The Wendy’s Co.’s 4 for $4 value bundle is selling well enough that the company now expects to meet the high end of sales expectations for the year, Wendy’s executives said Wednesday.
The meal — a Junior Bacon Cheeseburger, chicken nuggets, fries and a drink, priced at $4 — gives Wendy’s a strong value platform alongside its premium items, which have long been key to the Dublin, Ohio-based quick-service chain’s success. Executives suggested Wednesday that other value deals could be coming, too.
“We’re very happy with the early results,” Wendy’s CEO Emil Brolick said during a call Wednesday discussing third-quarter earnings. “We’re meeting the consumer need for compelling value with a high-quality offering.
“This will be the first of several value bundles you’ll see us use alongside our core, high-end messages.”
Wendy’s same-store sales rose 3.1 percent in North America during the third quarter ended Sept. 27, the company said. Those sales trends, along with the early results of the value bundle, gave the chain enough confidence to say that its same-store sales would be “on the high end” of its full-year guidance of 2 percent to 2.5 percent.
Wendy’s stock rose more than 4 percent on the news.
Wendy’s has generated sales with premium offerings in recent quarters, but executives have long said that the company needs a compelling value offering to lure price-conscious consumers.
Quick-service chains have evolved recently, Brolick said during the call, from emphasizing individual items at low prices, or dollar menus, into bundled meals, such as Wendy’s 4 for $4 offer and Burger King’s 2 for $5 promotion. McDonald’s is asking its franchisees to approve a 2 for $2 promotion.
“We can expect in a business this size that price/value always plays a role with consumers,” Brolick said. “Price/value is important to a certain group of consumers.”
Wendy’s third-quarter results reflect the chain’s massive refranchising effort. The company operated 153 fewer restaurants during the quarter, and, as such, revenues and net income both decreased. Revenues fell 6.5 percent, to $464.6 million, from $496.7 million in the same period a year ago. Net income fell 67 percent, to $7.6 million, or 3 cents per share, from $22.8 million, or 6 cents per share.
Adjusted earnings before interest, taxes, depreciation and amortization, or EBITDA, increased 11.4 percent, to $99.7 million, from $89.5 million. The chain has 6,500 units, of which 5,800 are located in the U.S.
Executives expect to continue selling company-owned restaurants to franchisees, with Wendy’s on track to sell 225 locations to operators this year, and another 315 units next year.
Wendy’s chief financial officer Todd Penegor, who will replace Brolick as CEO next year when he retires, said the company also plans to facilitate franchisee-to-franchisee restaurant sales “to ensure restaurants consistently are in the hands of strong operators.”
Wendy’s and its franchisees are on track to open 80 new restaurants for the full year. “We’re on pace in 2015 to hit our highest new restaurant development numbers in 10 years,” Brolick said.
The company is remodeling locations, and is on track to remodel 450 locations this year, with 22 percent of the system remodeled. Wendy’s goal is to remodel 60 percent of the system in North America by the end of 2020, Penegor said.
Meanwhile, Wendy’s continues to work on new technology. The chain offers mobile payment in 4,500 restaurants, and it is testing a new generation of its mobile app that would add mobile ordering.
The app, which is being tested in 100 locations in a few markets, includes beacon technology, which notifies a unit when a customer who ordered food through the app comes within a certain distance, so food prep can start.
“Rather than have customers try to predict their arrival time, we use the phone as a trigger to know they arrived,” Brolick said. The mobile app could let multiple customers pay for individual orders through their respective apps from the same car in the drive thru.
Wendy’s is currently rolling out a common point-of-sale system that should be in place by the end of next year. The system would enable the company to roll out mobile ordering and payment in more markets.
In addition to the mobile ordering app, the company has standalone kiosks in “a handful of restaurants.” But Brolick suggested that could expand in the future, although the company first wants to make sure the second iteration of its mobile app is “up and running.”