Q1 2025 The Wendy's Co Earnings Call
After the Speakers' remarks, there will be a question and answer session.
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 good morning, and thank you for joining our fiscal 2025 first quarter earnings Conference call.
After this brief introduction Kirk Tanner, President and Chief Executive Officer will provide a business update and then Ken Cook Chief Financial Officer will review, our first quarter results and share our 2025 financial outlook and capital allocation priorities.
From there we will open up the line for questions.
Today's conference call and webcast includes a presentation, which is available on our Investor Relations website, IR Dot Wendy's dot com.
Before we begin please take note of our Safe Harbor statement that appears at the end of today's earnings release. This disclosure reminds investors that certain information. We discuss today is forward looking and reflects our current expectations about future plans and performance.
Various factors could affect our results and cause those results to differ materially from the projections set forth in our forward looking statements.
Also some of today's comments will reference non-GAAP financial measures investors should refer to our reconciliations of non-GAAP financial measures to the most directly comparable GAAP measure at the end of this presentation or in today's earnings release.
If you have questions. Following today's conference call. Please contact me.
Kirk Tanner: I will now hand, the call over to Kirk.
Kirk Tanner: Thank you Aaron and good morning, everyone. We appreciate you joining us today I'm going to start with some comments on our first quarter performance and then provide an update on the progress we're making against the strategic priorities, we outlined at our Investor day in March.
Speaker Change: Then turn it over to Ken to provide some more detail on our financial results and outlook for the rest of 2025, but first I want to thank all of our employees and franchisees on delivering for our customers in the first quarter and opening 74, new restaurants across the globe.
Speaker Change: As we shared on our earnings call in February we anticipated same restaurant sales would be negative in the first quarter global same restaurant sales declined two 1%, which drove a 1.1% decline in global system sales.
Speaker Change: We stayed focused on delivering for our customers and competed well as we held traffic and dollar share in the U S. With same restaurant sales down two 8% and system wide sales down two 6%. This.
Speaker Change: This was driven by adverse weather in January and February coupled with a weaker than expected consumer environment throughout the month of March.
Speaker Change: Internationally, we delivered solid results with same restaurant sales growth of two 3% and system wide sales growth of eight 9%, we increased productivity at the restaurant level and managed our costs prudently, which allowed us to deliver adjusted EBITDA and earnings in line with our expectation.
Speaker Change: And we returned more than $173 million to shareholders through dividends and share repurchases moving to our strategy. We are focused on strengthening the wendy's brand by executing on three strategic pillars first we will deliver on our fresh famous food.
Speaker Change: Second we will provide an exceptional customer experience through personalization convenience and hospitality and third we will accelerate global net unit growth.
Speaker Change: In the first quarter, we made progress against these three strategic priorities to fuel long term sustainable growth.
Speaker Change: Me walk you through how we are executing on these initiatives.
Speaker Change: The first leg of our strategy is providing our customers with fresh famous food. We do this in three areas craveable core impactful innovation and collaborations and relevant value.
Speaker Change: This starts with using fresh ingredients source close to home to provide the highest quality food and <unk> a great value in the U S. Approximately 95% of our ingredients are sourced domestically, including a 100% fresh never frozen beef, we apply the same sourcing principle in many of our large.
Speaker Change: Just international markets for example, in Canada, we use 100% Canadian beef. This is particularly advantageous in the current environment as tariffs have minimal impact on our supply chain.
Speaker Change: Our core and iconic menu items are the perfect platform for innovation to drive traffic, we've dialed up our approach to innovation by elevating core offerings and leveraging collaborations that tap into culture and consumer passion points.
Speaker Change: Our strategic programming in 2025 launched with one of Wendy's most beloved products. Our frosty, we launched a thin mint frost in partnership with the girl Scouts that resonated with multiple generations of customers and drove positive results for the business, increasing both traffic and attachment rate. This.
Speaker Change: Collaboration was intentional to spotlight processes and tee up our next phase of frosty innovation, giving customers more of what they love.
Speaker Change: We're taking a similar approach with future collaborations by teaming up with consumer favorite brands to strengthen other parts of our core menu.
Speaker Change: And we've already kicked it off with perfect summertime treat our fresh ways to frosty platform Frosty swirls is off to an exciting start and frosty fusions will be coming soon on may 12th I'm personally most excited about our two new brand collaborations Oreo brownie batter and Strawberry pop tart.
Speaker Change: Building on the successful foundation of our iconic frosting collaborations with consumer favorite brands unlocks a win win for our customers and our brand.
Speaker Change: But in this environment, we know that customers are looking for an even more compelling reason to visit restaurants in response to changing consumer behavior. We're launching a new 100 days of summer campaign to provide customers even more of our fresh famous food through core innovation collaboration and value offerings.
Speaker Change: At a time when our customers need it most summer is when customers are most on the go and will feature compelling offers across all day parts to meet their needs Memorial day weekend is the official start to summer and we will start to season. The way we start our day, which is with a wendy's breakfast will offer a great deal on all <unk>.
Speaker Change: Beverages at breakfast later in the summer, we revamp our entire coffee and cold brew lineup than as temperatures start to rise we will bring the heat with the talkies collaboration partner with one of the fastest growing snack brands and a standout favorite with Gen Z. The talkies meal will include a spicy chicken sandwich and Swagel.
Speaker Change: Fries that are sure to become a customer favorite.
Speaker Change: And for our most loyal and engaged Wendy's fans 100 days of summer will be 100 days of savings through our digital app with deals like National Friday to provide customers with more of our fan favorite hot and crispy fries.
Speaker Change: As the summer ends our innovation and collaborations won't we'll be launching a new collaboration with one of them. This fall most anticipated entertainment properties. The 100 days of summer will be the perfect lead in to our fall and winter calendar packed with equity building core offerings accessible deals and innovation that only.
Speaker Change: Wendy's can bring.
Speaker Change: While customers come to Wendy's for fresh famous food they come back when they have a great visit that's why our next strategic pillar is delivering an exceptional customer experience, we're bringing this to life through our new operations vision. The model of excellence, we've defined what excellence looks like through the eyes of our customer and our <unk>.
Speaker Change: Increasing our operational intensity to improve their experience.
