Restaurants Remain Open for Delivery and Drive-Thru
Company Withdrawing 2020 Outlook
The Wendy’s Company (Nasdaq: WEN) announced today an update on the impact of the COVID-19 pandemic on the Company’s business.
“This is an unprecedented time, and we are focused on the actions where we can make a positive difference. To that end, we have taken several precautionary steps to advance public health goals, maintain essential access to high quality food, support our franchisees, and safeguard our team members and customers from the spread of COVID-19,” said President and CEO Todd Penegor. “As we navigate any challenges we face, we’ll do it the Wendy’s Way; with a focus on taking care of our people, customers and supporting our franchise partners as we navigate through this very challenging and historic time together.”
Business Update
Sales Performance
- Global same-restaurant sales for the quarter-to-date through March 22, 2020 were up 2.8%*.
- Same-restaurant sales were on plan for the quarter before COVID-19 started to impact restaurant performance.
- Same-restaurant sales were up approximately 4% through the first two months of the quarter.
- We had a very successful breakfast launch where sales were up approximately 15% in the first week of March.
- In the most recent week, ended March 22, 2020, same-restaurant sales have turned to down approximately 20%*.
- The Company has a resilient operating model where it can continue to offer drive-thru and delivery service during these difficult times as restaurants have been deemed an essential business in many jurisdictions globally
- Drive-thru and digital ordering have seen significant increases in the U.S for the week ended March 22, 2020.
- Drive-thru: Our drive-thru business has grown to approximately 90% of our overall sales mix.
- Digital Sales: We have seen our digital business grow to 4.3% of sales compared to 2.5% of sales in 2019, driven by strong growth in our delivery business.
- Systemwide Temporary Restaurant Closures and Dining Room Closures (as of March 24, 2020)
- 235 temporary restaurant closures (~3.5% of all system restaurants)
- U.S.: 46 closures
- International: 189 closures
- The Company has updated its brand standard to include the closure of all dining rooms except where there are specific needs, or a drive-thru or pick-up window option is not available. Decisions to continue to offer carryout services at select restaurants will be made on a case-by-case basis and in compliance with applicable state or local requirements.
- 235 temporary restaurant closures (~3.5% of all system restaurants)
Additional Items of Note
- The Company has taken significant steps in an effort to protect its employees and customers:
- Closing our dining rooms, with a focus on delivery and drive-thru services, to better serve our communities.
- Continuously reinforcing our strict food safety procedures, personal hygiene standards, handwashing requirements and sanitation protocols through additional retraining and communications.
- Increasing daily restaurant deep cleaning procedures across the system.
- Implementing travel restrictions for Company employees and moved to a remote work arrangement for most office-based employees.
- Remaining in close contact with public health experts, government agencies and legislators to ensure we are responding appropriately.
- The Company has not experienced any significant supply chain issues to date across the globe.
- We recently added Postmates to our group of delivery partners, which already included DoorDash and Grubhub in the U.S. Additionally, we are increasing our marketing focus on delivery and digital ordering and are providing digital and mobile offers.
- We are directing onsite merchandising such as reader boards and media messages to inform customers that our restaurants remain open and accessible through drive-thru and delivery.
- The Company is working to adjust its marketing plan as a system to reflect the dynamic and changing conditions of the marketplace. Given the very strong early performance of breakfast driven through our world-class social and digital communications, the Company intends to remove its incremental breakfast marketing spend investment in 2020 and support our franchise system in other ways. The Company and its franchisees remain fully committed to breakfast and as part of this plan we will continue to apply media pressure to this daypart as we believe it will be beneficial to both breakfast and rest of day sales.
Actions Taken in Response to COVID-19
Full Draw Down of Revolving Financing Facility
The Company has increased its cash position by drawing down $120 million under its revolving financing facility of Variable Funding Senior Secured Notes to improve its already strong cash position. Including the draw down, the Company currently has over $340 million in cash on hand. The increased borrowing was taken as a precautionary measure to provide enhanced financial flexibility considering the uncertain market conditions arising from COVID-19.
Share Repurchases
The Company has suspended all share repurchase activity.
Other Cost Savings Initiatives
The Company is currently evaluating its planned 2020 General and Administrative expenses and capital plan and is exploring opportunities to reduce expenditures to provide enhanced financial flexibility considering the uncertain market conditions arising from COVID-19.
Actions to Support the Company’s Franchise System
- The Company has reached out to its primary franchise lenders and is working through different options to support our franchisees during this time.
- The Company is extending payment terms for royalties and marketing funds by 45 days for the next three months.
- The Company is deferring base rent payments on properties owned by Wendy’s and leased to franchisees by 50% over the next three months.
- The Company is extending its Image Activation and new restaurant development requirements by one year.
Emergency Paid Sick Leave Policy for Company Hourly Employees
It is the Company’s policy, consistent with public health and regulatory guidance, that employees should not come to work while sick. In response to this global pandemic, the Company has implemented a new emergency paid sick leave policy that is intended to help support hourly employees, including Company restaurant employees, with up to 14 days paid leave in the event they are unable to work as a result of certain COVID-19 challenges.
Withdrawing 2020 Outlook and 2021-2024 Long-Term Outlook
Due to the current unprecedented global market and economic conditions in the United States and around the world, the Company is withdrawing its outlook for the 2020 fiscal year that was issued on February 26, 2020 and its 2021-2024 long-term outlook that was provided at its Investor day in October 2019. The Company plans to provide an update on its business and financial results on its First Quarter earnings call and intends to provide an updated financial outlook at such time as it can reasonably estimate the impact of the COVID-19 outbreak and changing market conditions.
Additional Information and Updates on the Company’s Square Deal Blog
The information and updates provided in this release are made as of the date and time of this release. Additional updates, if any, may be posted to the Company’s Square Deal blog at www.squaredealblog.com. Given the fluid nature of this situation, information may change quickly, and the Company does not undertake a duty to update this information to reflect changes.
* Global same-restaurant sales for the week of March 22, 2020 includes U.S. and Canada only (representing ~92% of all systemwide restaurants). The remainder of International same-restaurant sales are reported to us on a one-week lag and, as a result, are not yet available. The other 11 weeks in the quarter-to-date calculation include same-restaurant sales from all global systemwide restaurants.
