Q3 2024 The Wendy's Co Earnings Call
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Speaker Change: Good morning. Welcome to the Wendy's Company, earnings results conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session.
Speaker Change: If you would like to ask a question during this time, simply press star, followed by the number one on your telephone keypad. If you would like to withdraw your question, press star, followed by the number two, thank you. You may begin your conference.
Speaker Change: Good morning and thank you for joining our fiscal 2024 Third Quarter earnings conference call.
Speaker Change: President and Chief Executive Officer will provide a business update and then Gunther Plosch, Chief Financial Officer will review our third quarter results and share our updated financial outlook.
Speaker Change: From there, we will open up the line for questions.
Speaker Change: Today's conference call and webcast includes their presentation which is available on our investor relations website, IR.Wendy's.com.
Speaker Change: Before we begin, please take note of the safe harbor statement that appears at the end of today's earnings release.
Speaker Change: This disclosure reminds investors that certain information we discussed today is forward-looking and reflects our current expectations about future plans and performance.
Speaker Change: Warrows factors could affect our results and cause those results to differ materially from the projection set forth in our forward-looking statements.
Speaker Change: Also, some of today's comments will reference non-gap financial measures. Investors should refer to our reconciliations of non-gap financial measures to the most directly comparable gap measure at the end of this presentation or in today's earnings release.
Speaker Change: If you have questions following today's conference call, please contact me. I will now hand in over to Kirk.
Kirk: Good morning everyone and thank you Aaron. As many of you know, Aaron joined us in September to lead investor relations and we are excited to have him aboard.
Kirk: I'm going to start with some high-level results and drivers in the quarter and then we'll get into some of the initiatives we are working on to strengthen the Wendy's brand and its operations across the company and our franchisees.
Kirk: All then handed over to GP to talk more about our third quarter performance and updated outlook.
Kirk: During the third quarter, our restaurant continued to grow sales as global system-wide and same restaurant sales grew 1.8% and 0.2% respectively.
Kirk: In the US, we remain competitive as we held traffic share within the QSR Burger category, which has been a bit more challenging than we anticipated coming into the third quarter.
Kirk: Our team's focused execution allowed us to also maintain dollar share driven by consumer demand for our craveable core items, our impactful innovation, and relevant value.
Kirk: The morning day part continues to be a compelling growth opportunity delivering a mid-single digit sales increase compared to the prior year.
Kirk: Late Night Sales also delivered strong performance, growing sales at a high single-viget percentage compared to the prior year driven by momentum in our delivery and digital businesses.
Kirk: In our international segment, we achieved high-single-digit system-wide sales growth driven by nearly 100 new restaurant openings through the end of the third quarter. International, same restaurant sales growth with led by our Canadian market, including a high-teen percentage growth in breakfast traffic.
Kirk: Now, turning to our digital business, global digital sales grew almost 40% year over year led by our U.S. segment, delivering over 17% digital sales mix.
Kirk: This growth was supported by enhancements to the Wendy's app that have enabled us to deliver and have proved user experience.
Kirk: We now have about 45 million reward members enrolled. Now that's up from 43 million at the end of the second quarter.
Kirk: In addition, we open 64 new Wendy's restaurants globally during the third quarter and remain on track to meet our goal of 250 to 300 openings for the full year.
Kirk: Turning now to some of the initiatives I am working on with the team.
Kirk: As most of you know, I have now been in the role nine months and I can tell you I'm even more optimistic today on the potential for our brand and opportunities for the near and long-term growth. As we look ahead, we are focused on continuing to build love for Wendy's by delivering on our new brand promise.
Kirk: Fresh, famous food, made right for you. Every time in every restaurant, for every customer, every day. It means that we're doubling down on operational excellence ensuring customers receive the same excellent experience across every Wendy's restaurant.
Kirk: Our Wendy's promise is foundational to our culture and is delivered by inspiring our employees to always put the customer first. Make every restaurant to star, operate the one best way and own the responsibility to grow the Wendy's brand.
Kirk: We have shared the brand promise with employees and franchisees at our recent convention and has been met with enthusiasm.
Kirk: This promise is embedded in the framework I have established that will serve as our blueprint to relentlessly pursue long-term profitable growth.
Kirk: The Framework consists of 4 key elements, drive same restaurant sales and share growth, accelerate digital growth and improve restaurant profitability. All of which will drive net unit development.
Kirk: A Cheering Lee's goals will strengthen the Wendy's brand and reach more Wendy's fans worldwide with a consistent and high-quality experience. Let me expand a bit on the actions we are taking beginning with global unit development.
Kirk: [inaudible]
Kirk: In September, we also announce new development incentives in Canada and Latin American countries, which are already sparking many development and renewal conversations.
Kirk: As we continue to open new restaurants, we are using data, driven insights to target high growth trade areas. These new restaurants have delivered an exceptional customer experience, enhanced by technology and improved drive-through and delivery experiences.
Kirk: Fire Employees, satisfaction levels, under a more efficient labor model, and USAVs above $2 million in operating margins above the system average.
Kirk: Overall, the Wendy system is incredibly healthy.
Kirk: and our restaurant, Reimaging has been completed at 89% of restaurants globally. And we want to further improve our restaurant footprint and overall system health.
Kirk: In order to do so, we conducted a robust review of individual restaurants to ensure they meet our expectations for sales, have the profitability to fuel growth, and deliver the Wendy's brand experience for customers.
