WEN - Earnings call transcript Q3 2018

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to The Wendy's Company Earnings Results Conference Call. I will now turn the conference over to Greg Lemenchick, Director, Investor Relations. Please go ahead, sir.

Greg Lemenchick

Thank you, and good morning, everyone. webcast Investors PowerPoint www.wendys.com. section and available which call the on of conference includes presentation, a is Today's our website

will and we is end note that take that reconciliations our results certain This begin and Safe may hand investors factors GAAP financial forth directly reference Executive of the up Before statement Gunther discuss for most initiatives cash to and to will could adjusted Officer, we Harbor On our differ tax open today disclosure of our financial reminds adjusted of appears materially in will set Various our results measure. our With our projections the some Financial to provide EBITDA, of non-GAAP the forward-looking the an Investors results key free rate, Todd. and our After over systemwide information measures earnings those we forward-looking. comparable as release. cause flow outlook. today's I'll at that, conference earnings Todd quarter such please Penegor, affect the comments Chief sales. on full-year President questions. call non-GAAP measures our Officer, adjusted adjusted adjusted third today, update that, Chief Also, review statements. from per revenue, to things line share, should refer margin, will Plosch and EBITDA

Todd A. Penegor

everyone. morning, good and Greg, Thanks,

with begin Let's few the highlights a from quarter.

another of growth global North continued new restaurant at X% We and International growth, achieved systemwide America growth of impressive double-digit X%. another heels development. have sales quarter delivered XX% growing quarter contributing on at of We the with

time, of globe opened the continue XX% the new to operation our same around growing image. and new and XXX restaurants the reimage the year-to-date. as restaurants on global and restaurants continue have number Wendy's opened have now We we we At XX of the system

or sales grew third were basis. flat X% on in American two-year quarter the a North same-restaurant Our

finally, We our quarter, believe the that balanced achieving approach are additional of XX% in utilize this growth, increase growth our policy. our Inspire monetized which is our free We've long-term. right to our at we North how million Through before know, partnerships, which is compared our August of delivery the have a approximately through flow and XX% $XXX stake prior and million testament Brands' strategy and system to continue third We quarter. approximately by American outpaced the XX% And, $XXX end the the XX% working covering after is expectations strong the to for to cash capital adjusted as EBITDA an year-over-year we resilient considering tax now business financial strategy on tax. best contributed a you model. in for our allocation rollout cash, results been

some the the to to We million core close have brought a board available rounded million. the between Dave's $XXX-million North messaging our back $X for frozen We with that incremental has We authorization, with from $XXX of directors are Harvest approximately Tenders Buffalo pleased announce quarter We continued $X around out a end X American our offering Frosty prior provide followed with balanced to the quarter kicking the beef. Double by summer. approach and around focus that, stick marketing never context playbook new a sales. we share featuring repurchases. our on the our low our for up share on an repurchase authorization to and quarter, with third a Crispy Chicken to out now million with balance high increasing Chicken this message utilizing the Sandwich. now $XXX Ranch August on In fresh, With Salad approved $XXX and Chicken XX-cent to I of off want same-restaurant third our continued

create planned did in Our quarter growth sales offerings environment. as third in the a the high-low not heightened context competitive of

of for and with consumers promotions franchisees operationally believe that We are to partnering we sound our that and we and are finish long-term speed, are of XXXX, than to can affordability. place consumer QSR them restaurant often, is deliver the more we ensure our to we the plan the be with As on visits and are are over that as all well-positioned we out XX% win into the more year with providing that bring need restaurants profitable. convenience

restaurants another development. key driver, to growth Moving new

globe opening on progress America make XX opened restaurants by the net restaurants North XX the from in and XX our coming restaurants of our XX to XXXX of Net new around with achieving grew third footprint XX year-to-date. restaurants continue and closures, internationally. We positive a with new outlook. We quarter,