Speaker Change: Our best performing restaurants to find the windy standard and we're investing in resources training and technology to replicate the same heightened operational intensity at every restaurant. Our goal is to ensure we're consistently delivering an excellent experience for all customers no matter, which restaurant they visit.
Speaker Change: We recently completed the rollout of our new field structure and added resources to double the number of in restaurant visits annually we.
Speaker Change: We are already underway conducting individual restaurant assessments, which are key to improving visibility and benchmarking against model performance.
Speaker Change: These early results have enabled us to pinpoint specific improvements that we can make to improve the customer experience and productivity, including increasing focus on training.
Speaker Change: Our franchisees agree that we have opportunities to make improvements that will support growth and they are excited to partner on this journey towards excellence.
Speaker Change: Alongside operational improvements, we're investing in technology to improve the customer experience in restaurant level economics from enhancing our mobile app and scaling our loyalty program to implementing digital menu boards and fresh AI order, taking we're making technology, an integral element of our strategy to deliver a seamless physic.
Speaker Change: <unk> and digital experience.
Speaker Change: In the first quarter, we continued to deploy digital menu boards and fresh AI across the system and are on track to expand the implementation to more than 500 restaurants by the end of the year.
Speaker Change: This technology provides a curated suggestions based on customer's order often resulting in an increased check size.
Speaker Change: It also raises productivity and gives cruise more time to focus on hospitality.
Speaker Change: Customers and franchisee feedback has been encouraging and we're continuing to make advancements to improve technology even further.
Speaker Change: We're also enhancing the wendy's app for a better customer experience.
Speaker Change: In the first quarter, we introduced gamification to our App, giving customers a compelling reason to engage with the brand beyond the point of purchase. Additionally, we continued to enhance personalization features including the ability to deliver each customer digital messaging that is most relevant to them.
Speaker Change: These updates are driving improvements across app engagement metrics, including conversion rate, which reached an all time high in the first quarter and drove our digital mix to a record of over 20% of total sales.
Speaker Change: Customers tell us that order accuracy is the most important driver of satisfaction and we're deploying tools to improve accuracy across all channels. We are rolling out two initiatives to drive accuracy menu item label printers, and smart delivery scales.
Speaker Change: Item labels help ensure every sandwiches customized exactly how the customer wants it.
Speaker Change: And delivery scales ensure customers receive every item ordered in restaurants that utilize these tools order accuracy has significantly improved.
Speaker Change: While we are still in the early innings of delivering on our promise of a perfect every time experience, we're already making progress taking the right steps to reach our full potential.
Speaker Change: <unk> to our third strategic pillar accelerating net unit growth.
Speaker Change: It's all about building new restaurants, and we made significant progress in the first quarter, we opened 74, new restaurants across the globe over 60% of which came internationally in line with our long term strategy beginning with international I am pleased with the changes that we have made to our structure, enabling us to better execute on being globally.
Speaker Change: Great locally even better our new restaurant openings came from a combination of stronghold markets, such as Mexico, and Canada, and new markets like Australia.
We had a record number of openings in Canada, adding the most restaurants in the first quarter over the past 25 years. We also hit a milestone with the opening of our 500 restaurant in Asia Pacific and the Middle East and Africa, which continues to be our fastest growing region.
Speaker Change: In the U S. We opened 28, new restaurants, including eight that were company owned.
Speaker Change: We are pleased by the pace of openings to start the year and remain on track to meet our 2025 net unit growth target.
Speaker Change: In addition to restaurant openings in the first quarter, we continued to add development commitments that strengthen our long term pipeline.
Speaker Change: In Mexico, we are building scale and signed a development agreement for 25, new restaurants in Guadalajara.
Speaker Change: Restaurants in Mexico have strong economics with some of the highest restaurant level margins in our system engaged franchisees and are supported by a well established supply chain, Mexico will serve as a key foundational market to support the further expansion into Latin America.
Speaker Change: Additionally, in Latin America, our franchisee in Chile has signed up to build 30 more restaurants, bringing their total commitment to 50, new restaurants over the next five years.
Speaker Change: We are excited about the progress we are making to expand our footprint globally and look forward to continued growth ahead.
Speaker Change: In closing, we remain confident in our strategy and the strength of our brands deliver long term profitable growth. We are focused on controlling what we can control and adapting to the current environment through both value and innovation.
Speaker Change: The innovation on our menu meet changing consumer preferences and creates experiences through collaborations that tap into customer passion points.
Speaker Change: And our 100 days of summer campaign will provide compelling value offerings combined with the highest quality food in the industry.
Speaker Change: As the consumer environment remains more challenging than we anticipated we have updated our full year outlook. We now anticipate full year global systemwide sales to be flat to down 2%.
Speaker Change: Adjusted EBITDA between $530 million and $545 million and adjusted EPS of <unk> 92 to 98.
Speaker Change: Importantly, we are well on our way to delivering full year net unit growth of 2% to 3%.
Speaker Change: We are taking a prudent approach to operating the business, but remain fully committed to investing in our strategic initiatives to drive long term growth. Despite the current macro environment over my more than 30 year career I've found that listening to the customer will always steer you in the right direction. This is why we are putting the customer at the center of everything that we do.
Speaker Change: <unk> and are confident that delivering on our strategic plans will allow us to win in the marketplace with that I will pass it over to Ken to discuss our financial results and outlook in more detail. Thanks, Kirk and good morning, everyone I will start by covering our first quarter results, including an update on our operational initiatives followed by our capital deployment.
Speaker Change: During the quarter and last I will share some comments on our outlook for the remainder of 2025.
Speaker Change: Our first quarter financial results included adverse weather impacts early in the quarter alongside a challenged consumer environment exiting Q1.
Speaker Change: Global system wide sales declined one 1% on a constant currency basis, driven by global same restaurant sales, which were down two 1%.
Speaker Change: U S same restaurant sales were down two 8% driven by a decrease in traffic, partially offset by a higher average check.
Speaker Change: Performance in January and February was impacted by adverse weather, resulting in reduced traffic and temporary restaurant closures across the country.
Speaker Change: As the effects of winter weather subsided, we launched our tinman frosty collaboration on February 21, which drove U S. Srs into positive territory as we exited February and entered March.
