A well-known restaurant chain is planning to close 140 outdated locations in less profitable areas to enhance its profit projections. Wendy’s CEO Kirk Tanner announced on Thursday that over 100 restaurants will be shut down nationwide this quarter.
The closures will be balanced by the opening of new restaurants, resulting in nearly stable net unit growth, according to CFO Gunther Plosch.
Wendy’s, the second-largest fast-food chain in the U.S., anticipates launching 250 to 300 new locations worldwide this year.
This decision follows a series of recent closures in the restaurant industry, where many chains are grappling with rising rents, inflation, and increasing costs. For instance, TGI Friday’s recently closed nearly 50 restaurants amid bankruptcy concerns, and Denny’s plans to close 150 low-performing locations by 2025 to revamp its brand.
In the first nine months of this year, Wendy’s shut down 111 locations, including 78 franchises and six company-owned restaurants, as per a U.S. Securities and Exchange Commission filing.
Tanner attributed these closures to the poor performance of the locations. Despite this, he assured that Wendy’s overall system remains healthy.
Tanner stated, “I have made the strategic decision to close additional restaurants this year that are outdated and located in poor-performing trade areas.” He believes these closures will improve the company’s economic outlook as it prepares for future expansion.
During the call, Tanner expressed confidence in opening more stores in the upcoming years. He projected that by the end of 2024, Wendy’s would have opened over 500 new locations within two years, paving the way for increased growth in 2025 and beyond.
Wendy’s shares fell on Wednesday after the burger chain missed sales expectations by a significant margin for the first time in over four years. Although revenue exceeded forecasts, the company revised its growth outlook due to a “softer category environment,” reflecting financial struggles faced by restaurant chains nationwide.
The closures align with a trend of bankruptcy filings among other chains this year, including Red Lobster, the largest seafood chain in the U.S., and the Italian restaurant Buca di Beppo. Changing consumer behavior due to inflation has also contributed to these closures, as diners are spending 4% more on food compared to May of last year and are opting for home-cooked meals instead of dining out.
Currently, Wendy’s operates more than 7,200 locations globally, with expectations that 30% of future openings will occur in the U.S. and 70% internationally.
