Wendy’s to close hundreds of U.S. stores as low-income consumers cut back

Wendy’s, the popular fast-food chain, is set to close hundreds of its U.S. restaurants in the upcoming months due to a decline in revenue and profits. The company attributes this downturn to cutbacks by lower-income consumers, a trend that they believe will continue throughout the remainder of the year.

During an investor call on Friday, Ken Cook, Wendy’s interim CEO, announced the plan to close a “mid-single digit percentage” of its 6,011 U.S. locations. This could potentially amount to around 300 store closures if 5% of the existing restaurants are shut down. Cook mentioned that the closures will begin in the fourth quarter of this year and are aimed at improving traffic and profitability at the remaining U.S. restaurants.

The struggles faced by fast-food chains in boosting sales amidst rising food costs have been a common challenge. Both Wendy’s and McDonald’s have introduced value meals to attract customers, but Cook expressed that the financial strain on lower-income households is unlikely to ease in the near future.

This round of closures follows the shutdown of 240 U.S. Wendy’s locations in 2024, with the company citing outdated facilities as a reason for the closures. Cook took over as Wendy’s CEO in July after the departure of the previous CEO, Kirk Tanner, who moved on to lead Hershey Co.

In an effort to address underperforming stores, Wendy’s plans to make improvements to struggling locations, such as incorporating technology and equipment upgrades. Some stores may be transferred to new operators or closed altogether. Cook emphasized the importance of enhancing the brand and franchisee financial performance through these actions.

Despite the challenges, Wendy’s remains committed to enhancing its marketing strategies to highlight its value offerings and the freshness of its ingredients. The introduction of $5 and $8 meal deals, similar to those offered by McDonald’s, has helped drive some traffic back to Wendy’s U.S. stores. However, the company acknowledges the need to attract new customers and plans to adjust its marketing approach accordingly.

While Wendy’s shares saw a slight increase in early Tuesday trading, the stock remains down 46% for the year. The company is focused on navigating the current economic landscape and ensuring the long-term success of its remaining U.S. locations.

Overall, Wendy’s is taking proactive steps to address the challenges posed by the current economic climate and consumer behavior. By strategically closing underperforming stores and enhancing its marketing efforts, the company aims to strengthen its position in the competitive fast-food industry.