Speaker Change: We anticipated this trend to continue throughout March underpinned by consistent consumer behavior.
Speaker Change: As the month progressed consumer confidence deteriorated, leading to a reduction in demand.
Shifting to our international segment, the Wendy's brand continued to gain momentum around the globe delivering system wide sales growth of eight 9% and a two 3% same restaurant sales growth in the first quarter.
Speaker Change: System wide sales growth was positive across all regions led by Europe, and the Asia Pacific Middle East and Africa region.
Speaker Change: Early results from our expansion into Australia have exceeded our expectations and are another proof point of our ability to execute on a globally, great locally even better strategy.
Speaker Change: Our Canadian business also grew year over year in line with our expectations as we have amplified our fresh famous food messaging for our 100% Canadian sourced fresh never frozen beef are localized supply chain in the country also includes domestically sourced produce and frosty ingredients minimizing the direct impact from tariffs to our Canadian.
Trance.
Speaker Change: Shifting to margin Global company restaurant margin was 14, 3% for the first quarter and U S Company operated restaurant margin was 14, 8% a contraction of 50 basis points year over year the.
Speaker Change: The change in U S company operated restaurant margin was driven by sales deleveraging higher commodity costs and wage rate inflation.
Speaker Change: These were partially offset by higher labor productivity compared to the prior year.
Speaker Change: Let me provide some color on the operational initiatives that Kirk discussed.
Speaker Change: We have continued to deploy fresh AI to the system and are now at a 168 locations throughout the U S and we remain on track to hit our target of more than 500 by the end of the year.
Speaker Change: Through the end of the first quarter, we are encouraged by the continuous improvement in the platform driven by both enhancements that we've introduced to the system and learning from additional customer interactions we.
Speaker Change: We are excited to leverage this platform on a larger scale to improve restaurant productivity and the customer experience.
Speaker Change: At our Investor day, we talked about the importance of helping our franchisees enhance their profitability one of the ways. We're doing this is implementing a system to collect franchisee profit and loss statements on a monthly basis at the restaurant level. This tool enables proactive partnership to leverage insights and perform benchmarking of restaurants with similar demographic and economic profiles.
Speaker Change: To share learnings across the system, we have completed Onboarding and training for the franchisees who are in the process of uploading financials into the system feedback.
Speaker Change: Feedback has been positive and I look forward to sharing more about franchisee performance and additional earnings from this initiative later in the year.
Speaker Change: Early progress on these initiatives give us confidence that we're on the right path to improving productivity and enhancing restaurant level economics for both company owned and franchisee locations moving to the P&L.
Speaker Change: Total adjusted revenue was $423 1 million, a decrease of $6 $7 million.
Speaker Change: Due to lower company operated restaurant sales and lower franchise royalty revenue, partially offset by an increase in franchise fees. Adjusted EBITDA was $124 5 million a decrease of $3 $3 million, resulting primarily from lower adjusted revenue and a $4 4 million increase in G&A expense.
Speaker Change: This was in line with our expectations and driven in part by the investments to support our technology and operational initiatives.
Speaker Change: These items were partially offset by a $3 million increase in other operating income and a $2 $3 million decrease in company advertising expense.
Speaker Change: Adjusted earnings was 20 <unk> per share a decrease of <unk> <unk> from the prior year driven by a decrease in other income lower adjusted EBITDA and a higher effective tax rate.
Speaker Change: These were partially offset by fewer shares outstanding as a result of our share repurchase program.
Speaker Change: Turning to free cash flow, we are updating our definition of free cash flow.
Speaker Change: As we shared last quarter, we plan to increase our investments in the build to suit program to accelerate global net unit growth.
Speaker Change: Given this planned increase we believe changing our definition of free cash flow is beneficial to investors. Our new definition of free cash flow is net cash provided by operating activities less capital expenditures less build to suit franchise development fund investments.
Speaker Change: Under this new definition free cash flow was $68 million in the first quarter.
Speaker Change: Overall free cash flow improved by $12 million on a comparable basis to the prior year.
Speaker Change: Moving on to capital allocation investing in the business is our first capital allocation priority and during the first quarter, we invested $17 7 million in capital expenditures and $5 8 million and our build to suit program.
Speaker Change: During the first quarter of the 74, new restaurants opened 14 included investments from the build to suit program has.
Speaker Change: <unk> coming from the U S and the other half internationally in the UK and Canada.
Speaker Change: In addition to build to suit investments capital expenditures included $9 $9 million towards the development of New company owned restaurants.
Speaker Change: We also invested $6 1 million towards our technology initiatives, including continued investment in our digital menu board rollout. Our second priority is paying an attractive dividend in line with our capital allocation policy today, we announced our second quarter dividend payment of <unk> 14 per share.
Speaker Change: Our next priority is maintaining a strong balance sheet.
Speaker Change: We ended the first quarter with over $335 million of unrestricted cash on the balance sheet and a net leverage ratio of four five times.
Speaker Change: This includes the impact of the share repurchases during the first quarter. Finally, we believe cash belongs to our shareholders and we will use share repurchases to return excess cash to shareholders. During the first quarter, we repurchased eight 2 million shares for approximately $124 million and year to date through April 25th have repurchased over.
Speaker Change: 12 million shares for approximately $175 million.
Speaker Change: We continue to believe an attractive opportunity exists to repurchase our shares as they remain undervalued compared to both our own history and relative to our peers. We are continuing to buy and anticipate repurchasing up to an additional $25 million of shares in 2025.
Speaker Change: Through share repurchases and dividends, we plan to return up to $325 million of cash to shareholders. In 2025, an increase of up to $40 million compared to 2020 for this return to shareholders highlights our focus on disciplined capital allocation that supports our long term strategy.
Speaker Change: Now, let's turn to our financial outlook on.
Speaker Change: On the fourth quarter call, we shared that our outlook for the year was grounded in multiple industry forecast, which molecule our burger traffic to be flat to down 1% for 2025.
Speaker Change: During the first quarter <unk> Burger traffic was below these industry forecasts driven by the combination of adverse winter weather in the first half of the quarter and a pullback in consumer demand based on the change in consumer behavior. We saw in March we are updating our outlook for the full year 2025 due to the high degree of uncertainty in the market our updated outlook assumes that the <unk>.
