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 2020 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 2020 FDD
- Section IV – Number of franchised and company-owned Wendy’s outlets at the start of the year and the end of the year for 2017, 2018, and 2019, based on Item 20 of the company’s 2020 FDD
- Section V – Presentation and analysis of Wendy’s financial performance representations, based on Item 19 of the company’s 2020 FDD, including information on the:
- 2019 average, median, high, and low gross sales for the 339 company-owned and 5,210 franchised Wendy’s Restaurants that were open and in continuous operation for at least 52 weeks as of December 29, 2019
- 2019 average, median, high, and low gross sales, cost of sales, gross profit, other operating expenses, rent, and restaurant EBITDA for the 325 traditional company-owned Wendy’s Restaurants that were open and in continuous operation for at least 52 weeks as of December 29, 2019
Section I – Background Information
18 Things You Need to Know About the Wendy’s Franchise
Implements New Animal Care Standards Program
1. Near the end of January 2020, Wendy’s released its 2019 corporate social responsibility report under a new banner, “Good Done Right,” highlighting a new commitment to have a comprehensive accounting of animal care best practices, including responsible use of antibiotics and animal housing conditions, by the end of 2024. The report also includes efforts to enhance benefits for employees and reduce the company’s environmental footprint.
2. Todd Penegor, president and CEO of The Wendy’s Company, said, “At Wendy’s, we believe that doing the right thing is the only way to do business. Being a responsible corporate citizen is a priority for our brand, and Good Done Right is our way to communicate how we’re advancing various commitments to make a positive impact in the areas of food, people and our environmental footprint.”
3. Bringing the company’s corporate social responsibility (CSR) efforts under one banner and documenting progress is one step in the evolution of the company’s approach, which also includes conducting a third-party materiality assessment to ensure the company aligns its CSR-related goals and commitments with stakeholder priorities, the company’s business, and areas where Wendy’s can drive meaningful change. This materiality assessment will inform the company’s CSR strategy, future programs, and commitments.
4. Wendy’s made significant progress in 2019 across its three key CSR pillars of Food, People, and Footprint. Key highlights include:
- Food: To enhance its animal welfare standards to optimize for supply chain traceability, the company formalized its new Animal Care Standards Program (ACSP), a detailed assessment tool for beef, pork, chicken, and eggs, which launched in 2020. Wendy’s transitioned to 100 percent hydroponic, vine-ripened tomatoes across North American restaurants and tested hydroponic lettuce in Canada. The brand launched its food vision, Fast Food Done Right, which includes continued menu innovation and a commitment to fresh menu options.
- People: As of January 2020, Wendy’s achieved a perfect score of 100 on the Human Rights Campaign’s Corporate Equality Index and the designation as a Best Place to Work for LGBTQ Equality. This survey is the nation’s premier benchmarking survey and report measuring corporate policies and practices related to LGBTQ+ workplace equality. The Wendy’s system continued its commitment to support children in foster care by raising more than $15 million in 2019 for the Dave Thomas Foundation for Adoption and its Wendy’s Wonderful Kids program. The company elevated employee benefits by extending domestic partner benefits to employees and expanding its Employee Assistance Program to cover all company employees, including restaurant crew members and their household members.
- Footprint: Wendy’s Squarely Sustainable approach launched in early 2019 and includes moves to “use less,” “use better,” “spark action,” and “engage partners.” Examples of this approach in action include more than 1,500 Wendy’s locations participating in the U.S. Department of Energy’s Better Buildings Challenge as well as the company’s continuing efforts to reduce water use, minimize food waste, and adopt new sourcing and packaging options that reduce environmental impact. Through its partnership with the NextGen Consortium, the company is a participant in the NextGen Cup Challenge to identify more sustainable hot and cold fiber cup options.
Launches Nationwide Breakfast
5. In early February 2020, Wendy’s announced that it was launching a new breakfast menu. From fresh, hand-cracked eggs on every sandwich, to savory Applewood smoked bacon, Wendy’s breakfast menu brings a fresh twist to familiar flavors and pays homage to Wendy’s fan favorites – featuring items like the Breakfast Baconator, Honey Butter Chicken Biscuit, and Frosty-ccino.