to more the costs return new going helping drive net franchisees closures us restaurants unit XX% the in are build they XXXX. access of to and that North thus agreement on to continue growth ground-breaking coupled incentive, also work our majority higher if recently investment franchisees provide abatements to stimulate of and investment a sign We demand design-to-value development the generate restaurants. new two franchisee forward, for to incentive a us years in leading new reduce behind to X% approximately outlook some the doing XX.X% continue a and new growth will advertising America the take of interest share initiative the unit provides development This to we've we royalty moment restaurants. With of I to to incremental front maintaining from brand. with strong for to more X.X% great fourth a of quarter, new and global been internationally, our in wanted on pipeline restaurants over the launched

part the eligible for projects. incentive, the As are also future new reimaging use of any refresh-lite to franchisees

this incentive or program only and for As removes this less, of a reminder, available option AUVs $X.X that with cap. was restaurants million

of on early, our exceeded we in a have brand, single-digit to These thriving International would While In create internal seeing we franchisees an our and update. are to refreshed-lites, invest is our we find expectations. I how global spirit examples still of be provide it the better have for as great growth. like beloved and lifts to low-to-mid to continue we been vision financial returns solutions

continue to We delivered gain momentum sales systemwide we growth. quarter of double-digit as another

XXXX in expanding XX% we are net We another year unit XXXX. growth, delivered in XX% of as are and growth expecting

to In growth. poised addition, we're prioritization being deliver, this to led new Abigail which international and we approach investing exploring market is entry, change, stimulate Pringle. structure a that market our by methods to are international alternative re-evaluating is With in

reexamining of targets. the need that brand We our strongest our focus restaurant international resources and increase we our result, the to on the are our prospects to success a access markets around franchisees that our growth long-term ensure and As give us globe.

to builds will pacing our We Expansion out her and the and SkipTheDishes footprint comes ahead expectations. during delivery of Abigail of provide plan strategy new with more the life XXXX is our as details team. and DoorDash

now coverage the the end and at XX% North of XX% approximately We targeting of America approximately are XXXX. system by

the ads, continue with national which as transactions DoorDash offered sales in increased we various both leading DoorDash and raising to is in tagged investments delivery. Our TV make and third promotions. the to free In remains through awareness, U.S. strong we delivery quarter, partnership

and seen the a with to the NCAA Single by have second free-delivery purchase quarter, delivery offers a driven significant promotional We a compared Dave's offer. increase of weekly the sales in

We are are at sustaining levels continues to encouraged on the the which increase that delivery delivery. post-promotion, higher watermark sales overall

we convenience, seen appetite delivery customer of delivery have we our been Average point app, sizes access X X.X to check Lastly, to delivery our integrating to provide and see of continue economics. higher to on repeat. work another have to through consumer for into continue and an we mobile have with our this customers. The solid DoorDash to on all times orders, continues

to delivery, forward encouraging. strongest scores our are for to to our even demand this from as extremely markets is look delivery franchisee coming satisfaction addition, partnerships leveraging In high more which customer offering. remains roll-out We

strategy with technology active effort continue resulted steps front the more with third In to acquisition the of are second into us in app making deal quarter, on to to compared to huge as to and was bring quarter, which progress users Wendy's life. This Dave's number an active mobile free We The customers an use the a in we entice the users success. the app focused doubling are our drive programs offer. we on we our Single taking download to a pleased

of our from usage are feedback mobile mobile Our all drive mobile and app, we reimage able to strategy is franchise in been one feedback and sales which franchisee. of Without and XX% also U.S. results which easy increased FBR's take achieve mobile over which the us go I highest in along our a food has with in where ordering, again, to that top use up without were see seamless of set restaurant and on. to Wendy's powerful the our to now great to To we XXXX that happy would America. North rate of Franchise offer to It's We again, making and resulted of coupled Wendy's importantly, see roll-out and very the have over begun in customers more industry dedicated would new us to is on from more that it Wendy's strong improvements our some will restaurants, with XXXX. named year to Business another the of led offers, franchise an alignment Review being and providing positive would continue would recommend moment give system, lot half of navigate. to you access system. us not our nearly mobile benchmarks. are is our another more received Wendy's consistent for of roll-out across successful brand will pretty today update growth decade. all app This, of a mobile restaurants, been ordering, now system a a beverage a These our survey we brands, one available want exceeding to giving XX% have than and invest franchisees. growth, our downloads for be support of not to in sustain