Speaker Change: Current consumer environment persists throughout the remainder of the year.
Speaker Change: Our outlook also reflects the strong programming, we have for the remainder of the year, including our new Frosty swirls infusions are upcoming talkies collaborations.
Speaker Change: Our 100 days of summer programming and new collaborations and additions to our menu later in the year.
Speaker Change: Before diving into our updated outlook I want to reiterate that despite the challenging environment. We continue to manage the business for the long term investing in our strategic priorities to deliver value for our customers, our franchisees and our shareholders.
Speaker Change: Now, let's move on to the details.
Speaker Change: We are reaffirming our global net unit growth target of 2% to 3% for 2025 and are pleased with our results in the first quarter.
Speaker Change: For the full year 2025, we now expect global systemwide sales to range from down 2% to flat year over year U S Company operated restaurant margin is expected to be 15% plus or minus 50 basis points. This includes an updated commodity inflation outlook for the year of two 5%.
Speaker Change: We expect G&A to be between 265 and $275 million and continued to represent approximately one 9% of system sales for the full year.
Speaker Change: We will continue to invest in the resources and technology needed to deliver on our strategic priorities. Additionally, we will tightly manage discretionary expenses and expect incentive compensation will be lower than our initial outlook.
Speaker Change: Adjusted EBITDA is expected to be between 530 and $545 million.
Speaker Change: We continue to anticipate interest expense of approximately $127 million as we expect to issue $400 million of whole business securitization notes in late 2025 and used the proceeds to pay off the $400 million of debt that matures between December 2025, and September 2026, taking.
Speaker Change: Taking all these into account we now expect adjusted EPS to range from 92, a share to <unk> 98 per share.
Speaker Change: We expect full year free cash flow under our new definition to be between 185 and $205 million for the full year.
Speaker Change: This includes approximately $65 million of build to suit investments.
Speaker Change: We continue to anticipate capital expenditures of between $100 million to $110 million for the year.
Speaker Change: In closing despite the uncertain macro environment, we remain focused on controlling what we can control.
Speaker Change: We are confident in delivering the highest quality food and <unk> and believe that our programming for the remainder of the year, we will provide customers with compelling reasons to eat at Wendy's and allow us to win in the marketplace.
Speaker Change: We have a focused strategy and are executing to elevate the customer experience and investing to expand our global footprint to drive profitable growth I'll now hand, it over to Aaron to share our Q2 Investor Relations calendar.
Aaron: Thank you Ken.
Aaron: On may 19th we will participate in the virtual Wolfe Research Investor Conference.
Aaron: We will participate in the Bernstein strategic decisions conference on May 29th and on June 11th will participate in Evercore consumer and retail conference. If you are interested in joining us at any of these events. Please contact the respective sell side analyst or equity sales contact at the host firm.
Aaron: We will now transition to the Q&A part of the call.
Aaron: Due to the high number of covering analysts please limit yourself to one question only.
Speaker Change: Operator, please queue up the first question.
Aaron: Thank you.
Speaker Change: If you'd like to ask a question. Please press star led by one on your telephone keypad.
Aaron: You've got to remove your question. So first of all I'd say.
Speaker Change: First question for today comes from Jeffrey Bernstein of Barclays.
Speaker Change: Your line is now open. Please go ahead.
Speaker Change: Great. Thank you very much.
Speaker Change: Just looking at the 2025 guide.
Speaker Change: I know you sounded bullish in early March at your Investor Day.
Speaker Change: You are tempering. It this morning after just the first quarter.
Speaker Change: And it seems like a fairly good amount. So does seem to demonstrate you expect the first quarter weakness to prevail for the year.
Speaker Change: I'm just wondering if you could maybe share your thoughts being new to the quick service restaurant space. It would seem like <unk> would benefit or would hope to benefit from retaining the lower income consumer and or trade down from middle and upper income consumers.
<unk> been the calling card for quick service being more defensive in a slowing macro so I'm just wondering Kurt how are you.
Speaker Change: <unk> quick service positioned currently.
Speaker Change: Tied to that just I think you mentioned value.
Speaker Change: Time, so I'm just wondering if you're still confident in your current platform kind of led by the Biggie bag or whether you think you need to refresh that platform or maybe increase the mix of marketing on value. Thank you.
Speaker Change: <unk>.
Speaker Change: Yeah.
Speaker Change: Hey, Thanks for the question Jeffrey.
Speaker Change: Consumers certainly is under pressure and I think thats reflected in the Q1 numbers and we feel we see that persisting we thought it was prudent to plan.
Speaker Change: The consumer is under pressure for the full year, what do we do to control what we can control and we like the second half of the year for the activity that we have and we think that we have every right to win the consumer win in the marketplace.
Speaker Change: Feel really good about our 100 days of program or 100 days of summer program and I think it reflects the balanced approach of getting after the customer in solving customer issues and opportunities.
Speaker Change: Starts with.
Speaker Change: Focusing on our core we have core innovation.
Speaker Change: Innovation platforms like our frosty value is important as you mentioned, we do have the best quality value meal in the industry, but we will also provide value every single week for our customers through this 100 days of December off of our core menu.
Speaker Change: And then I'd say the collaboration that we have in the summer also drive passion points with customers and drive traffic I'm really excited.
Speaker Change: Our program starts in June with Talkies desk.
Speaker Change: Definitely create consumer love and noise and it will drive traffic I think.
Speaker Change: Our approach is one of balance being able to balance value innovation focus on our core and deliver that with a great customer experience, we're very focused on hospitality and delivering that execution in the restaurant as well we've deployed those resources and we like the improvements we're seeing so.
Speaker Change: It's a couple a couple of things that we see and we do think that <unk> has the right to win in this economic environment, but we're really focused on what we can do to bring customers into when these and deliver a great customer experience I know that was a long answer.
Speaker Change: But that's that's.
Speaker Change: We feel we're very optimistic with what we're doing in the marketplace, but we wanted to have a prudent approach of how we plan.
Speaker Change: Thank you.
Speaker Change: Next question comes from David Palmer of Evercore ISI. Your line is now open. Please go ahead.
Speaker Change: Yes.
Kirk Tanner: You Kirk definitely.