Kirk: Following this review, I have made the strategic decision to close additional restaurants this year that are outdated and located in underperforming trade areas. These restaurants have AUVs of approximately $1.1 million and operating margins well below the system average.
Kirk: We have designed this initiative to ensure that over time many of these units will be replaced by new restaurants at better locations with significantly improved sales and profitability.
Kirk: We anticipate that total closures in 2024, including additional closures in the fourth quarter, will be offset by new restaurant openings this year, leaving our net unit growth approximately flat compared to prior year.
Kirk: By the end of 2024, we will have opened more than 500 new restaurants over the last two years.
Kirk: and have the confidence we will deliver an elevated growth in 2025 and the years to come.
Kirk: As we shared last quarter, we have development commitments in place to meet our 2025 new bill goal which supports our previously stated outlook for 3-4% net UN aggrow. Now let's turn to our plans to drive growth in the fourth quarter and beyond.
Kirk: We continue to expect sequential improvement in year-over-year sales growth from the third to the fourth quarter. This will be driven by our commitment to putting the customer first in everything we do to deliver our craveable menu, impactful innovation, and relevant value.
Kirk: We have strong momentum, as earlier this month we launched the Crabby Patty Burger and Pineapple under the C. Frosty Celebrating Spunge Bob's 25th anniversary.
Kirk: We were excited to bring this fan favorite to life through innovation on two of our iconic core menu items and we are executing this promotion in a way that only Wendy's can deliver.
Kirk: This programming is resonating with consumers, generating a powerful response that is driving significant sales growth and earn media for the Wendy's brand. We are very pleased that the initial performance is exceeded our expectations.
Kirk: This is a great example of what we can deliver when we bring our innovation, marketing and execution capabilities together.
Kirk: Looking ahead, we are building on this momentum where the strong lineup of campaigns launching in the upcoming weeks.
Kirk: We will feature an innovative, new-sealted, caramel, frosty flavor. The return of a customer favorite mushroom bacon cheeseburger and national media showcasing our iconic spicy chicken sandwich.
Kirk: Building on our marketing efforts, we are evolving our national advertising and digital strategies.
Kirk: Our new campaigns incorporate the God of Ywendys tagline and highlight our delicious food as the hero. We're pleased with the traction this approach is gained and look forward to sharing more as we progress.
Kirk: Moving on to our commitment on restaurant profitability, I see significant potential to strengthen our position in profit-acredive categories like beverages.
Kirk: Extending our partnership with Coca-Cola is one of the ways we are doing this. Our new agreement enables us to grow this highly profitable segment, leveraging the Coca-Cola Freestyle platform which offers more than 100 drink choices.
Kirk: We also have plants at beverage options aligned with modern consumer preferences.
Kirk: And right now we're giving our beverage business a boost as we kick off the fourth quarter with one dollar any size drink promotion.
Kirk: Another category where we will drive margin improvement is...
Kirk: Thrust through breakfast sales growth, which we anticipate will continue to outpace the rest of day. As part of our company investment in breakfast advertising, we recently launched National Media for our breakfast burritos and are encouraged by the consistency of our breakfast growth.
Kirk: In addition, our fresh AI voice enabled order taking provides us with another opportunity to enhance margins.
Kirk: This technology boost labor efficiency and allows crew members to spend more time on activities that elevate the customer experience. We are encouraged by the results of testing at Select Company Restaurant and we will broaden the implementation.
Kirk: and 2025 across more company and franchisee restaurants that will unlock margin expansion opportunities. Our pursuit across these initiatives gives us the confidence in our outlook for accelerated growth and profitability to close out 2024 and beyond.
Kirk: Looking ahead, I'm excited about the future and our vision for Wendy's to reach its full potential.
Kirk: Our ability to deliver profitable growth and create shareholder value is grounded in our focus on the execution of our strategic priorities that they'll do on our brand promise.
Kirk: We look forward to sharing more details about our long-term growth strategy and execution plans at our investor day which will be held on March 5th, 2025. Finally, I want to express my appreciation to all of our employees, franchisees and suppliers for their dedication and outstanding contributions.
Kirk: Williams. I'll now turn it over to GP to share more details on our third quarter results.
GP: Thanks Kirk, in the third quarter our global system wide sales group 1.8% 6.6% on a two-year basis. Supportive the global same-rushed and sales growth across both our U.S. and international segments and contributions from new restaurants open this year.
GP: Our US company restaurant margin was 15.6% flat to prior year. The impact of higher average check and labor efficiencies was offset by labor rate inflation and customer count declines.
GP: The increase in GNA was primarily driven by an increase in employee compensation and benefits and an increase in professional fees. These were partially offset by a decrease in incentive compensation of rules.
GP: A trusty divita decreased 2.9% to approximately $135 million, resulting primarily from an increase in the company's incremental investment in breakfast and the increase in channel and administrative expenses.
GP: [inaudible]
GP: The D-True is in the Trusted Learning Special, was driven by lower Trusted EBITDA, an increase in depreciation and a high FF-5-Tex weight. These were partially offset by few years outstanding due to the company's share-reported program.
GP: Finally, the increase in free cash flow resulted primarily from a decrease in cash paid for cloud computing arrangements and the decrease in capital expenditures.
GP: These were partially of set but a company's incremental investment in Brexit advertising.
GP: Now let's turn to expectations for 2024.