6. Kurt Kane, president, U.S. and chief commercial officer of The Wendy’s Company, said, “People deserve a delicious, affordable and higher quality breakfast than what they’re currently getting, so that’s exactly what we’re going to serve when Wendy’s launches breakfast nationally on March 2. Our crew will be hand-cracking fresh eggs on all our breakfast sandwiches and leaning into the quality ingredients that have long set Wendy’s apart from the competition. We’ve crafted unique sandwiches that will leave you craving another, like the Breakfast Baconator, which features a fresh-cracked egg, signature sausage patty and six strips of Applewood smoked bacon.”
7. To celebrate the launch of the new breakfast menu on March 2, Wendy’s gave consumers a free Honey Butter Chicken Biscuit with purchase via the Wendy’s mobile app. “To date, some others in the category have let breakfast consumers down by offering breakfast sandwiches with frozen, folded eggs and pre-cooked bacon. Today, all that changes,” said Carl Loredo, chief marketing officer of The Wendy’s Company. “We are known for our high-quality food and breakfast is no different. Try any of our craveable items – we believe this menu will become your favorite.”
8. Wendy’s selection of irresistible, bold new morning items features fresh, hand-cracked eggs on every sandwich and savory, Applewood smoked bacon baked in the restaurants’ ovens each morning. The menu gives a “morning twist” to some of Wendy’s favorite menu items, including:
- Breakfast Baconator: A combination of a fresh-cracked egg, six strips of Applewood smoked bacon, one square breakfast sausage patty, and two slices of American cheese all topped with a Swiss cheese sauce between two premium buns.
- Honey Butter Chicken Biscuit: A fresh-baked buttermilk biscuit topped with crispy all-white-meat chicken breast with whipped honey butter. A sweet and savory combo to start the day.
- Frosty-ccino: Cold brew coffee with chocolate or vanilla Frosty creamer, served over ice. A perfect pick-me-up to start the morning.
Appoints New Chief Information Officer
9. In mid-October 2020, Wendy’s announced the appointment of Kevin Vasconi as chief information officer. He will report to Todd Penegor, president and CEO of The Wendy’s Company, and serve on Wendy’s senior leadership team. Prior to joining Wendy’s, Vasconi served as executive vice president, chief information officer of Domino’s Pizza, Inc., a role from which he retired earlier that month.
10. In Vasconi’s eight years at Domino’s, he served on the executive leadership team and was responsible for developing and leading all domestic and international technology capabilities. Emphasis on technology innovation helped Domino’s achieve more than half of all global retail sales in 2019 from digital channels, primarily online ordering and mobile applications. In the U.S. in 2019, Domino’s generated over 65% of sales via digital channels.
11. At Wendy’s, Vasconi will assume responsibility for all aspects of Wendy’s global technology efforts, including consumer-facing digital, restaurant technology, enterprise architecture and technology, and information security.
12. Penegor said, “Digital technology is a critical growth driver for Wendy’s today and will be in the future. Kevin Vasconi is an ideal leader to join our organization and help us advance to the next level. We are confident that his industry-leading experience will help to accelerate the growth we have already seen across technology channels in 2020, and he will lead a talented and well-resourced team focused on the substantial opportunities we see across the globe.”
13. Vasconi said, “It’s incredibly exciting to join The Wendy’s Company in this next chapter of my career. The great potential for technology transformation at Wendy’s, combined with the brand’s 50-year heritage for quality and innovation tell me that the future is bright at Wendy’s.”
14. Wendy’s was founded in 1969 by Dave Thomas in Columbus, Ohio. Thomas was inspired to start his own burger place after frequent visits to Kewpee Hamburgers in his home town of Kalamazoo, Michigan. Kewpee sold square hamburgers and thick malt shakes and Thomas decided that Wendy’s would also sell old-fashioned square burgers and malts, which he called Frosties. Thomas also felt that square burgers on a round bun would give the impression of an abundance of good quality meat. The restaurant was named after Thomas’ fourth child Melinda Lou “Wendy” Thomas; the restaurant’s iconic logo, a little red-headed girl, was also modeled after his daughter.