Speaker Change: We're working on a lot of things and.
Speaker Change: And also you made that comment about putting the consumer at the center.
Speaker Change: Im wondering if maybe you could touch on the consumer data what its telling you in the key metrics.
Speaker Change: Care about drive thru speed value perception and quality of your premium items.
Speaker Change: Of course, you mentioned something about accuracy, there too but.
Speaker Change: Based on your initiatives, where do you see the biggest improvement happening where you're starting out versus maybe where the brand has been in the past where do you see the biggest improvement happening it feels like Youre doing a lot maybe on the quality side through the rest of the year.
Speaker Change: But I'd love to get your thoughts about where you see the most improvement coming from where you're starting thanks.
Speaker Change: Yes, I appreciate the question David.
Speaker Change: Operational excellence, and creating a great customer experience and driving hospitality a wendy's is the focus of the investment we put behind our field resources getting into our restaurants twice with the twice the frequency coaching and training and elevating that experience is key.
Speaker Change: We're focused on a few big drivers of customer satisfaction. One is accuracy, so deploying tools in the restaurants and training in the restaurants. So delivery scale is one thing that we're working on where you can quickly evaluate the weight that ties to the accuracy of the delivered meal that is one that we're <unk>.
Speaker Change: <unk> two label printing these seem very straightforward, but these things drive focus on accuracy and execution in the in the marketplace. The other thing is friendliness and hospitality measuring those things drive customer satisfaction and the early results.
Speaker Change: <unk> are good so when we think about.
The accuracy from a delivery scale and label printers, those things that we have deployed have dramatically improved accuracy and so as we take those across our U S owned businesses in the franchise system, we're going to do that I think the other thing is this is one system our franchisees our customers.
Speaker Change: R R.
Speaker Change: Our personally owned our company owned restaurants doing this together is critical we've spent the last three weeks visiting with our franchisees rolling out this summer program reinforcing the programs of driving execution at the restaurant level and we have alignment.
Speaker Change: A high sense of urgency to do that so what we measure is our customer satisfaction and we see improvements with the things that we're focused on and we like where we're going.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: Question comes from Dennis Geiger of UBS. Your line is now open. Please go ahead.
Dennis Geiger: Great. Thanks. Good morning, guys. I was wondering if you could talk a bit more about the unit development outlook, including any information maybe on the on the pipeline and sort of overall franchisee demand in the current environment.
Speaker Change: Solid start to the year good to see a reiteration of the full year development targets, but anything sort of on how the current environment might impact demand and plans for 2006 looking ahead. Thank you.
Speaker Change: Yes, we like what we see right now we're off to a good start I'd tell you it's.
Speaker Change: Right on our strategy so little over 60% of those units came from international our international market I believe our international strategy is working and we see that pipeline and commitments in our international plans and then domestically we had a strong start domestically with the unit growth we have.
Speaker Change: The pipeline that we can see for this year and the pipeline for 2006 and beyond we are confident in what we're doing and again it goes back to the things in the fundamentals that we're driving restaurant level economics, driving the topline and lowering the build costs. We're focused on all of those things.
Speaker Change: And then.
Speaker Change: Engaging with our franchisees to help them drive those solutions again, we're also investing more capital in our build to suit program. So we feel really good about our unit growth in 'twenty five that's why we're sticking to our guidance, we feel really good about that and we feel good about the future post 'twenty five.
Speaker Change: Great. Thank you Kurt.
Speaker Change: Thank you.
Speaker Change: Next question comes from John <unk> of Citi. Your line is now open. Please go ahead.
John <unk>: Great morning.
John <unk>: Thanks for taking the question I'm just curious if you could dig in a little bit to what transpired during the quarter.
John <unk>: For your business specifically.
John <unk>: It did sound like obviously on that.
John <unk>: In February you were expecting a soft quarter.
John <unk>: And then March came along and was worse than you had.
John <unk>: Dissipated.
Speaker Change: You just dig into how that showed up in your business was it broad based did you see specifically show up and certain day parts weekdays weekends, and if you can parse out maybe.
Speaker Change: You see it specifically you had certain income levels I'm just curious if you could provide any more flavor to that thank you.
John <unk>: Yes, thanks for the question John.
John <unk>: You are right Q1, it was a noisy quarter five in the first eight weeks of the quarter had significant weather events in our system.
John <unk>: Then things turned around as we exited February and into March we launched <unk> on February 20, <unk>, we saw our own same restaurant sales turn positive as we exited February and entered March in our original outlook.
John <unk>: Assume that it would stay that way throughout the month of March. However, we saw a significant shift in industry consumer behavior as we move throughout March consumer confidence fell and customers increasingly pulled back from <unk> <unk>.
John <unk>: Industry and we performed in line, we continue to win in the market, but we saw those those same trends in our results. So given the uncertainty around industry demand going forward, we ground at our full year outlook and what we're seeing over the past. Several weeks then we apply normal seasonality to that and that kind of gets you to the low end of the guidance that we've provided.
John <unk>: <unk> we're.
John <unk>: We're not standing still we have a lot of additional incremental programming through the rest of the year that Kirk talked about including our 100 days of summer. We think as we execute that that will help us continue to win in the market and then climb our way towards the midpoint of the guidance range that we provided and then in the event. There is some additional consumer recovery later this year from an industry perspective.
John <unk>: And then we can be talking about the high end of the guidance.
John <unk>: From an income cohorts perspective, we measure household income above 75000 household income below 75000, and we saw broad based pressure in the quarter I would say the pressure was more acute but those households under $75000 and we did see industry traffic with those households pulled back by high single digits low double.
John <unk>: Digits, especially in the month of March.
John <unk>: We continued to hold share obviously as you can expect in this environment, both from a weather environment and a consumer pullback environment breakfast performed a little bit worse than rest of day in breakfast from worst in rest of day as consumer behavior changed so that's kind of the.
John <unk>: Now for guidance as we're focused on controlling what we can control. We're excited about reaffirming our net unit growth outlook of 2% to 3% and also reaffirming capex guidance, we're investing for the long term and we feel confident about building more restaurants, winning in the market and enhancing restaurant level economics.
John <unk>: I appreciate the color. Thank you.
Speaker Change: Thanks, Keith on next question comes from Sara Senatore of Bank of America.
