Wendy's,
the No. 3 U.S. hamburger chain by sales, said it would sell about 500
restaurants to franchisees and reduce company ownership of its outlets
to about 5 percent by mid-2016.
Wendy's, known for its square beef burgers and thick "Frosty" milkshakes, has been selling company-owned restaurants to franchisees to cut costs and fund a long-term image overhaul.
Read MoreWendy's meets 4Q profit forecasts
The company, which sold 237 restaurants to franchisees in 2014, owned 957 of 6,515 Wendy's branded restaurants as of Dec. 28.The sale of the 500 restaurants is expected to generate pretax proceeds of $400 million to $475 million and significantly reduce capital expenditure requirements, Wendy's said in a statement on Tuesday.
Wendy's, known for its square beef burgers and thick "Frosty" milkshakes, has been selling company-owned restaurants to franchisees to cut costs and fund a long-term image overhaul.
Read MoreWendy's meets 4Q profit forecasts
The company, which sold 237 restaurants to franchisees in 2014, owned 957 of 6,515 Wendy's branded restaurants as of Dec. 28.The sale of the 500 restaurants is expected to generate pretax proceeds of $400 million to $475 million and significantly reduce capital expenditure requirements, Wendy's said in a statement on Tuesday.
Same-restaurant sales at company-owned restaurants
rose 1.9 percent in the fourth quarter from a year earlier, less than
the 2.4 percent increase estimated by analysts polled by research firm
Consensus Metrix.
The company also estimated revenue of $502 million for the quarter ended Dec. 28, below analysts' average forecast of $509.1 million, according to Thomson Reuters I/B/E/S.
Wendy's estimated fourth-quarter net income of $23.3 million, or 6 cents per share, attributable to the company. Excluding items, adjusted profit was estimated at 10 cents per share, in line with the average analyst estimate.
The company forecast a 2015 adjusted profit of 33 cents to 35 cents per share, below analysts' average estimate of 39 cents. The forecast includes the previously announced sale of its 100 remaining restaurants in Canada to franchisees.
Read MoreFast food vs better burger: Inside the burger wars
Wendy's said it and its franchisees would build 80 restaurants in 2015 and remodel 450.
The company said it plans to release its final results on or before Feb. 26.
Wendy's shares were untraded before the bell. Up to Monday's close of $10.41, the stock had risen 15 percent in the last 12 months.
The company also estimated revenue of $502 million for the quarter ended Dec. 28, below analysts' average forecast of $509.1 million, according to Thomson Reuters I/B/E/S.
Wendy's estimated fourth-quarter net income of $23.3 million, or 6 cents per share, attributable to the company. Excluding items, adjusted profit was estimated at 10 cents per share, in line with the average analyst estimate.
The company forecast a 2015 adjusted profit of 33 cents to 35 cents per share, below analysts' average estimate of 39 cents. The forecast includes the previously announced sale of its 100 remaining restaurants in Canada to franchisees.
Read MoreFast food vs better burger: Inside the burger wars
Wendy's said it and its franchisees would build 80 restaurants in 2015 and remodel 450.
The company said it plans to release its final results on or before Feb. 26.
Wendy's shares were untraded before the bell. Up to Monday's close of $10.41, the stock had risen 15 percent in the last 12 months.
I think it's a good strategy by Wendys. By selling around 500 stores to franchisees it will ensure that these franchisees will improve the quality and performance of these stores. It also reduces risk and spending by corporate which is really important in this extremely competitive market. With average revenue less than what was predicted and shares also less than predicted something had to be done.
ReplyDeleteThe idea of expanding wendys and selling their restaurants to franchisees has alot of advantages which they will not hesitate on taking. As we can see in this article the company sold 237 restaurants in 2014 to different franchisees expanding and recieveng large revenue from royalties. The fact that the Wendy stock rose 15 percent in 12 months means it is a very stable fast food company keeping its growth slow and steady meaning they are trying to avoid any type of risk that will harm there sales. The expansion of Wendy's throughout the world will benefit them greatly due to the fact there competition is extremely harsh and getting more restarautns will increase the percentage of people chosing Wendys, either as a last resort or as a first choice dinner.
ReplyDeleteAlthough it’s great to see the statistics and the amount of money they will make buy selling their corporate stores, but it will only be a one-time influx of cash. Once Wendy’s reduces their amount of corporate owned stores the only profit they can make is from their franchisees which is fine, but will it be enough to make up for the profit that the corporate owned stores could make year after year? It seems to me that it’s a quick fix to their problem and not a long term solution. We hear about corporations taking over franchised locations because they can make more money if they own the profitable locations, but not in this case. Are they reducing their risk because they see an end to the company? Or do they just want to have the cash to invest and improve the brand image?
ReplyDeleteWendy's has been modernizing its style by changing its brand's logo, its store's interior design, and their overall customer service. I think they are heading towards the right direction if their intention is to compete against healthier fast food franchises like chipotle. Changing their image is a good way to start appealing more customers and welcoming them to see what other changes may be coming along soon. Maybe a change in their menu is their next step, and by selling some of their corporate owned stores they will get the money needed to make these changes possible.
ReplyDeleteI think what Wendy's is doing is extremely smart. They need to cut costs, but don't want to salvage their profits so theyre franchising the locations instead of closing them. This will allow them to inevitably receives income from those locations without taking on all of those costs that they probably would have if they were company owned. The bit about the numbers is all good information, but I dont see the point in putting it in the article. Wendy's seems like a good business to franchise simply because of the brand recognition and the vast amount of capital that is in the business already.
ReplyDeleteWendy's idea of selling their Company Owned stores to Franchisees is great. Franchisees usually do better than Company Owned stores, because they are willing to put the time and effort required to improve the operations of the store for their own benefit. Also, Franchisees generally own more than one store, therefore, these Franchisees have a high probability of opening more stores. This will not only improve the brand image of the company, it will also help them expand and generate more revenue in the long run.
ReplyDelete