’s Company. It is a publicly traded company (NASDAQ: WEN).

There are about 6,500 Wendy’s restaurants in the United States and 28 other countries. Nearly 85 percent of the restaurants are franchised, and most restaurants (77 percent) are located in North America.

Wendy’s is best known for its signature menu item, a square burger made from fresh ground beef. Its regular menu also includes chicken sandwiches, chili, French fries and the Frosty. The popular Dave’s Hot ‘N Juicy quarter-pound single was introduced in 2011.

Four for $4 Heats up Burger Wars

In late 2015, Wendy’s made a significant volley in the burger price wars by introducing its “4 for $4 deal” that includes a junior bacon cheeseburger, four chicken nuggets, small fries and a drink, all for $4. The deal is promoted as being for a limited time, but a date for it to end has not been set. The Wendy’s website explains that consumer response will determine how long the promotion lasts.

Additionally in 2015, the chain announced that it planned to sell more than 500 of its restaurants as part of a rebranding action plan. This plan also included the opening of about 80 new restaurants and the remodeling of 450 locations. The chain announced last year that it plans to remodel at least 60 percent of its North American restaurants by 2020.

Rebranded stores feature a sleeker, more contemporary appearance with natural earth tones accented by a towering red element reaching out of a glass enclosure. Stores and menu items also feature a logo that was redesigned in 2013, the first logo change in 30 years.

Remodeled Stores Offer Relaxed Atmosphere

In an effort to help customers linger and feel more relaxed, the remodeled Wendy’s interiors offer fireplaces, ambient lighting, varied seating options such as lounge chairs and booths, Wi-Fi and flat-screen TVs, and digital menu boards.

In early 2016, Wendy’s announced that its North American locations will transition into the complete use of cage-free eggs for its breakfast menu by 2020. Since 2001, the company has utilized an animal welfare program that covers all meat suppliers, and the company has pledged to eliminate gestation stalls from its pork supply chain by 2022.

Last year, Wendy’s, which offered salad bars in the early years of its existence, promoted its fresh salad ingredients in a video series on YouTube.

“Our kitchens are stocked throughout the week with fresh produce so we can provide consumers farm-fresh flavor every day,” said Brandon Solano, Wendy’s chief marketing officer, in a press release. “While others may use bagged lettuce and factory-cooked bacon and chicken, we don’t cut corners.”

Section II – Estimated Costs

  • Please click here for detailed estimates of Wendy’s franchise costs, based on Item 7 of the company’s 2015 FDD.

Section III – Financial Performance Representations (Item 19, 2015 FDD) and Analysis

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