of Wendy's out which held was regarding results the earlier. in Just some annual business year from is coming optimism received a convention, what and future our attitude September. late it feedback franchisees' show up that as was of powerful, Survey we

competition. they the us Wendy's We great laser the improve pass is our and our we to to GP our food, on remain value, differentiated life, Way, our focused elevating every restaurants. for to When with recognize through continues customer to know than quality times satisfaction the quarter I centers food on delighting Wendy's difference a restaurant I Consumers and a food, reflects focused frozen between delivering the future. is wanted this. leading and The our our to outlook food the get a providing is a hold on no things across bring customer, faster they great promise has Overall that, you to of position and which never fresh, connection a we two strong our is this brand highlights on also restaurant it's financial to our hand and our Quality as tasting into great quality. to must recipe, differentiation know that and I'll map and at visit. to grow our higher all that our recognize around everything advantage. things restaurant quality consumer, of to to our on are for growth investing will brand, GP, business, than Before In significantly in eyes matter continue the same promise in the our our that Wendy's bring of this as the food order back third have we quarter This will exceptional customer day, rates advantage need have in they brand about competitors. globe. service Consumers of beef again competitors road to Wendy's take visits, at can leadership and improved consistency great day over continue At beef, and restaurant And end we year. commitment cornerstone with every and nearly we of as serve of service, our be fresh the closest the the period. to

Gunther Plosch

Todd. Thanks,

company decreased increased the reconciliation other statements. X.X%. a driven our of by X.X% in Adjusted acquiring labor prior market savings contributing adjusted a by compared restaurant benefits release XX% back be resilient Adjusted primarily business versus XX% savings Year-over-year costs. insurance the system As G&A the for increase million, recast $XXX we will G&A company-operated by $X.XX the pricing company to a Also restaurant the versus capital of result the demonstrates and royalties $XXX initiatives by This ongoing restaurant the reminder, incentive meaningful inclusive in restaurants was adjusted accrual. benefited increase basis, due revenues timing our capital the points is $X.XX. increase grew growth to XX fees. rate strategy, points, as XX results to royalties a these company's margin of result EBITDA Adjusted flows year per the decrease part increased all million same-restaurant in an in to refer increased from the discussing and basis flow our our quarter. of XX% impact of sales, P&L was revenue incentive Please XX.X%, by optimization our to inflation company XX% operations in as Columbus margin $XX.X in recast million prior as increased of the of sales. to and XXX on an recognition financial in and compensation and and EBITDA This a EBITDA favorable lower cash driven working lower achieved of decrease cost, partially initiative. by year in earnings growth the by to commodity was in $XX.X earnings in by addition was high reclassifications. increased tables the and which compensation expense cash core salaries actions primarily and to XX% We and primarily driven offset in G&A franchise of lower reductions our and expanded result from initiative. which quarter We of model. share from million, basis to in G&A X EBITDA, Free XXXX.

