Would Wendy’s buy another brand?
The Wall Street Journal reported in mid-July that Wendy’s held merger talks with Papa John’s. The preliminary conversation fizzled following the John Schnatter incident, namely a July 11 report that Schnatter, the pizza chain’s founder, used a racial slur during an in-company conference call.
When asked if Wendy’s would consider future M&A opportunities, Penegor responded: “Yeah, we'd have to look at would it complement the capabilities that we have? Could it accelerate the capabilities that we have? Would it work for our franchise community?”
“But that said, investing in growth is our number one priority, and that's we'll stay focused,” he said.
Nothing new for now, but definitely worth keeping an eye on.
And about that growth …
Wendy’s opened 36 restaurants globally in Q2, including 25 in North America. Net with closures, Wendy’s expanded its footprint by 23 restaurants (13 in North America), bringing its development to 22 net openings globally year-to-date. There are more than 6,600 units worldwide and Wendy’s is sticking to its 2020 target of 7,250 global restaurants.
Wendy’s also continues to evolve its system with “franchise flips.” Last February, Penegor said, thanks to these franchisee-to-franchisee restaurant transfers, nearly 40 percent of its North American system had changed hands—a process he said strengthens Wendy’s system by ensuring restaurants are in the control of strong operators with access to capital. The chain completed 64 franchise flips in Q2 and is on pace for 200 in 2018.
Wendy’s continues to update its design through an Image Activation program, with plans to expand by about 10 percent this year. That would put Wendy’s north of 50 percent by fiscal 2019.
The company’s is curating smaller footprints to fit Wendy’s into all trade areas as well. There’s now anything from a 28-seat dining room store to 45 to 55 to the traditional 65-plus seaters. Wendy’s opened a “Smart 2.0” restaurant that pulled another $150,000 of costs out of the restaurant by optimizing its footprint. This built on Smart 1.0, which is a big part of Wendy’s pipeline today, Penegor said. The next iteration will play a role next year.