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FDD Talk 2017: What You Need to Know About the Wendy’s Franchise Opportunity (Financial Performance Analysis, Costs and Fees)

by Franchise Chatter on August 24, 2017

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 2017 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 2017 FDD
  • Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for a Wendy’s franchise, based on Items 5 and 6 of the company’s 2017 FDD
  • Section IV – Presentation and analysis of Wendy’s financial performance representations, based on Item 19 of the company’s 2017 FDD, including information on the:
  • 2016 average, high, and low annual sales volume for the 294 company-owned and 5,021 franchised Wendy’s Restaurants (separately stated) that were open as of the end of the company’s 2016 fiscal year
  • average weekly net sales before and after Image Activation Remodels completed in 2015 and 2016 for company-owned and franchised Wendy’s Restaurants (separately stated)

Section I – Background Information

13 Things You Need to Know About the Wendy’s Franchise

Lower Revenues But Higher Adjusted EBITDA for Q2 2017

1.  In early August, Wendy’s released its second quarter 2017 results and reported a better than expected same-restaurant sales increase. Same restaurant revenue from North America rose 3.2 percent in the quarter, which is higher than the 3.1 percent rise analysts had predicted, according to research firm Consensus Metrix.

2.  Over the past few years, Wendy’s has been focused on refranchising its restaurants in order to insulate from wavering commodity and labor costs. As a result, the company’s revenue fell 16.3 percent to $320.34 million. On the other hand, franchisee royalty and franchisee rental revenue, which account for about 48 percent of the company’s net sales, rose 29 percent to $159.5 million in the second quarter.

3.  Adjusted EBITDA was $116.1 million in the second quarter of 2017, compared to $102.5 million in the second quarter of 2016, despite the ownership of 251 fewer company-operated restaurants at the end of the second quarter of 2017 compared to the beginning of the second quarter of 2016.

New Board Member

4.  Toward the end of July, Wendy’s announced that it had increased the size of its Board of Directors from 11 to 12 members with the addition of Kristin A. Dolan to the Board. Dolan is the founder and Chief Executive Officer of 605 LLC, an audience measurement and data analytics company in the media and entertainment industries.

5.  In addition to serving as a member of Wendy’s Board of Directors, Dolan serves as a director of AMC Networks Inc., The Madison Square Garden Company, and Revlon, Inc.

New Summer Items

6.  At the beginning of June, Wendy’s released its new summer salad, the Strawberry Mango Chicken Salad, which features fresh-cut strawberries and mangoes paired with crumbled feta cheese, sunflower seeds, grilled chicken breast, and a drizzle of Marzetti Simply Dressed Honey Citrus Vinaigrette. The salad is available at participating Wendy’s locations until Labor Day (September 4).

7.  In July, the Strawberry Mango Chicken Salad was available at Wendy’s Re-Fresh Tent at the Pitchfork Music Festival in Chicago. Wendy’s Re-Fresh Tent also offered guests hair braiding services at its braid bar.

8.  Wendy’s latest summer menu items debuted in early July and all feature queso. The three limited-time menu items are the Bacon Queso Burger, Bacon Queso Chicken Sandwich, and Bacon Queso Fries. Wendy’s Chief Concept & Marketing Officer Kurt Kane said that “people are going to go crazy for our new queso products because they are that good.”

9.  The two Bacon Queso sandwiches feature a jalapeno bun and the meat of choice (either Wendy’s quarter pound hamburger or Homestyle chicken breast), topped with fire roasted salsa, fresh red onions, thick-cut Applewood Smoked Bacon, all natural-shredded cheddar cheese, and a poblano queso cheese sauce.

Company History

10.  Wendy’s was founded by Dave Thomas in 1969 in Columbus, Ohio. The idea for Wendy’s signature “old fashioned” hamburgers was inspired by Thomas’s trips to Kewpee Hamburgers in his hometown of Kalamazoo, Michigan. Kewpee sold square hamburgers and thick malt shakes similar to the food that Thomas eventually began selling at Wendy’s.

11.  Thomas named the restaurant after his fourth child Melinda Lou “Wendy” Thomas; pictures of Wendy were on display at the original restaurant until it closed in 2007.

12.  The first Wendy’s franchise was opened in 1972 by L.S. Hartzog in Indianapolis, Indiana. That same year, Wendy’s aired its first TV commercials, which were broadcast locally in Ohio. Wendy’s opened its first international location in Canada in 1976. Today, there are over 6,500 Wendy’s restaurants in operation around the world.

Entrepreneur’s Franchise 500

13. Wendy’s has not appeared on Entrepreneur’s annual Franchise 500 list in the past decade.

Section II – Estimated Costs

  • Please click here for detailed estimates of Wendy’s franchise costs, based on Item 7 of the company’s 2017 FDD.

Section III – Initial Franchise Fee, Royalty Fee, Marketing Fee, and Other Fees

  • Please click here for detailed information on Wendy’s initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2017 FDD.

Section IV – Financial Performance Representations (Item 19, 2017 FDD) and Analysis

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