The Wendy's Company 2026 Q2 Earnings Call

Good morning, and thank you for joining our fiscal 2026 second quarter earnings conference call. After this brief introduction, Bob Wright, President and Chief Executive Officer, will provide a business update. Steve Cirulis, Chief Financial Officer and Chief Strategy Officer, will review our second quarter results, as well as our capital allocation priorities. From there, we will open up the line for questions. Today's conference call and webcast includes a presentation, which is available on our investor relations website, ir.wendys.com. Before we begin, please take note of the safe harbor statement that appears at the end of today's earnings release. This disclosure reminds investors that certain information we discuss today is forward-looking and reflects our current expectations about future plans and performance. Various factors could affect our results and cause those results to differ materially from the projections set forth in our forward-looking statements.

Some of today's comments will reference non-GAAP financial measures. Investors should refer to our reconciliations of non-GAAP financial measures to the most directly comparable GAAP measure at the end of this presentation or in today's earnings release. If you have any questions following today's conference call, please contact me. I will now hand the call over to Bob.

Good morning, everyone, and thank you for joining our call today. Let me begin by saying how happy I am to be here. Wendy's is an iconic brand with distinctive attributes that have traditionally set us apart from our competition. We're at our best when we leverage those distinctions to the advantage of our customers, our franchisees, and our business. Today, we are not performing at our potential. Traffic is down, our value proposition has slipped, and franchisee economics are under pressure. That said, I've seen this brand at its best, and I know we can fix these issues. I'm incredibly optimistic about the power of the Wendy's brand and the future success we can create. I'll start by sharing a little bit of my background. I spent my entire career in the restaurant industry, including previously serving as Executive Vice President, Chief Operations Officer and International here at Wendy's.

I've seen firsthand the strength of our franchise system, the capability of our restaurant teams, and the power of our differentiated quality position. More recently, I served as CEO of Potbelly Sandwich Works. You'll hear from our new Chief Financial Officer and Chief Strategy Officer, Steve Cirulis, in a few moments. Steve and I worked together at Potbelly, where we drove meaningful sales growth, margin expansion, franchise unit development, and created significant shareholder value. That experience reinforced an important lesson: successful turnarounds are achieved through a focused strategy, guided by clear principles, and executed with discipline and accountability. That philosophy will guide how we lead here at Wendy's. Returning to Wendy's is especially meaningful to me. My first day with the company was over 28 years ago. In those days, I had the privilege to work alongside our founder, Dave Thomas.

That experience shaped how I think about this business and helped me understand the foundations of our brand from Dave himself. Wendy's is a brand rooted in quality in everything we do. We have exceptional assets, a differentiated brand, a strong franchise system with an international footprint, talented restaurant teams, and passionate employees. Those strengths provide us with a solid foundation on which to build. At the same time, we're not executing to the standards we know we're capable of. Our quality differentiation has eroded, our value proposition has weakened, and we have not consistently delivered the experience customers expect from Wendy's. These issues have weighed on traffic and created pressure on the restaurant economic model, which is the heartbeat of this business, and this is reflected in our latest results. Today, I will briefly review our second quarter performance.

My main focus, however, is to give you an assessment of where the business is today, followed by an outline of the initial strategic focus areas needed to improve performance and what near-term actions we will take to execute. Steve will take you through the second quarter results in more detail. In the second quarter, global systemwide sales decreased by 6.5%. U.S. same restaurant sales were down 7%, and international same restaurant sales declined 2.3%. This sales decline drove lower adjusted EBITDA and adjusted earnings per share. These results reinforced the work needed to sharpen our execution across the system. There were some bright spots during the quarter. U.S. customer satisfaction scores improved, and U.S. company-operated restaurants outperformed the broader system in same restaurant sales by 280 basis points. We also opened 21 new restaurants in the U.S.

Internationally, systemwide sales grew as we continued to expand our footprint with 27 restaurant openings during the quarter. Let me share my assessment of where the business is today. I've invested a significant amount of time visiting restaurants, speaking directly with our customers, meeting with franchisees, listening to our restaurant support center teams, and talking to employees across the system. What encourages me most is the passion I see throughout the Wendy's system. Our franchisees and employees care deeply about this brand. They're eager to sharpen our strategic focus on what makes Wendy's great, drive historic levels of performance, and return to sustainable growth in traffic-driven sales, profit, and cash flow for the company and franchisees. This level of commitment gives me confidence in what we can accomplish together. Recommitting to quality is essential to rebuilding our competitive advantage.