Let's now open. Please go ahead.
Sara Senatore: Oh, thank you.
Speaker Change: Last quarter I think you said that in 2025, we're redeploying some of the advertising spend to investments in field operations. I was wondering if you think this pullback in spending might have.
Speaker Change: Influenced or had an effect on your performance I know you mentioned maintaining share.
Speaker Change: But yes, I think the conventional wisdom says, it's terribly simply need your share of market.
Speaker Change: And we did see some other restaurants improving in March and April. So, yes, do you have thoughts on on advertising spend or maybe.
Speaker Change: Pressing the lever a little bit.
Speaker Change: Harder and then.
Speaker Change: Curious, what with Burger traffic down last year.
Speaker Change: Broker traffic I know you had expected.
Speaker Change: It would be flat to down in 2025 down 1% just curious if you can benchmark for last year.
Speaker Change: Yes happy to in terms of <unk>, our Burger traffic for the last several years has kind of been down in the low single digit range. We expected this year in total to be a little bit better than that based on the industry forecast. We were looking at zero to minus 1%, obviously, the first quarter from an industry perspective performed the worst thing that we saw industry traffic.
Down mid single digits in the first quarter, which was worse than we expected and we do expect those industry forecast to come down as we move throughout the rest of the year and obviously that is embedded in our guidance because we assume that the current consumer pressure persists throughout the remainder of the year in terms of advertising spending I think when you look at what the industry traffic did relative to.
Speaker Change: What we did again, we continue to hold and hold share in total on traffic and dollar wise. So I don't think that the advertising spend had had a big impact on us. The other thing I'd say is we do see significant opportunity in our restaurants as we enhanced the customer experience, we think that ultimately drives frequency and enhances the windows now.
Speaker Change: Proposition and will ultimately allow us to continue to win in the market. So we feel good about the decisions we've made.
Speaker Change: Yeah.
Speaker Change: Thank you.
Speaker Change: Yeah.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Brian Bittner of Oppenheimer Your.
Speaker Change: Your line is now open. Please go ahead.
Speaker Change: Thanks, Good morning.
Speaker Change: Around the industry and within your own business I think we've seen very successful <unk>.
Speaker Change: Or promotions, such as your time with Spongebob last quarter and others around the industry are doing similar things why do you think that is so effective and how do you think about how to convert those successes into sustainable future comp growth moving forward and do you have any catalyst like that set for 2025.
Speaker Change: Brian Great question, but I think it's a balanced approach I think you have to focus on your core your innovation has got to be incremental and you have to have compelling value I would say that's foundational. So that's what we're focused that collaboration like Spongebob I think connect you to culture and drive.
Speaker Change: Excitement through passion points. They bring you bring customers into the restaurant I think that is for sure. We are focused on the learnings that we took from spongebob into the future collaborations that we have coming up.
Speaker Change: We have a collaboration on our frosty lineup starting with.
Speaker Change: Strawberry pop tart and.
Speaker Change: Oreo brownie, but our batter those to our collaborations with brands that we know consumers going to left so that that's going to elevate.
Speaker Change: The frosty platform. Shortly thereafter, we've got a partnership with hockey Talkies why <unk> is so important it connects with Gen Z customers multi cultural it's a customer group, we're going after it drives traffic into our restaurants, and we give customers a great.
Speaker Change: Experience through.
The collaboration of our chicken Sandwich, we have <unk> chicken sandwich meal, we have wiggled fries customers are going to be looking for these things. The secret is how do you build on that how does that become innovation onto your core menu and you create brand love through those experience, but I think it's Phil.
Speaker Change: Important to stay customer focused.
Speaker Change: That customer focus tapping into passion points through these collaborations I think is really important now for us we're very intentional on who we partner with and we ask ourselves does that help us get the customers that we're looking forward to drive traffic and share and win in the marketplace, but I like the frequency in which we have.
Speaker Change: Land collaborations we have talked to is we have one again at the end of this summer that's tied into an entertainment property, we're not going to talk about it right now, but that will be coming as well again, we're taking our learnings tapping into passion points and going after specific customer groups to build our brands for the long term.
Speaker Change: Thank you.
Speaker Change: Next question comes from Jim <unk> of Stephens. Your line is now open. Please go ahead.
Speaker Change: Yes. Good morning, Thanks for taking my question.
Speaker Change: I wanted to ask a little bit about the engagement from the consumer with some of these branded partnerships, particularly if we kind of assume.
Speaker Change: Maybe a softer consumer for the remainder of the year.
Speaker Change: Our competitors talk about extending value offerings in like <unk> Pizza is seeing I think a higher frequency of discounting and so.
Speaker Change: Do you have any concern that some of these.
Speaker Change: Offerings on like the proxy platform than any other collaboration you might have might get.
Speaker Change: Drowned out by all of the other value offerings in the channel or do you still think that they can bring incremental traffic to the store, even with kind of more value noise out.
Speaker Change: Thank you.
Speaker Change: I think it's an important question and I think that balance on our menu is important so we have compelling value across our biggie black platform plus will have value on our core but when you talk about consumer passion points that is I'd like to think about that is a value proposition when you can ignite custom.
Speaker Change: Passion points that drives traffic.
Speaker Change: I think you only have to look back to the Spongebob event in October that ignited a passion and a tied into culture that drove traffic I believe we have those collaborations that are very intentional I think that those are valuable our value and I don't believe value meals or deep.
Speaker Change: Discounting will overshadow how you connect with customers my experience has been when you ignite customer passion points, that's a major driver of enthusiasm for your brand.
Speaker Change: And I like where we're going with that.
Speaker Change: Great. Thank you.
Speaker Change: Thank you. Our next question comes from Lauren Silberman of Deutsche Bank. Your line is now open. Please go ahead.
Speaker Change: Yes.
Speaker Change: Yes.
Speaker Change: Hi, Thanks, a lot so I want to follow up on one of the comments from <unk> question, You said Burger Catholic was down mid single digit in Q1 does that imply traffic is down closer to high single digit exiting the quarter in April.
Speaker Change: And then my actual question is on the comp guide I just want to level set expectations in terms of what you're embedding for the cadence of comps as we move through the year. It sounds like <unk> may be similar to the first quarter improvement three Q, given the initiatives and naphtha on the fourth quarter given the tough compare so any color you can give on cadence and perhaps what you expect.