Speaker Change: S. Kirk said, we are competing well and are pleased to have maintained the drastic change in the third quarter.
Speaker Change: However, given a softer category environment in the third quarter, we now expect full-year global system might sales growth of approximately 3%. Made up of 1 to 2% same-rust and sales growth and contributions from URAS to end open this year.
Speaker Change: We have strong momentum to start the fourth quarter with October, U.S. Samurstone sales accelerating significantly compared to the third quarter giving us confidence in achieving our updated 2024 Samurstone sales outlook.
Speaker Change: I was drafted EBITDA out, logo 535 to 545 million dollars remains unchanged.
Speaker Change: The impact of our updated system might see as outlook is being offset by incremental franchise fees related to the additional restaurant closures in the fourth quarter and lower channel and administrative expense.
Speaker Change: With one quarter left to go in the year, we have narrowed our US company operated restaurant margin expectation to 15 to 16 percent and our house look for a trusted EPS to 99 cents to $1.00 and 1 cent.
Speaker Change: Finally, we continue to expect capital expenditures of $90 to $100 million and free cash flow of $275 to $285 million.
Speaker Change: Now I'd like to highlight our cap-location policy which remains unchanged.
Speaker Change: Our first priority is still investing in profitable growth, which we will continue to do while holding true to our asset-light model.
Speaker Change: Secondly.
Speaker Change: Today we announce the collaboration of a fourth quarter dividend of 25% per share reflecting a fully a dividend of $1 per share in 2024. This represents an industry-leading mid-singual digital dividend yield and aligns with our commitment to sustain and attractive dividend.
Speaker Change: Lastly, our capital allocation policy gives us the flexibility, due to access cash to reproaches shares and reduce debt.
Speaker Change: Today through October 24th we have repurchased approximately 3.6 million shares and have approximately 248 million dollars remaining on our 500 million dollars share repurchased authorization, expiring in February of 2027.
Speaker Change: The Continuantissipate Total Sharing purchases in 2024 of approximately $75 million.
Speaker Change: We have fully committed to delivering our sample yet powerful formula. As an efficient growth company, we drive system-like sales growth supported by positive same-rust on sales and expanding global footprint.
Speaker Change: This is translating into significantly cash flows which supports meaningful return of cash to share all those through an attractive dividend and share repurchases.
Speaker Change: With that, I will hand things over to Evan to share our upcoming I.R. calendar.
Evan: Thank you, GP. On November 19th, we will be in Chicago for an NDR hosted by Morgan Stanley. After which, we will head to the Stevens Investment Conference in Nashville on November 20th.
Evan: On December 3, we will participate in the Barclays Eat Sleep and Play Conference in New York City.
Evan: If you are interested in joining us at any of these events, please contact the respective cell-side analyst or equity sales contact at the host firm.
Lassley: Lassley, we plan to report our fourth quarter and full year earnings and host a conference call on February 13th, 2025. And as mentioned earlier, we will hold an investor day on March 5th with more details to come later.
Lassley: We will now transition to the Q&A part of the call. Due to the high number of covering analysts, please limit yourself to one question only.
Lassley: Operator, please queue up the first question.
Speaker Change: Thank you. As a reminder, if you like to ask a question, that's Star 1 on the telephone keypad.
Speaker Change: Arthur's question for today comes from that David Palmer of Evercore ISI. Your lines now open, please go ahead.
David Palmer: Thanks. I'll try to squeeze into a two-part or a...
David Palmer: Really unrelated, but the unit growth tip out look, I wonder how you're thinking about that now. I know you had some closures that might prove temporary as a drag to net unit growth in the US.
David Palmer: Um...
David Palmer: and then at the same time it looks...
David Palmer: Pretty bright what's going on in terms of international development. I'm wondering if you're thinking about a more of an international skewed to your development going forward, how you're thinking about that.
Speaker Change: and as far as the marketing goes, Crabby Paddy's clearly been a big win.
Speaker Change: I'm wondering how you're thinking about more platformish type renovations, innovations, things that are...
Speaker Change: That seemed to have more of a longer curve to them. I mean, these types of activations are great, but I'm wondering if you're also working on some bigger stuff that we should be thinking about around the corner. Thanks.
David Palmer: David Good Morning and appreciate the question. First I'd like to talk about the UNIgrove.
Speaker Change: Question that you asked and let's be overall strategy and initiative here is to build on an already strong system.
Speaker Change: This is the nation.
Speaker Change: and the one that's pointed out a few things about our system. When you look at the Wendy System, 89% of our restaurants have already gone through this in this activation. We built 500 new restaurants over the last two years. We've built almost 250 to 300 restaurants.
Speaker Change: This year.
Speaker Change: You think about strengthening our system. We are looking at closing a few restaurants that underperform. They have 80s of about a million dollars. Their margins under the average of the business. And they're just in locations that don't build our brands. And so those are the opportunities that we've taken a look at.
Speaker Change: To truly make our system much stronger. Now when you think about development for the future, we're guiding it 3-4%. Now, do I get a think about that? 70% of the international 30% being domestic.
Speaker Change: That's kind of how we're thinking about our development goals. The strengthens our development progress over the next several years, not just in 25, but we're looking at it as 25, 26, 27, beyond.
Speaker Change: So that really is the development strategy and strengthening our system. Let me turn the focus to our menu. We've seen some success with crabby patty and you know what I really attribute some of success is it's really built off our core menu.
