Wendy's beef might be "fresh, never frozen," but it isn't getting customers in the door — and it doesn't seem the company is coming up with anything that will.
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00:00Wendy's beef might be fresh-never-frozen, but it isn't getting customers in the door,
00:06and it doesn't seem the company is coming up with anything that will.
00:10In 2024, Wendy's publicly floated what turned out to be one of their most unpopular ideas
00:16ever when CEO Kirk Tanner said in an earnings call,
00:20"'Beginning as early as 2025, we will begin testing more enhanced features like dynamic
00:25pricing.'"
00:27The concept was similar to what rideshare services like Uber do, with prices changing
00:31depending on demand.
00:33Once Wendy's dynamic pricing plan was made public, though, backlash was swift.
00:38The company quickly went into damage control mode, claiming they never planned to raise
00:42prices, but rather were thinking about lowering the prices on breakfast items during less
00:46busy times of the day.
00:48What the hell is going on?
00:50Now, I'm supposed to say that Wendy's clarified things, saying it's dynamic pricing.
00:56It's a price gouge."
00:58While there are around 7,000 Wendy's locations open for business in the U.S., in 2024, only
01:04about 400 of those are company-owned.
01:07And in 2024, Wendy's announced plans to close 140 underperforming locations, with the hopes
01:13of eventually replacing them with more profitable ones.
01:16The decision to abruptly close down such a substantial portion of its portfolio came
01:22after the chain's latest shift in strategy.
01:24In 2023, it walked back an aggressive plan to move more into food delivery.
01:30As a result, some areas of the United States no longer have Wendy's food available at all,
01:35something that can't be good for the brand's long-term health.
01:39There's a lot of money to be made in the fast food breakfast sector.
01:43Just ask McDonald's.
01:45They pioneered the fast food breakfast market in the 1970s, and offerings like the Egg
01:49McMuffin bring in over $2 billion each year for the chain.
01:53Yet, Wendy's hasn't been able to get much traction.
01:57The chain has tried several times to launch a nationwide breakfast menu, and each time,
02:02they failed.
02:03Attempts in 1985, 2007, and 2012 all proved unpopular.
02:08And while the new breakfast menu that debuted in 2020 has stuck around the longest, so far
02:13it's an expensive gamble that hasn't really paid off.
02:16Wendy's initially spent $20 million to get the program off the ground, and in 2024, Wendy's
02:22CEO Kirk Tanner pledged to spend another $25 million over the next year to make breakfast
02:27stick.
02:28He said on an earnings call,
02:29"[Breakfast remains an incredibly important day part.
02:32It is highly profitable, and we have not yet reached our potential."
02:36Still, as profitable as the breakfast sector is in theory, Wendy's overall missed its second
02:42quarter earnings projections by $7 million.
02:45And that could buy you a whole lot of Egg McMuffins.
02:49With only a small portion of Wendy's locations actually owned by the company, Wendy's relies
02:54on franchisees for most of their business.
02:57Independent franchisees pay a fee to Wendy's to use the brand name and sell Wendy's food
03:02in exchange for splitting the profits.
03:05When it works, it's great for both parties.
03:07But when a franchisee fails, both parties suffer financial consequences.
03:12Nearly three-fourths of Wendy's franchisees own and run 10 restaurants or less, so if
03:16one of them goes under, Wendy's can absorb the blow.
03:20The real problem comes when a larger franchise flounders.
03:23In 2020, NPC International, which owned over 400 Wendy's locations, declared bankruptcy.
03:30And in 2023, The Starboard Group also declared bankruptcy.
03:33At one time, it owned as many as 72 Wendy's locations.
03:37These sizable losses have made things difficult for Wendy's in an already challenging time.
03:42Collectively, the 10 biggest American quick-serve restaurants operate 66,000 outlets outside
03:49of the U.S.
03:50While there are fast food joints seemingly on every corner in America, there are still
03:54lots of markets around the world where growth is possible.
03:57Unfortunately for Wendy's, though, they haven't found as much luck as some of their competitors.
04:03That's in part because of a curious legal battle.
04:05Collectively, the 27 member nations of the European Union represent the biggest economic
04:10market in the world.
04:12Wendy's tentatively opened a few stores in Europe in the 1970s and 1980s, but they flopped
04:17and closed down.
04:18That opened the door for a rival.
04:20The U.S. Wendy's and the European Wendy's have engaged in many court battles, but so
04:25far, the European Wendy's has always emerged victorious.
04:29The more famous Wendy's keeps trying to set up shop in Europe, opening some locations
04:34in the non-EU United Kingdom in recent years, and securing agreements to try out Ireland
04:39and Romania.
04:40But, so far, their success has been limited.
04:43Less than 20 percent of Wendy's locations are overseas, compared to more than a third
04:48of all McDonald's locations.
04:51For many big companies, nothing matters more than growth.
04:55Revenues and the value of their stock need to be consistently moving upward.
04:59If a fast food megachain's revenues are only growing slowly, that's almost as bad as
05:04stagnation or a decline.
05:06That's the case with Wendy's.
05:07They've experienced upticks in revenue, but not as big or as fast as investors want.
05:12In 2024, for instance, analysts predicted that Wendy's could expect to enjoy a 6 percent
05:18rate of growth.
05:19That didn't happen.
05:21After looking at its figures following the second quarter, Wendy's announced that its
05:24sales would actually rise by somewhere around 3 percent to 5 percent instead.
05:29And its customers?
05:31There were 2 percent fewer coming in, suggesting that diners with less income weren't going
05:36as often as they once did.
05:38It might not sound like much of a difference, but it's enough to make some potential investors
05:43worry about Wendy's future.
05:46In recent years, Wendy's has faced a number of lawsuits over everything from broken teeth
05:51to E. coli, which have cost the company both money and bad publicity, even when they've
05:56won.
05:57In March 2023, Wendy's was the target of a class-action lawsuit, which accused the
06:02chain of false advertising.
06:04Wendy's ultimately emerged victorious, refuting claims that its actual products didn't resemble
06:09at all the appetizing burgers shown in photos in commercials and on its website.
06:14But the PR damage had already been done.
06:16In another class-action lawsuit, Wendy's reached a financial settlement with ex-employees who
06:22alleged that the company broke Illinois state laws by collecting biometric information from
06:26its workers without their consent.
06:29The company agreed to pay out $18 million in damages.
06:33And 2024, the parents of 11-year-old Aspen Lampers filed suit against Wendy's, alleging
06:39that their daughter's consumption of a biggie bag in 2022 led her to contract an E. coli
06:45infection.
06:46After experiencing stage 3 kidney failure, Lampers endured permanent and profound neurological
06:52damage.
06:53She had significant brain swelling, suffering seizures while in the hospital.
06:58She had left-sided paralysis.
07:00Wendy's has denied any wrongdoing.