on growth year-over-year driven the in activity. and increase Also to was tax adjusted a third rate, EPS results. a in contributing increased benefit partially by as our changes from Moving to growth $X.XX adjusted result the U.S. The the EPS of was tax of the quarter. law, option favorable EBITDA

stock-option Our of stock can than remember exercises. effective third and tax lower quarter is we income important to rate due quarter materially It the XXXX adjusted that what exercises was change expected quarter. timing amount had to to option

our proceeds an remains million. unchanged our with we strategy capital by with one investing as of Inspire our through allocation the dividend Brands' excess priority, $XXX The playbook sustaining to of shares. allocation capital of looked growth Our continue and in Wendy's number attractive We've cash utilizing brand followed after-tax strategy as repurchase approximately

share An by total to from million. repurchases we the sale XXXX. result, of increase August, for of brings announced share fiscal our increased million. $XXX $XXX available a As have we authorization when our $XXX $XXX Inspire million repurchase Brands amount million end to This of the approximately

same-restaurant lowered million accruals. lowered as down slightly to G&A, offset to approximately we of of After $XXX a through results take our have million $XXX X%, partially to sales to and restaurant of margin expect incentive our remainder compensation forecast EBITDA G&A $XXX versus company year-to-date updates to outlook. XXXX, America XX.X%. and lower result sales With we for to to million our primarily North for our same-restaurant let's look of approximately the a million. $XXX margins now and expectations prior XXXX flowing restaurant at year, come the million, adjusted $XXX by has expectations approximately expense lowered XX% refining Now growth

to $XXX flow quarter the was million the our reduction earnings our to to lower $X.XX And, outlook, million. to of tax $X.XX, per million from EBITDA. we're a the $XXX which offset to as in in range, $X.XX adjusted the $X.XX of to favorability have We $XXX in is rate original finally, cash increased and result in which $XXX by third free share guidance adjusted partially million, depreciation approximately our middle tightening guidance

XXXX not noticed reaffirm we out you As that night, last our went have in did goals. may release earnings

in Abigail have growth mentioned the and Todd we our leadership, also Pringle's our As earlier XXXX we are to international under outlook. plans continuing review updated presentation,

these of a and look at take caused result these to moving this a pause targets. As pieces, has us

company for an into unchanged. cash Our growth growth generation. is significant is showcasing flow growth expansion sales road growth, map remains sales efficient of that which is same-restaurant continued meaningful Wendy's translating systemwide global free the backdrop restaurant on and

open Greg by to hand I'll back shareholders our rewarded last also Q&A. approximately the repurchases $X.X have presentation years. billion in five dividends we before over returning the We up and over that, With share for

Greg Lemenchick

to like Slabaugh, I Investor Play Tuesday, X, our and will on Relations in our GP, XX, Will calendar. I'd Wednesday, Eat, GP. sponsored in will Barclays for market some a New on Dublin, host and Sleep, visit York by Thanks, December team Conference. events Lauren And upcoming November Stephens. the management review here quickly On be senior Todd, Cutright

at plan in to any contact following firm. questions. the XX. conference take outlook, analyst please to are of host's on February ready earnings, preliminary with XXXX interested respective now you're If sell-side us these on we finally, events, Wednesday, XX, with and your release a With our meeting our And, that, equity sales the call along at or February the we morning, XXXX host contact

Operator

Your first comes Gallo from from question Michael CLK.

Your line is open.

Michael W. Gallo

hear you Can okay? morning. Good me Hi.

Todd A. Penegor

morning. Good

Gunther Plosch

Morning.

Michael W. Gallo

obviously would I go you forward. individual bundle-oriented also Good on promotions somewhat kind you app, kind and some they less if promotions, your wondering Or exchange in that value-oriented. of should about reach morning. mix, can a negative Thanks. than the we start that probably forward? kind greater look at more drove ran what those that you I And it away you expected, a going how you of new you lot as of to with you impact of saw Is drove rebalancing promotions Todd, was sign-ups think then you're of ran kind to ticket do seem in when to where, the GP, something obviously, and forward? quarter, were third you that point giving perhaps going a you lot price mine a – an investment. which, continue of expect point and of