Speaker Change: The Craving Patty Burger is still top that, where...
Speaker Change: Fresh Never Frozen Burger, and of course leveraging our frosty is always a game changer. No combination of those two things really get the mark.
Speaker Change: As we look into the future of continuing to...
Speaker Change: Focus on on menu, we do that in three.
Speaker Change: Three ways. One, build our core. We're looking at how we energize our core menu. I think that's incredibly...
Speaker Change: Important, we'll continuously talk about the fresh, never frozen quality of the ingredients that we put into our menu. We think that that's an advantage over our competition, but we'll continue to look at areas.
Speaker Change: To Build Our Forerat, We'll Always.
Speaker Change: Have an innovation pipeline.
Speaker Change: We've seen that this year, if you look at our business this year, you've seen an innovate on soccer nugs.
Speaker Change: You've seen us bring frosty innovation to the forefront. That's always going to be a place where we can delight our consumers.
Speaker Change: and then the left part will continue to have a value offering that delivers the highest quality at the best value. And you know, we do that today through Biggie Bag, so those kind of three things we're thinking about as far as our menu on going.
Speaker Change: We always have this opportunity to get even better and that's our focus.
Speaker Change: The End.
Speaker Change: Thank you. Our next question comes from that Dennis, go over UBS. Your lines sound open, please go ahead.
Speaker Change: Great, thanks guys. I wanted to come back to the breakfast and you know, it seemed like you're continuing to see good performance at that day, that day before, given the initiative that you've got in place across advertising some of the offers, innovation, et cetera. Just curious, Kirk, if you could kind of touch a bit more on that on how plans are.
Speaker Change: Our progressing and how progress is progressing against your plan and we think about 2025 perhaps from a breakfast perspective, anything I like there.
Speaker Change: And Dennis, thanks for the question and appreciate it, yes.
Speaker Change: Breakfast is an important part of the week.
Speaker Change: We've really set out and we launch breakfast in 2020 but we've invested in breakfast, is sharing continued and best in breakfast.
Speaker Change: In the years to come, we feel like this is still a real opportunity for us to build a potential of Wendy's. We'd like.
Speaker Change: The tailwind that it's giving us right now, it's growing faster than the category and it's growing faster than our business. So it's a nice tailwind to us.
Speaker Change: We look at this opportunity as Prophet Akredis leveraging the restaurant. It's also an incremental day part as we build that. So it gives us the traction that we need for the long haul. We do see this as a long-term strategic initiative. It's not going to be...
Speaker Change: Something that we just do this year or next year, you can look forward to continuing to develop our breath of strategy over the years to come.
Speaker Change: Thank you. Our next question comes from that Daniela Arturo of Bernstein. You'll answer what open. Please go ahead.
Speaker Change: Great, thank you.
Speaker Change: You mentioned that the Makler was a bit more challenging than you were expecting and need to kill 3 So can you help us understand the health of the consumer, both domestic and less well as internationally? And whether you've seen any softening of these Makler pressures getting into the fourth quarter So any intercorder commentary might be helpful. Thank you.
Speaker Change: Yeah, look, I would talk a little bit about Q3, you know, we're still in a very...
Speaker Change: Challenging Environment, I would say, you know, with a consumer.
Speaker Change: I would tell you there's kind of Q3, there's two half to Q3. We saw some momentum in the second half of Q3.
Speaker Change: The Gives Us some confidence in the, of course, we've seen that pick up and cue for as well.
Speaker Change: That gives me the confidence that one will deliver against our guidance and then it's a little bit brighter moving into 2025. That's kind of how I would shape it. So you know, still under pressure, Q3, the second half of Q3 felt a little better than the first half. And then we're seeing some momentum in Q4. That's kind of how I would architect what's happening with consumers.
Speaker Change: Thank you, our next question comes from John I've Inco of JP Morgan. The Lancelot open, please go ahead.
Speaker Change: Hi, thank you very much. The question is on prime across food and paper plus labor which, you know, in the most recent quarter ran around 63, I probably don't have to tell you that screen is actually very high all to the most.
Speaker Change: Public Restaurant Company, in fact I can only think of one that's higher in that brand is not in quick service and doesn't have advertising. So I guess have you, you know, Kirk as you came into the Wendy system kind of benchmark that number relative?
Speaker Change: and I really do mean to say that quote unquote easy way to kind of fix that number.
Speaker Change: One of the types of opportunities that we should be thinking for you to significantly improve that ratio and get it closer to a more typical 60 type of number where I know the industry typically long term, not tries to target. Thank you.
Speaker Change: Yeah, of course. We've definitely gone through some benchmarking exercises.
Speaker Change: and our focus on delivering that restaurant level margin. It's really important that we do that. I see this in two buckets. One is driving that efficiency. That's why you see us investing in things like AI with our drive through.
Speaker Change: That allows us to have our employees in the restaurant working the orders efficiently at saves time, etc. That drives the labor number down as you know that.
Speaker Change: The split between food and labor is almost equal in restaurants and so our opportunity is to drive labor cost down and to improve the food cost.
Speaker Change: You'll see us do that, and I think the last thing, you'll see us focus on some categories that drive positive mix, one is diverges
Speaker Change: You know, we've got a new agreement with Coca-Cola. This allows us to aggressively grow our beverage business, which is...