Customers recognize it, franchisees believe in it, and it's at the heart of what Dave Thomas built. Wendy's quality heritage provides a strong foundation for the turnaround, but success will depend on translating that equity into a proposition that's relevant for today's fast-evolving QSR landscape. That heritage is a meaningful asset, but we need to be clear-eyed about the issues weighing on the business today. Based on what I've seen so far, several themes stand out, which together have contributed to our recent performance. They include quality degradation, challenges around our value offerings, inconsistent operations, and marketing that is not driving customers to our restaurants. I'll walk through each of these in turn. Wendy's has always been known for quality. Fresh, never frozen beef, hamburgers made to order, bacon cooked in our restaurants, and fresh produce prepared daily.

Over time, we've drifted away from some of the standards that made Wendy's distinctive. While we've maintained core practices, in some areas, we've let cost and efficiency drive decisions that weaken that differentiation. On value, the Biggie Deals was built for value-conscious consumers, but the offering has become increasingly complex and value diluting, making it less compelling and less effective as a reason to visit Wendy's. Operationally, our execution has become inconsistent, and our performance management processes are not fully addressing the underlying challenges. Drive-thru is a good example, where we need to better manage peak hour traffic, ensure restaurants are staffed appropriately for demand, and equip teams with training, tools, and systems they need to deliver consistently. We need to sharpen marketing.

We've been over-reliant on a calendar of one-off promotions and collaborations rather than a consistent, relevant brand narrative grounded in our equity and what Wendy's stands for. All of these factors combined have created persistent traffic pressure, particularly among our most frequent and loyal customers. It's going to take time, but these issues are within our control, and my conversations with franchisees, restaurant employees, and customers give me strong conviction that attacking these issues head-on will yield results. In addition to acknowledging where we are and how we got here, turnarounds also require deep understanding of what needs to be done to improve performance. Next quarter, we'll share more detail around the specific actions we're taking to drive our turnaround, but I can tell you already we've aligned to five areas we believe are most critical. First, strengthening our menu with quality food at a compelling value.

We win when we have fresh, cravable food that our customers identify as distinctively Wendy's. We will rebuild the menu at the ingredient level, at the menu item level, and the category level, while also addressing the menu price architecture that brings value to our customers. Second, distinct branding and marketing that drives demand. We have one of the most recognizable brands in the industry, and we need to make our messaging, media, and creative drive a meaningful connection with our customers and drive traffic to our restaurants. Third, driving operational excellence that delights customers. We must set clear performance standards, establish the processes and procedures needed to meet them, provide training that enables every team member to execute consistently, and ensure the organizational structure supports our restaurants and reinforces our commitment to excellence. Fourth, creating a digital experience that builds frequency.

There are significant opportunities to improve analytics, customer-facing digital assets, fully integrated restaurant technology solutions, and our customer loyalty approach, along with the integration with third-party aggregators. Lastly, we must ensure our most visible and prominent brand asset, our restaurants, are leveraged as an engine for growth. Ultimately, that means getting back to market expansion and unit growth domestically. More immediately, our focus must ensure we have compelling four-wall operating economics and a consistent deployment of high return investments at existing restaurants. We must also have a franchise system that is well capitalized and poised for growth. This applies to every restaurant in the system, whether company or franchise owned. In addition to adding Steve to the management team, I've already invested in critical professional services and utilized the expertise of several outside brand, business, and strategy resources.

This has been beneficial in accelerating the strategy development and organizational development work to this point, and it will be of great value in compressing the time to impact. Equally as important to developing our strategy is having the right structure and talent to deliver upon it going forward. This means ensuring the organization is aligned and able to deliver on these strategic focus areas with meaningful impact. In some areas, that means enhancing existing capabilities. In others, it means building new capabilities that are essential to the work ahead. We've already started looking at necessary restructuring and reorganization efforts, and I look forward to sharing more details with you as they develop. I'll be closely engaged in key decisions across the organization and ensure we are moving with focus, speed, and accountability. We need to ensure we have the right level of funding for our strategic initiatives.