As Wendy’s Co. continues its effort to modernize restaurants, up to 130 U.S. restaurants could be closed in the coming year because they are not making enough money to be worthy of being remodeled or rebuilt. The news came yesterday as the Dublin-based company announced earnings for the fourth quarter and full year.
Wendy’s is beginning the third year of its Image Activation program to raze, rebuild or remodel nearly half of its 600 company-owned stores by the end of 2015.
So far, the Dublin-based fast-food restaurant has rebuilt 58 company-owned stores since 2011, and it plans to rebuild or remodel another 100 company stores and 100 franchised stores this year.
The first year, the rebuilt stores “drove average sales increases of 25 percent, and those results continue to hold today,” Emil Brolick, the company’s chairman and CEO, told securities analysts during a conference call.
Sales results from last year’s remodeled stores “are very consistent to the results of our 2011 prototypes,” Brolick said.
This year, Wendy’s is accelerating its rebuilding program by involving franchisees in the process. Late last year, the company rolled out a $10 million incentive program to encourage franchisees to invest $750,000 to raze and rebuild their stores, or make lesser investments of $550,000 or $375,000 to remodel their stores.
So far, franchisees that own more than 100 stores have raised their hands for one of the three tiers in the rebuilding program. “We are excited about the positive response from our franchisees to the Image Activation incentive program,” Steve Hare, Wendy’s chief financial officer, told analysts.
“The trick is creating an economically viable remodeling program,” said Dennis Lombardi, executive vice president of foodservice strategies at WD Partners in Columbus.
All the money from Wendy’s incentive program is committed. So the company’s remaining franchisees likely will wait to hear whether it was a good idea from those who have taken the investment plunge, Lombardi said.