Speaker Change: Plot of a proffet of creedas from a mixed standpoint. You'll see us focus on menu accretion from a proffedility standpoint. Those are three areas we're looking at. Looking at labor efficiency.
Speaker Change: We're looking at food costs and we're looking at growing those categories that are more profitable than the rest of the business faster.
Speaker Change: Thank you. Our next question comes from a Jeffrey Bird, Steen of Barclays. Your lines now open. Please go ahead.
Speaker Change: Great, thank you. I had one question and then one follow up. The follow-up actually just GP reiterated the Jeffery Badaa guidance.
Jeffrey Bird: Despite the comp and the system fails shortfall, I was wondering if it was maybe just a high level as to what you think of the offset to a light and maintain that EBITDA.
Jeffrey Bird: and then my question is more just following up on the Unicrow side of things.
Jeffrey Bird: I'm wondering in terms of international and I guess US franchisee is receptivity and you guys seem confident in...
Jeffrey Bird: I guess 2025 accelerating that's 3 to 4% net.
Jeffrey Bird: Presumably it is on a base reduced by the closure, some warning if you share how many closures there were, or maybe how many absolute number of openings you're expecting in 25. Because I know you mentioned 100% of the new build goal is tied to development commitments, but it was a question of whether or not those are executed on. So any color they would be great. Thank you.
Speaker Change: I've been morning cat, so first on the Saturday Ibiza guidance
Speaker Change: Be alright, obviously the tightening of the sales range created ahead of us on the EBITDA side. That was offset by increased train-tripe fees, whether it be allowing for any of these.
Speaker Change: To close the restaurant, we are earning a fee that is helping our EBITDA. And secondly, obviously, slightly lower T&A. The overall guidance range of 255 to 255 million dollars of T&A is unchanged. We are sliding a little bit to the lower end of it. So that's how we were able to keep the EBITDA unchanged.
Speaker Change: Little bit more colour on the closures, right? As we said previously, it was a 2% net unit growth rate, the additional closures about 140 additional units.
Speaker Change: So basically we are closing over all as many units as we are opening that's why we are ending up overall slightly flat.
Speaker Change: That obviously gives us really good confidence for the really significant, accelerated unit growth rate of 3% to 4% in 2025. And as Kirk said, I think in one of his answers already, right, these additional closures.
Speaker Change: The No-Calm Out of 2025 is a pleasure that will happen in 2025, 26 and 27. So it gives us a longer visibility on accelerated net openings to come.
Speaker Change: to
Speaker Change: Thank you. Our next question comes from Brian Mullin of Piper Sampler. Your line sound open, please go ahead.
Brian Mullin: and thanks to the Brexit State Park, Kirk, can you talk about the beverage component of the offering? Do you feel good about the beverage platform or is that an area where you'll be spending more time where you think perhaps to be innovated from your just any thoughts on that component of the offering would be great.
Kirk: Yeah, thanks for the question. Yes, you know, my heart is still with beverages a lot. This is an opportunity for us.
Kirk: For sure with breakfast, I think we've done a really good job building.
Kirk: An unbelievable menu with a kind of highest quality ingredients, many that really delivers for our customers. Beverage is an opportunity, as I mentioned before, it drives profitability. Yes, it works for us to innovate across a beverage portfolio for a breakfast and the rest of the day parts. You'll see a lot from us.
Kirk: and the beverage category.
Speaker Change: Thank you. Our next question comes from a Chris O'Col at From Seafood. Good afternoon, so open. Please go ahead.
Speaker Change: Good morning, guys, and thanks for taking the question. Kirk, it's good to hear the Crabby Patty promotions performed really well. Can you discuss what customer segment it's appealed to and if they're plans to collaborate with any other future, any other brands in the future?
Speaker Change: Yeah, this is one that has reached a lot of folks, he thinks about it.
Speaker Change: 25 year anniversary of SpongeBob has definitely...
Speaker Change: Struck Accord with a large population, and that excitement is driven clearly. A lot, and it's the best of kind of what Wendy's can bring to the table, I think that's...
Speaker Change: What I take away is a great partnership, one plus one equals three, and I think we got that with Paramount in the regard. I think this also is kind of a celebration of the quality of the menu that we have, that delivered against the expectation of customers.
Speaker Change: I think yes, this is an opportunity for us to continue to find ways to excite our customers and drive traffic. I think this is an example where others will want to partner with us to do that. We're always open minded.
Speaker Change: To Drive Growth, Drive Traffic and Excitement, leveraging our menu. I think this is an example of what we can do and what partners we can be to drive growth.
Speaker Change: Thank you. Our next question comes from a law and a silverman of Deutsche Bank. The law is now open. Please go ahead.
Speaker Change: Thank you very much.
Speaker Change: One more developed all of on the recent trends, clearly the acceleration that you've seen.
Speaker Change: As a launch comes to an end, would you expect trends to normalize at a sustainably higher level than what we've seen in recent quarters? And then can you to talk about the performance that you're seeing across the low middle and high income court? Thank you.
Speaker Change: Puff.
Speaker Change: Good morning Lauren. Yeah, so October as we said in the bit-pad remarks, we really significantly accelerated growth. We're supposed to third quarter as you do the math on our guidance in place.
Speaker Change: Adobus Libya sequentially stepping up a performance in the fourth quarter.
Speaker Change: So that obviously was a great start to the year. We have, as we said, a lot of additional really impactful programming out there for the rest of the quarter with...