Speaker Change: <unk> for the international segment, especially in the U S. It would be helpful. Thank you.
No great question Lauren Thank you.
Speaker Change: Starting off with the shape of the year Youre right I would say, we would expect the second quarter to look very much like the first quarter in.
Speaker Change: In terms of total system wide sales growth in terms of Srs.
Speaker Change: In terms of the profitability side, so year over year expect the second quarter to look a lot like the first two.
Speaker Change: <unk> point, we do have a lot of exciting programming coming out through the summer and at the end of summer. So we do expect to see momentum as we exit the second quarter to propel us into the third we expect that momentum to continue in the fourth but like you said, we do have we do have some tough comps there from a international perspective, we really like what we're seeing in the market So international system.
Speaker Change: <unk> sales grew eight 9% year over year on a constant currency basis with all regions contributing.
Speaker Change: <unk> Europe, and APAC EMEA, both grew high teens low 20% system wide sales year over year, we saw Latin America, and the Caribbean plus 10% on a constant currency basis, and Canada grew mid single digits from a system wide sales perspective, so broad based strength.
Speaker Change: Nationally in the business.
What we'd like to see in terms of traffic for the industry. Yes, I do think it will be it will remain pressured. So we did see the consumer behavior change across the industry throughout the month of March.
Speaker Change: And the guidance the low end of the guidance assumes that that consumer behavior and that traffic pattern persists throughout the remainder of the year.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Margaret.
Speaker Change: <unk> of Wolfe research.
Margaret: Your line is now open. Please go ahead.
Speaker Change: Good morning, guys and thank you for taking my question. So you launched your rehab property pipeline that April can you discuss any early readings and the opportunity you see here, especially when it comes to driving awareness. Thank you.
Speaker Change: Margaret Thank you for the question, Yes, we we just launched frosty swirls and we launched Frosty Fusions May 12, we've seen really good results early with frosty and I can tell you our experience has been when we get it right with frosty are definitely delivers traffic.
Speaker Change: We saw this when we did the girl Scout frothy.
Speaker Change: With our collaboration earlier this year that set us up for this platform, we have a lot of confidence in building out our frosty business. We think that this is a place where we're playing into again customer passion points with one of our most iconic brands. So yes, we plan on that being a differentiator.
Speaker Change: And helping us win in the market and take share frosty will definitely be a platform. We have a lot of confidence and early results are really encouraging.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: Question comes from Andrew Charles of TD Cohen.
Speaker Change: One is now open. Please go ahead.
Andrew Charles: Great Kirk there is an increased focus on chicken across the industry in 2025, particularly in the immediate term. So I'm curious if we look past the current Cajun Chicken limited time offering Pataki's limited time offering in June are you happy with your chicken portfolio or do you either opportunities to bringing permanent news the menu via strips were <unk>.
Speaker Change: <unk> chicken sandwich, and Ken if I could sneak one more in it didn't come up during the call the prepared remarks, but the $4 million claim that was cited in the queue can you just talk a little bit more about that just given the increase that drove in other operating income.
Andrew Charles: Okay.
Andrew Charles: Yes, So let me talk about chicken one that we're very intentional about putting the Takeda collaboration with our chicken sandwich and we do see chicken is a major opportunity. We will announce later this year our plans to Holistically look at the chip chicken we have been worth.
Looking on it I've tried these products we have a lot coming your way from a chicken standpoint, I would think about.
Andrew Charles: Delivering the best chicken sandwich in the industry plus we're looking at other chicken innovations that.
Andrew Charles: So with that that that will be coming shortly I would say, we're very intentional about again setting up our chicken getting momentum in that in that part of our menu. We know that is critically important to our customers and attracting customers. So we are very focused on that youll see much more from us in the later.
Andrew Charles: Half of the year.
Andrew Charles: Yes in terms of the $4 million claim settlement that was associated with a settlement with credit card providers.
Andrew Charles: We won't get into the details on that but it was planned for as we exited 2024, we expected. This app in the first quarter and it came in in line with our expectations.
Andrew Charles: Thank you.
Speaker Change: Thank you. Our next question comes from that.
Speaker Change: <unk> opened in Spain.
Speaker Change: Your line is now open. Please go ahead.
Speaker Change: Good morning.
Speaker Change: Usually around this time you update on the tons of epos flow. So I was wondering if you can provide an update on the principal cash flows.
Speaker Change: How much it grew on a year over year basis.
Speaker Change: More importantly, as we look into 2025, we have the balance of your guidance embedding some tough macro environment, while Abigail is leading operational excellence in the stores, which hopefully is going to be leading to greater EBITDA four fronts of detail can you comment also on what sort of expectation for 25 on the balance between the two thank you.
Speaker Change: Franchisee profitability.
Speaker Change: We normally give an update on the second quarter call in terms of what that looked like and we'll plan to do the same this year and provide an update on franchisee financials I talked a little bit in my prepared remarks about the P&L benchmarking tool that we're rolling out. So we are in the process of collecting data from franchisees for both full year 2024 results as well as 2020.
Speaker Change: <unk> results.
Speaker Change: One of the things we're really excited about this P&L benchmarking tool is it is going to provide franchisees with more data. So they can uncover opportunities in the restaurant to further enhance the economics. There. So historically now that we are that we will reflecting it in our restaurant level, we will be able to compare across the system with restaurants that are most similar.
To each franchisee from AAV perspective from a wage environment perspective from a demographic perspective. So we're really excited about the ability to do that and helping our franchisees who are our most important customer enhance the economics of their individual restaurants.
Speaker Change: Thank you. Our next question comes from Rod Hall.
Speaker Change: Of J P. Morgan Your line is now open. Please go ahead.
Good morning. The question is on the 300 <unk> units planned for the next four years of which I believe 75 person <unk>.
Speaker Change: We are co investing in given the current trends on outlook revision and if this headwind to persist would you still think this is the right level of development.
Speaker Change: At what point would you ever be visitor does given the fact that sales to investments Bell continues to be around one times on a follow up here would you take the opportunity of this current environment to manage the U S dollar portfolio more aggressively.