15. Following the success of the first Wendy’s, Thomas opened a second location with a “pick-up window,” which Wendy’s says is the world’s first modern drive-thru window. Two years later, in 1972, Thomas started franchising the Wendy’s concept and over the next few years, the chain continued to grow around the United States. In 1975, Wendy’s opened its first international stores in Canada. By the end of the 1970s, Wendy’s had opened more than 1,000 locations.
16. Over the next few decades, Wendy’s continued to expand around the world and added new items to its menu that are customer favorites, such as chili, baked potatoes, and the in-store salad bars (which were phased out in 2006). By the late 1990s, Wendy’s reached 5,000 restaurants open. Also around this time, Wendy’s acquired Tim Hortons, a Canadian baked goods and coffee chain. Wendy’s sold off Tim Hortons in 2006.
17. In 2008, Wendy’s and Arby’s merged to form a new company called The Wendy’s/Arby’s Group, Inc., which is now The Wendy’s Company. In the early 2010s, Wendy’s began a modern rebranding effort, which aimed to improve the customer experience. Key initiatives included bold new restaurant designs, product innovation, and engaging advertising and digital media. Since then, Wendy’s has continued to innovate and there are now locations in more than 29 countries.
Entrepreneur’s Franchise 500
18. Wendy’s did not rank on Entrepreneur’s 2021 Franchise 500 list.
Section II – Estimated Costs
- Please click here for detailed estimates of Wendy’s franchise costs, based on Item 7 of the company’s 2020 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 2020 FDD.
Section IV – Number of Franchised and Company-Owned Outlets
- Outlets at the Start of the Year: 5,409
- Outlets at the End of the Year: 5,432
- Net Change: +23
- Outlets at the Start of the Year: 5,432
- Outlets at the End of the Year: 5,457
- Net Change: +25
- Outlets at the Start of the Year: 5,457
- Outlets at the End of the Year: 5,495
- Net Change: +38
- Outlets at the Start of the Year: 330
- Outlets at the End of the Year: 337
- Net Change: +7
- Outlets at the Start of the Year: 337
- Outlets at the End of the Year: 353
- Net Change: +16
- Outlets at the Start of the Year: 353
- Outlets at the End of the Year: 357
- Net Change: +4
Section V – Financial Performance Representations (Item 19, 2020 FDD) and Analysis
Part 1 – U.S. Average Gross Sales for the Period December 31, 2018 to December 29, 2019 (Fiscal Year 2019)
- As of the end of fiscal year 2019 (December 31, 2018 through December 29, 2019), excluding Wendy’s Restaurants located in U.S. Territories, there were 357 domestic Wendy’s Company Restaurants, and 5,495 domestic Wendy’s Franchised Restaurants.
- In 2019, a limited number of Company Restaurants and Franchised Restaurants were participating in Wendy’s new breakfast daypart menu, some of which had been selling a prior iteration of Wendy’s breakfast menu for more than five years prior to implementing the new menu.
- The average gross sales of these Restaurants are not set out in this Item separately due to the small sample size of these Restaurants, their geographical concentration/variation, and because these Restaurants’ new breakfast daypart menu sales were generated without any media or advertising placements regarding their breakfast menu items.
- As used in this Item, “Gross Sales” is defined as all income less: taxes, refunds, and amounts from coupon or discount programs.
- The Restaurant sales volumes for Franchised Restaurants are based on a combination of weekly sales data submitted by Wendy’s franchisees, as well as automated data generated by the Restaurant point of sale system. Wendy’s has not independently verified that these reports were true and correct.
- The table below provides the average gross sales and related information for the domestic Wendy’s Company Restaurants and Franchised Restaurants that were open and in continuous operation for at least 52 weeks as of December 29, 2019.