Speaker Change: The Solid Caramel Frosty, the Markson Bacon Cheeseburger, the consumer's really laugh and we're putting mainstream national media against the spicy chicken sandwich.
Speaker Change: and clearly our dollar one promotion on any size drinks is continued to run from the quarter. So a very confident with that outlook.
Speaker Change: and we think it's a pragmatic guidance and we were very confident to achieve the step up in performance in the fourth quarter versus our year-to-date performance. As far as income growth is concerned, as you know, our research agency.
Speaker Change: is splitting income cohorts in households with at around last 175.
Speaker Change: $1,000 and those to the maintaining more than $75,000. Overall, we are at the overall maintaining sheer in the category, dollar and dress six year. The same thing happens in those income courts.
Speaker Change: We're maintaining our traffic and a domasher with both the lower and the higher income towards.
Speaker Change: The End.
Speaker Change: Thank you. Unlike the question comes from a Brian Harbour of Morgan Stanley. Your line is now open. Please go ahead.
Speaker Change: Thanks for the morning guys.
Brian Harbour: sort of a random one. The voice AI and drive through, are you in fact seeing kind of like labor hours savings? I guess like, you know, if you could quantify that or sort of tell us more about what you're seeing in what's.
Brian Harbour: Let's like the Acres.
Brian Harbour: See you right on that, or what, you know, do you?
Brian Harbour: and the other two are the same things you like.
Brian Harbour: Tell us more about that.
Brian Harbour: Yeah, let's work.
Brian Harbour: We're out!
Brian Harbour: Still, you know, developing this, we like what we see. You see, think about the efficiency that we're driving to drive through. That's the key component of that.
Brian Harbour: That.
Brian Harbour: As a direct correlations to the efficiency in which we can drive in the drive through.
Brian Harbour: Which you think about the transactions that go through a win these today and 70% of those transactions going through the drives through this is kind of the first place you want to get right.
Brian Harbour: I tell you we're delighted with how this...
Brian Harbour: Continuous week gets better, we're seeing improvements in accuracy, efficiency, and it gives us the confidence that we're going to see some efficiencies in the overall.
Brian Harbour: Labor model in the restaurant, so we'll leverage the restaurant, the employees in the restaurant to deliver against a more efficient execution. And that is enabled by AI. But this is one of those things you go slow to go fast. Right now we're in this.
Brian Harbour: Continuous improvements learning getting our accuracy to a place where we like and then you'll see a deployed across the system.
Speaker Change: Thank you. Our next question comes from a German Tower of City. Good luck and so open. Please go ahead.
Speaker Change: Great, thanks for taking the question. Maybe specifically in the quarter, I'm just curious starting.
Speaker Change: How did your Biggie Black platform?
Speaker Change: Reform during the third quarter.
Speaker Change: Knowing that one of your larger competitors decided to do a value meal deal throughout the period.
Speaker Change: More broadly speaking, similar competitors talking about relaunching a new everyday value platform, likely in early 2025.
Speaker Change: Can you speak to how your brand has performed in the past when large competitors kind of revamp their value message and frankly how you might plan to respond to this go round.
Speaker Change: [inaudible] supported our, the mix deal we year was up at the centre, so so so
Speaker Change: It did well for us and helped us perform valenment and share on a dollar and drastic basis in the third quarter.
Speaker Change: It's weird thinking about value, right? We absolutely believe.
Speaker Change: That value in an environment of value-consuming consumers is not about only executing price-pointed promotions and value deals and value bundles. There's more to that for us we believe.
Speaker Change: To be competitive, we need to continue to innovate, we have demonstrated this in the third quarter. You see the innovation line I've been the fourth quarter we've come to continue to do this.
Speaker Change: To the Light's Developmental Useeking Consumer.
Speaker Change: Tobberwood, as Kirk already said, we are not letting go on the Co-Ameniol.
Speaker Change: The Corman units to delight also in the value environment. Again, we are executing accordingly to that in the fourth quarter, and let's don't forget operations. We are laser focused.
Speaker Change: For the restaurant to be the star and we really have a customer-centric mindset. We're working really hard on having that value seeking consumer having an outstanding experience at the restaurant, so this whole package of.
Speaker Change: Great value, great for my menu, we're innovating and we're really executing well when it matters. When we're meeting the consumer, this is how we can think, we can be very successful in the value environment.
Speaker Change: Thank you. Our next question comes from a gemless lera of Steven's. You're lying in so open. Please go ahead.
Speaker Change: Hey guys, the morning, thank you for taking our questions.
Speaker Change: and your prepared remarks you mentioned.
Speaker Change: October accelerating and obviously the implied acceleration for you and the guidance. He's maybe offered some more color around.
Speaker Change: and what's components of the menu are driving that acceleration. I know you've seen a lot of saucy, no advertisements during football games this season. Maybe some color on how that's contributing and then just any thoughts on bridging the back half of the quarter assuming that you see the crappy petty benefits start to roll off.
Speaker Change: You know, in quarter four, you know what I'd like to see about the momentum is the balance across our menu.
Speaker Change: We've seen our large sandwich, you know, performed very well. Our innovation with talking about his done very well.
Speaker Change: and our value platform, Mr. G.P. just talked about. It's that balance to approach across our menu. They give this a confidence that the momentum will continue.
