Wendy’s (US) Expects to Reach 8K Units Globally by 2025

Wendy's plans to add roughly 250 units globally in 2021 after opening about 150 restaurants in 2020, Wendy's CEO Todd Penegor said on Wednesday during an earnings call with investors.The company expects to have about 7,000 restaurants globally by the end of 2021 and 8,000 by the end of 2025.

The company also recently announced a new franchisee incentive program that it expects to drive unit growth by more than 3% in 2022, Penegor said. Under this program, Wendy's rewards franchisees for new unit expansion, faster timing and committing to multi-year deals to grow operations. Franchisees also earn more rewards by doing conversions quickly, he said.

Wendy's joins a handful of QSRs that have set their sights on growing domestically and internationally in the wake of the pandemic, with McDonald's, Papa John’s, Noodles & Company, Bojangles and Shake Shack planning to add more units in the coming years.

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With Wendy's reporting U.S. same-restaurants sales of 5.5% during Q4 2020 and 2% for 2020, it has the financials to attract more franchisees and partners to help expand its unit count. The company is finding some success from recently launched initiatives, too, including adding a breakfast daypart.

Wendy's breakfast grew to make up 6.5% of sales during Q4 2020 and is on its way to also make up 10% of sales this year, Penegor said. The fast food chain's digital business is also seeing growth. Wendy's launched a loyalty program during the last half of 2020, which helped digital capture 6% of sales in the U.S. and this business is expected to make up 10% of sales by the end of 2022, Penegor said.

"We have a franchise system that's very healthy, that had really strong profits last year, had strong balance sheets and is really eager to take advantage of the opportunities with some of the contraction in the industry to continue to provide more access to our brand," Penegor said.

Wendy's franchisee incentive program is providing 15% to 20% cash-on-cash returns for those taking advantage of the opportunity, Wendy’s CFO Gunther Plosch said during the call. For those partaking in conversions, they can get about $170,000 in incentives, while franchisees can get incentives up to $250,000 if they accelerate their existing projects or $200,000 for starting new projects, he said. These incentives come in the form of royalty and/or marketing fund abatements.

The company is also eyeing smaller, more efficient formats that can help improve returns, which led the company to create a drive-thru-only design and a traditional freestanding option to help grow digital and delivery businesses, Penegor said. The company has also opened numerous ghost kitchens around the world, he said. Wendy's plans to open 250 ghost kitchens in India, for example.

All of these concepts have helped the company increase its nontraditional pipeline to about 30% in its 2021 development plan, Penegor said. Wendy's is particularly focused on making its restaurants "frictionless transaction centers," and it launched curbside and mobile grab-and-go last year, which Penegor said are expected to increase significantly with increased customer awareness.

Wendy's has been particularly focused on growing its global footprint since 2019, when it turned its attention to expanding into Europe for the first time in 40 years. The company plans to add new units in the United Kingdom this year. Wendy's also expects to have 1,000 international units by the end of 2021, Penegor said, inching closer to its goal of reaching 1,500 units abroad by 2024.