Wendy’s (WEN) 2Q16 Earnings Call Notes

Eating at home has gotten cheaper

“But the hamburger sub-segment has been flattish. And I do think this food at home versus food away from home gap does impact it…it’s gotten a lot more cheaper relatively speaking to go get fresh beef at your local butcher and go home and grill it. So that does have a bit of an impact.” Todd A. Penegor – President, Chief Executive Officer & Director


Low wage growth and economic uncertainty have also made eating at home more attractive

“the cost of eating at home versus the cost of eating in the restaurants, it’s about 3x delta. And when a consumer is a little uncertain around their future and really trying to figure out what this election cycle really means to them, they’re not as apt to spend as freely as they might have even just a couple of quarters ago. And it’s at a time where we’re still not seeing real wage growth, but we are seeing some of the cost of living move up when you get into what does it cost to own an home and operate your life in general. And there is a little bit of tightening on the disposable income, especially on the low-end…And that’s why we’re investing so much back into our food to really make sure that we widen the quality gap…we want to create a new QSR experience at traditional QSR prices and that’s why we think we’re uniquely positioned to win in this environment.” Todd A. Penegor – President, Chief Executive Officer & Director


Optimization strategy delegates restaurants to strong regional operators and facilitates franchisee to franchisee transfers

“The decision to divide up the New York market is consistent with our strategy to maintain restaurants in different parts of the country and with various demographics to reflect the diversity of our marketplace and to maintain the scale necessary to be operationally efficient where geographic concentration allows. System optimization is all about building an even stronger system and serving as a catalyst for growth by putting restaurants in the hands of strong operators who are committed to driving new restaurant development and accelerating reimaging.” Todd A. Penegor – President, Chief Executive Officer & Director

Earnings Call Notes Pricesmart and Wendys 4Q13

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings.


“I would say that most of the economies are pretty solid, a little bit more challenging Honduras. Right now, they have elections during calendar year 2013 and the government is actually a new government starting January 20th or something like that, this month of January. Every time you have elections, there are some political changes in these countries. There seems to be a slowdown

Hopefully nothing would change and we will see things getting back to normal, but that’s the only market that I would highlight in Central America that that’s more of a challenging or guess, uncertainty right now on Honduras.”


a new QSR standard

“We are, through Image Activation, repositioning the Wendy’s brand experience to that new QSR standard, which is, by the way, the standard that consumers today are expecting. Our product price segmentation strategy is differentiating the Wendy’s brand and growing same-restaurant sales and elevating average unit volumes.”

Why quick serve has taken share:

“So why are they the quick — the sweet spot? Because quick-serve restaurants have done the best job of delivering against the 2 most fundamental needs consumers have: convenience and value. And that is why they have built share against mid-tier restaurants, as well as casual-dining restaurants over this 5-year period of time.

Economics of re-imaging locations and rebuilding locations

“the $450,000 to $650,000, a couple of the key elements of that program. To do a reimage is about 5 weeks of closure time. We are seeing sustainable lifts of 10% to 20% when we do reimages. And we are looking for a 40% profit flow-through on those reimages. And of our total reimage — of our total Image Activation universe, 80% of all of the activity will be reimage.

The other 20% will be the scrape and rebuilds. So I mentioned a lot of the restaurants are in great trade areas with high AUVs. Much better from an economic perspective to actually scrape and rebuild for the long run. The investment is higher, $1.5 million to $1.9 million, about 13 weeks of closure time that we’d have to absorb as we did that activity, but the sustainable sales lifts are higher, 25% to 35% with that same profit flow-through.”