Speaker Change: But that's kind of if you take a look at it, it's not one of those areas, it's a combination of the three, the core menu, gravity paddies, and a nice shot in the arm.
Speaker Change: But still toss of a terrific core menu that is delivering growth. We'll continue to do that. Again, we're willing to, you know, you can't iterate enough that, you know, the excitement and innovation drive.
Speaker Change: You'll see us continue to drive innovation as we've talked about. We'll see a self-encomo, Foski come out this time link for the season. You'll see us deliver again at great.
Speaker Change: Wally hamburger in our mushroom bacon cheese burger. Those are the kind of things you can expect from us. Continuous innovation focused on our core and delivering the best value in the market life.
Speaker Change: Thank you. Our next question comes from a sorrow at Sanatol or Bank of America. You're along the south open. Please go ahead.
Speaker Change: Thank you very much. I want to go back to the store closures.
Speaker Change: Just in the sense of, are there any kind of things around the types of markets that they're in geographically? The reason I ask is it feels like a lot of restaurants that are accelerating and Gunther are kind of shying away from...
Speaker Change: The rest of the Northeast and really targeting.
Speaker Change: The Sunbelt and Fashra growing cities and MSAs and I'm trying to figure out if there's room for everybody and also what this means in terms of net growth is this sort of population shifts and as you follow them we should think about it.
Speaker Change: From that perspective, where is there really kind of room to dim to buy further or to grow beyond the moods in the computer, the topulation that we've seen over time in the US.
Speaker Change: Yeah, let me answer that thanks for the question, Jarah, let's see.
Speaker Change: If you look across the entire US, these are really spread out. It's not one geography in particular.
Speaker Change: You know, it's a thing when you think about straightening our system, you look at a brand at 65 years old and some of those restaurants are quite out just out of date.
Speaker Change: and that's really...
Speaker Change: Kind of the punch line on that one. It's not one particular area. It's across the board. It's not that many in the scheme of things. It is really about strengthening our system. When I look at our potential though, I look at, you know, we still have runway in the US that have, you know, another additional couple thousand restaurants.
Speaker Change: That would allow us to kind of hit our potential. And then internationally, of course, there's a great deal of potential to reach the penetration that we aspire to. So if you think about the strategy with strength in our system.
Speaker Change: To get high performing restaurants moving. Our focus is on building new restaurants because we know they deliver, well over the average of these poor performing restaurants. So, poor performing restaurants.
Speaker Change: A bat of million dollars, these new restaurants that we're building, due to a million AUVs, that's kind of the mentality that we've taken in this approach and then we overall want the best restaurants for the customers.
Speaker Change: and that customer experience we want to deliver. So that's kind of how we have structured this strategy.
Speaker Change: Kiki, our next question comes from Andrew Charles of TD Cohen. The one who's now open, please go ahead.
Andrew Charles: Great, thank you. I wonder, reconcile the breakfast performance of Missing What Avidit with the comp silver all around flat. So can you talk about the incrementality of breakfast sales and what you're seeing there versus incrementality and recent years?
Speaker Change: Yeah, it's highly incremental from the day-part standpoint. It also leverages.
Speaker Change: You know, the labor model in the restaurant and leverages the restaurant itself.
Speaker Change: So you think it's highly incremental to anything else that we would do. And again...
Speaker Change: We see the mid-single-niget growth that's ahead of our growth. It's ahead of the category so we're, you know, you think about gaining momentum on competition and building out this day part. It gives you the confidence.
Speaker Change: To stick with it, and that's exactly where we're at. We'll continue to build this day park.
Speaker Change: It's an important part of our strategy, important for our franchisees as well. So that's kind of how we're looking at the breakfast day part, but it is to answer questions Incredibly incremental to the rest of our business.
Speaker Change: Thank you. Our next question comes from a Gregory Frank Solt, of Guggenheim, the Securities. Your lines now open. Please go ahead.
Speaker Change: Hey, thanks for the question. I just had a kind of cost question GP. Can you maybe just frame up what you're seeing from the commodity side and the labor side, an inflation basis and how you expect that to play out in the near-to-video term. Thanks.
Speaker Change: Good morning Greg, you are a couple of things. So on the commodity front, a little bit more inflationary last time at all, we would be flat, we have got a little bit more inflation on bees.
So we see about a 1% commodity inflation for the year. It's obviously contemplated in the restaurant marching guidance. We issued labor rate, stable, between 3 to 5% last quarter and continue tracking that way. So we have full visibility now. Our price is our lockdown for the year. So don't expect any other movements in that area. We're obviously turning our focus now to lockdown and get visibility for commodities for 2025.
Thank you. Our next question comes from a Jake Bartselitz of Chorus Securities. Your line is not open, please go ahead.
My question was about your comments on operational improvements. You talked about doubling down, and I'm wondering how large an opportunity, improving operations, what really you rank that is, one of your kind of largest sales thriving
Speaker Change: Potentials in the near and longer terming to 25. How would you explain that opportunity as a sales driver?
Speaker Change: Yeah, good, very good question something close to my heart. When you think about our overall strategy and our promise of putting the customer first, you know, making every restaurant to star operating one best way.
and owning it. Those are kind of the behaviors that we want and you should think about what we're doing with our marketing, our innovation, our many to deliver top-line growth, our digital acceleration. All those things are under pin by operational excellence.
Speaker Change: and those, that's kind of how I think about it. I think that...
