Wendy's NASDAQ: WEN reported first-quarter results that management said were largely in line with expectations, while acknowledging the restaurant chain remains in the early stages of a U.S. turnaround effort aimed at improving traffic, operations and franchisee economics.
Interim Chief Executive Officer and Chief Financial Officer Ken Cook said the company is focused in the U.S. on advancing its Project Fresh turnaround strategy, while the international business continues to expand in key growth markets. The company also announced a new franchise agreement to build up to 1,000 restaurants in China over the next 10 years.
“Results were largely in line with our expectations, though still not where we need to be,” Cook said. He cited a challenging competitive environment, severe weather and the company’s efforts to optimize its restaurant footprint and operating hours as factors affecting the quarter.
U.S. Sales Pressure Offsets International Growth
Global systemwide sales declined 5.5% on a constant currency basis in the first quarter. U.S. same-restaurant sales fell 7.8%, driven by lower traffic, partially offset by a higher average check, according to Suzie Thuerk, Chief Accounting Officer and Global Head of FP&A.
Thuerk said severe weather accounted for about one full percentage point of pressure during the quarter, with the impact occurring mostly in January and February. Cook said U.S. same-restaurant sales declined about 8% in January, worsened to the high-8% range in February, then improved to a 6.2% decline in March. April was down about 6.4%.
International systemwide sales grew 6%, driven by net unit growth in markets including the Philippines and Mexico. Cook said the China development agreement is the largest in Wendy’s history and represents “an important milestone” in the company’s effort to expand in Asia Pacific.
“We could not ask for a better partner,” Cook said of the unnamed China franchisee, describing it as a large restaurant operator with decades of experience in the country and a deep understanding of Chinese consumers.
Adjusted EBITDA Declines as Costs and Traffic Weigh on Margins
Total adjusted revenue rose $9.2 million from the prior year to $432.3 million. Thuerk said the increase was primarily due to system optimization-related franchise fees and higher company-operated restaurant sales from the acquisition of franchise-operated restaurants in the third quarter of 2025, partially offset by lower franchise royalty revenue.
Adjusted EBITDA was $111.3 million, down $13.2 million from the prior year. Adjusted earnings per share were $0.12.
Global company-operated restaurant margin was 10.8% in the quarter, while U.S. company-operated restaurant margin was 11.4%. Thuerk said the U.S. margin decline reflected lower traffic, commodity cost increases of about 8% and labor rate inflation of about 4%. Beef inflation and product quality investments were key drivers of the commodity increase.
Wendy’s generated $36.5 million in free cash flow during the quarter, down $31.5 million from the prior year, primarily due to the timing of vendor incentive payments and lower adjusted EBITDA. The company ended the quarter with $338 million in cash and a net leverage ratio of 4.9 times.
Project Fresh Focuses on Brand, Operations and Franchisee Economics
Cook said Project Fresh is built around brand revitalization, operational excellence and system optimization. He said the company is working to reestablish Wendy’s as the highest-quality choice in quick-service restaurants by emphasizing its fresh, never frozen beef and by upgrading core products.
During the quarter, Wendy’s launched Biggie Deals at $4, $6 and $8 price points, introduced new buns and upgraded ketchup and mayonnaise for its hamburgers. The company also rolled out what Cook called the most significant quality upgrade in the history of its Spicy Chicken Sandwich, including a new marinade, panko-style breading and nine spices.
Cook said the company is also rebuilding its innovation pipeline with more rigorous testing and more in-market trials. Planned initiatives include a collaboration tied to Illumination and Universal Pictures’ upcoming “Minions & Monsters” movie and the return of the Pretzel Bacon Pub Cheeseburger later this year, after customers voted for it through a March Madness-themed “Bring It Back Bracket.”
On operations, Cook said restaurants with the highest customer satisfaction scores are outperforming the lowest-tier locations by roughly 400 to 500 basis points in same-restaurant sales. Company-operated restaurants, which have fully implemented the company’s operational initiatives, outperformed the U.S. system by 310 basis points in the first quarter.
The company has expanded menu item label printers from less than half of restaurants to 85% over the past six months, aiming to improve order accuracy and make it easier for customers to identify items. Cook also highlighted the launch of a “White Glove” cleaning program, saying customer satisfaction measures improved broadly during the quarter.
Footprint and Hours Optimization Continue
Wendy’s said it completed more than half of its planned footprint optimization work during the first quarter and remains on track to be substantially complete by the end of the second quarter. Cook said the company’s outlook for system optimization is unchanged, affecting about 5% to 6% of the system.
The company is also working with franchisees to adjust operating hours, including reducing some morning hours and extending late-night hours where the opportunity is greater. Cook said breakfast remains important for many restaurants, but it was the weakest-performing daypart in the quarter and negatively affected U.S. same-restaurant sales by more than 100 basis points. Late night was the strongest-performing daypart.
Thuerk provided additional context on franchisee economics, saying U.S. franchisees in 2025 averaged a year-over-year net sales decline of about 6%, while average EBITDA margin declined 270 basis points to 9.3%. More than half of the margin decline was driven by commodity cost increases, primarily beef.
Company Reaffirms 2026 Outlook
Wendy’s reaffirmed its full-year 2026 outlook, including expectations for global systemwide sales to be approximately flat. The company expects global systemwide sales to decline by a mid-single-digit percentage in the second quarter before returning to growth in the second half of the year.
The company also reaffirmed its outlook for:
- Adjusted EBITDA of $460 million to $480 million
- Adjusted earnings per share of $0.56 to $0.60
- U.S. company-operated restaurant margin of 13%, plus or minus 50 basis points
- Capital expenditures, including build-to-suit investments, of $120 million to $130 million
- Free cash flow of $190 million to $205 million
- General and administrative expense of approximately $295 million
Thuerk said the company continues to expect labor rate inflation of about 4% and commodity cost inflation of about 4% for the year, with commodity inflation weighted toward the first half because of beef costs.
Wendy’s also announced a regular quarterly dividend of $0.14 per share. Thuerk said the company’s first capital allocation priority remains investing in the business, followed by paying an attractive dividend, maintaining a strong balance sheet and returning excess cash through opportunistic share repurchases. She said Wendy’s currently has no plans to repurchase shares in 2026, though about $35 million remains on an existing authorization that expires in February 2027.
Cook closed the call by saying the company is “controlling what we can control” as it works to stabilize the U.S. business and build long-term growth capabilities, while continuing to expand internationally.
About Wendy's NASDAQ: WEN
The Wendy's Company NASDAQ: WEN operates as a global quick-service restaurant chain, best known for its square-shaped beef patties, fresh ingredient sourcing and signature Frosty dessert. The company's menu features a variety of hamburgers, chicken sandwiches, salads, breakfast sandwiches, sides and beverages, designed to appeal to a broad customer base seeking both classic and contemporary fast-food options. Wendy's has placed particular emphasis on product innovation, introducing limited-time offerings and revamped core menu items to maintain customer interest and respond to evolving dining trends.
Founded in 1969 by entrepreneur Dave Thomas in Columbus, Ohio, Wendy's expanded rapidly through both company-owned and franchised outlets.
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