Speaker Change: Asked another way, what's the bar for Abigail performance metrics will be discussed in much been notably higher thank you.
Speaker Change: I guess two things will start with the second half of the question. We are looking at opportunities to accelerate all of those initiatives throughout the year, both from a productivity perspective in the restaurants and from a hospitality perspective in the restaurants. So yes, we're going to take every opportunity we can and we're going to implement those initiatives as quickly.
Speaker Change: As we can in terms of new unit development beyond 2025, So we're not we're not going to make any changes to that today I think important thing to think about when you think about Wendy's unit development is about 70% of those new restaurants are going to happen outside the United States and our international business is firing on all cylinders really.
Speaker Change: Happy with the performance there when you look at the U S. We think the hospitality culture. The model of excellence that we're implementing and rolling out now is going to drive significant improvement to both the top and the bottom line for company owned and franchisee restaurants.
Speaker Change: We're really excited about sharing progress on that as we move throughout the year and into 2026.
Speaker Change: Yeah.
Speaker Change: Thank you.
Speaker Change: Yeah.
Speaker Change: Thank you. Our next question comes from Chris <unk> of Stifel. Your line is now open.
Speaker Change: Please go ahead.
Chris: Thanks, Good morning, guys.
Speaker Change: Kurt can you give us a sense of the early operational impacts the company is seeing from the fresh AI voice system, and maybe any metrics to help frame the system's benefit to labor order accuracy or any other kpis.
Speaker Change: Yes, Chris we like what we're seeing I think.
Speaker Change: Focused on two things one is the opportunity to see an increased check size and we're seeing that and we see that through the customer because there is this.
Speaker Change: Opportunity when Wendy greet you at the drive thru she knows what to ask you to get yes.
Speaker Change: Get the opportunity to enhance your order, maybe you forgot that but she'll remind you and so we see that uptick in sales and then accuracy is also a big driver taking an accurate order is the key in driving accuracy and you have a perfectly accurate order thats right in front of the customer that we've seen work.
Speaker Change: We've also seen efficiency in the restaurant driving efficiency around being able to.
Speaker Change: Working on the order and providing speed of service and accuracy from a delivery standpoint, so we like what we see the economics are encouraging.
Speaker Change: It continues to rollout we talked about will be in over 500 restaurants. This year. So we like where we're going with fresh AI.
Speaker Change: Great. Thanks.
Speaker Change: Thank you. Our next question comes from Brian Mullan of Piper Sandler. Your line is now open. Please go ahead.
Speaker Change: Thanks.
Brian Mullan: Question on the breakfast day part and in the past you've referenced that may be the next leg of growth to come from innovation. Just wondering if you could remind us really any components of the offering where you see the biggest opportunity and how you'll be addressing that either this year or longer term.
Speaker Change: Related to that if you could just address the beverage offering at breakfast as he talked about would love to get your thoughts. Thanks.
Speaker Change: Yes, I think it's really important question breakfast remains.
Speaker Change: A priority for us a top priority for us because we have a ways to reach our potential and it will be upside we are innovating on our British beverage platform and this summer we will have a new coffee lineup of cold Brew coffee is that alright. There are exceptional I've tried to state fantastic will also dry.
Speaker Change: <unk> value add beverages in the morning as part of our 100 days of Summer program, we know and we've done some beverage tests in the past and we've learned that we sell our high level of beverages in the morning, and we're tying that to some value offerings that we can so we can drive traffic against that that day part so.
Speaker Change: We're encouraged will continue though in the future to innovate on breakfast and bring that.
Speaker Change: Into our restaurants, so that we remain competitive and again grow to our full potential which.
Speaker Change: As a long term strategy, but there is a pipeline of innovation.
Speaker Change: Thank you.
Brian: Next question comes from Brian <unk> of Morgan Stanley.
Speaker Change: Please go ahead.
Speaker Change: Yes.
Speaker Change: Thanks, Good morning, guys.
Speaker Change: Just for your industry comments about kind of marks and whatnot I guess.
Speaker Change: <unk>.
Speaker Change: More recently as we're thinking about March and April and I think there is some of the top 10 <unk> chains that are are up year over year solidly right. There's there's others that are.
Speaker Change: More challenged so it seems like there's kind of a clear share shifting dynamic.
Speaker Change: More recently.
Speaker Change: That the case or are you kind of are you.
Speaker Change: Seeing that based on your data and.
Speaker Change: What do you think what do you think will make the most difference from your perspective too.
Speaker Change: Take back some of that share this year.
Speaker Change: I think thats, a really important question, yes, there isn't that what what it shows is winning in the marketplace in challenging conditions is what we're focused on I think from a planning standpoint, we prudently plan, but our expectation is to win in the marketplace.
Speaker Change: I think it goes to some of the things that we have.
Speaker Change: We've talked about with this 100 days of summer you go after a highly seasonable time for our customers and you deliver against what I think are critical check marks for the customer.
Speaker Change: Then the core your core menu has to stand out and be exceptional value is important and you have to deliver value worth paying for exciting collaborations that drive consumer passion points. I think is really important and innovation, that's incremental and if you think about our plan.
Speaker Change: <unk>. This is the plan, we believe will win in the marketplace innovation that drives our core brands excitement plus collaborations.
Speaker Change: Our brand is <unk>.
Speaker Change: <unk> share of the customer I think that's really important.
Speaker Change: Those that are winning are delivering against these elements every single day with great customer experience in hospitality and we know we have opportunities to drive great customer experience in hospitality. That's why we deploy the resources that we did to do just that so that you can have that great customer experience and wendy's.
Speaker Change: That I think is the plan that's our recipe for success in.
Speaker Change: Our moving forward and we really like where we're going in the second half of the year in our 100 days of summer.
Speaker Change: That was our last question of the call.
Speaker Change: And then the last question the call. Thank you, Kurt and Ken and Thank you everyone for joining US. This morning have a great day.
Speaker Change: Sure.
Speaker Change: Thank you all for joining today's call you may now disconnect your lines.
Speaker Change: [music].
Speaker Change: Yeah.
Speaker Change: Sure.
Okay.
Speaker Change: Yes.
Speaker Change: Yes.
Speaker Change: Yes.
Speaker Change: Okay.