Operational Excellence is what delivers against your strategy.
Right, and that's how important it is to us. We are very focused on it. We wanted to deliver that amazing experience for our customer every single time. That's why we're over about the Wendy's Thomas.
Speaker Change: So that's kind of the essence of how we're putting focus on that. We organized ourselves to do that, we've...
Speaker Change: Recently had our convention with our franchisees, we focused our energy on this operational excellence. I think this is what all great companies do. They operate with excellence and deliver a great experience for their customers. That's kind of the essence of what we're talking about.
Thank you, our next question comes from Peter Salah of BTIG. Your line so open, please go ahead.
Yeah, thanks for taking the question. I wanted to ask about the dollar any size.
Peter Salah: Soft drink promotion. You guys are running, you know, that's been a proven strategy. I think we've seen many of your competitors run this in the past and it definitely works. So, could you just talk about the early success that you're seeing there and...
is this promotion that's limited to the fourth quarter or will this carry into 2025.
Yeah, thank you. Yeah, beverages and main focus they're like I mentioned before. You know, we have this, you know, terrific partnership with Coca-Cola and we have.
Freed the Freestyle Machine, which we love, it has the ability to deliver over a hundred different beverages. What I like about it is it definitely delivers the portfolio that Coca-Cola has and it delivers it in both full sugar and the worshipers are getting customers.
Real Choice, that's an advantage at Wendy's.
Peter Salah: And we wanted to celebrate that and remind people of that, that's one of the one dollar promotion. Definitely is effective. We see that in quarter four.
Well, you know, we won't talk about 25 moving forward, but that's kind of the intention about one celebrating we have beverage, beverages, a real profit opportunity for us in the future. We have a platform in Freestyle and a lot of this.
The deliverer choice for customers and you'll see a settle down on that. So we've got some momentum on beverages right now. We expect that will continue.
Thank you, and the next question comes from Christine Chow of Goldman Sachs. But lines out open please go ahead.
Great, thank you for taking the question. So we saw some announcements on executive leadership changes in major hires, including the Chief League girl officer and senior VP of U.S. operations and processing for community in some of the, your analyst day in March. But Kirk, do you feel you have all the right people in place now to kind of drive accountability and accelerate scores globally? And what are some of your key priorities in that organization perspective?
F. Thank you.
Speaker Change: Yes, thanks for the question. We've made some changes that we are very excited about here when I think that I want you to take away the ones we have brought.
High-level Italian.
and that is focused and what I say focus, we structure ourselves to drive our U.S. business from a development and execution standpoint. We structure our international business to accelerate our international development and operations.
So we have organizing ourselves and supporting that organization with great.
Speaker Change: Cowland, that I'm very confident will drive future growth for us and you know that is I think a very deliberate stretch that we've engaged in.
Thank you. Our next question comes from Alex Slegel of Jeffree. Your line is now open. Please go ahead.
Thanks. Going back to the success you're seeing with this fun collaboration and what seems like a really big jump in recent weeks. It's just wanted to see if you could elaborate what you're doing differently, just to drive engagement, whether there's something in the digital or social or any specific changes on that front that.
are working and you can carry on future promotions and innovations.
Yeah, this is another example of when...
A lot of things are working at the same time wanting to build off a great menu, it's a great collaboration. The network's been working right, so our social game on this has been very impactful.
Our Digital Business growing through both our low-key program and the delivery has been elevated. So it's kind of taking a lot of boxes. You got something that's exciting that our customers and our fans.
Speaker Change: Interested in and then you deliver the execution against it with the best menu in the business, coupled with great advertising, great digital platform and great social media. So it's really all come together on this one.
Thank you. Our next question comes from a gem that's Anderson of North Coast Research. Your line is now open. Please go ahead.
Speaker Change: He thinks for the question, and I'm just following on the discussion of a promotional support given the success of the crabby patty promotion. Do you plan to add more partnerships or potentially celebrity endorsements? Something that would actually promote the product innovation you've described that you're launching later this quarter.
Yeah, let's just success. Definitely give us the encouragement to do more things. This nature, I think it also shows that Wendy's can be a great partner in this regard, I think that's important that both.
Partnership, or both parties in the partnership win. And I think in this case, that is true. Of course, we look at every opportunity to elevate what is the best menu at Wendy's. We think that...
The Future is bright when it comes to these opportunities. We'll certainly look for those opportunities that make sense for us and that only builds the brand to new places. And that's kind of how we think about this in the future.
Speaker Change: The End.
Thank you. I'll find a question for today comes from Logan Retch of RBC. Your line is now open, please go ahead.
Hey, good morning. Thanks for taking the question. This one test will follow up just about the...
Improving Trans through the Quarter and into October relative to income cohorts. Are you guys seeing improvement in the lower income cohort as well as the middle and higher income cohorts or is there any sort of divergence between those brackets within the quarter and interupt over?
Good morning, Logan. It's a set previously in one of my answers from a market. She appointed a few in quarter three.
Rementaine Share with the lower end to higher income cohort.
October numbers, it sounds like a cop-out answer. The date is not available so I really can't ask you a question.
That was our last question of the call. Thank you Kirk and GP and thank you everyone for joining us this morning. We look forward to speaking with you again on our fourth quarter call in February. Have a great day.
Speaker Change: and the next episode.
Speaker Change: Thank you all for joining today's cool, you may now disconnect your lines.
Speaker Change: The End.