Todd A. Penegor

calendar helps of when us a all for them our into about continue get realization. when them felt drive the up first a good message. to to to for that and driver great with and start promotional game our we have that fourth to and mixed we're plans think Mike, Ultimately, folks the having set actually in the continuing drive have regards about it year, app, premium pointed it's of we trading think traffic quarter. that on helps accomplish your we're information. in drive our strong, Yeah, to up restaurant, up question, It continues us to and offers, an us to high about continues into items? to into to that, be, into them And our driving reflecting into play we early not our we're acquisition, to how calendars, we the ourselves set and in and mobile the put From plans as into We balance to place, messaging part And we our core in right the more to as them up out, we our helps going you the our quarter big restaurants, do at we mix between ordering. but, our next items only on own low place into need look really And mobile right? how opportunity do we app that. actually plans start us

app continue going get ways them our to a continue we're Wendy's and restaurants. So, frequency find to folks to engage with into more The to create to into little

Michael W. Gallo

you. Thank

Operator

Your next question comes from KeyBanc. Eric Gonzalez from

open. Your line is

Eric Gonzalez

the for thanks Hi, question.

in you aggressive development, to Regarding taking your development, you stance agreements on a more considering new international presence, the made comments master are as perhaps international re-evaluate franchise markets? through you

Todd A. Penegor

of entering as a want Eric, different we markets talked and Hey, to got how opportunities we of to the over the a approach cash. play We've counting prepared gets take International one in always another And a acclimated market lot we've game. remarks, new of with years. at entry. said Abigail to her lot in on been we've the as past, our we next or the look re-evaluate new really team, I to works as think We've two got couple business

we we explore all of we in play the meaningful growth, will to of of to the sequencing across give, into a focusing plan International on a growth that the where really long those drive we on But run those as together So, alternative little as ways market unfolds, feel business. and time have to things globe good that, still that get stimulate we're can want to pacing Abigail, I'm we'll sure at talk more the in look how which the about we our February. bit resources mix lot and and

Operator

will Barclays. from Jeffrey question Bernstein come next from Your

Your line is open.

Jeffrey A. Bernstein

sales Great. environment. peers you you the Thank questions. burger challenging the you. mentioned just seem maybe like margin. a by widening Two outpaced your QSR does on It One, category,

balance or think Just you like had a what underperformed would would then to I on about side? think that? the value do response be or assess more how something and you you one you wondering of premium on premium, where the short-term value as that follow-up. And And

Todd A. Penegor

QSR to last it's some still look to couple at category, that does We're you over growth, And continue the the of see to place up real to the matter. X% Jeff, traffic starting flat scale quarters. be. If and

traffic the the manage look can category. in hamburger you at with continuing well. of We we've category QSR and category. in And if biggest the done play to are sub-segment share the the drive well dynamics that in hamburger traffic So, quarter, category, the

menus we offering, into get our them to X exciting earlier, trade up-selling experience folks off a is we sure continue trade messaging, the we for and so of appropriate them once premium the that and price-pointed appropriate us, to is how the the plays move to on them offering restaurant from they As in continue How price. a premium to with $X how to do the offerings High-quality we do do continue core great meal? And food I and the our front to higher opportunity all said up, in a like have those strengths, news all into we restaurants are at offerings? so come have very continue more Those of affordable those work it are that we'll back. opportunities right? make good a $X-bundle

Jeffrey A. Bernstein

it. my half the Got guess, heels in on follow-up back just And was of that franchise the convention, September. I of

to labor inflation. As pricing? talk to Obviously, about some mean, menu the and I do how are they compression deflation of and profitability about you're the side, (XX:XX) there's what on margin easing or food you talk franchisees, with think seemingly their been inflation term suggestions Or making?

their just help So, to about the be pricing biggest they're to wondering margins, maybe the how protect there? I'm thinking technology outlook driver of

Todd A. Penegor

gap. be pricing a Yeah, approach grocery got the that on there. reasonable business is there's to to discounting competitive, Jeff, because versus first take to be food-away-from-home I we a and lot of we've want think to piece very focused And food-at-home the continues

in a to our front. on around be have around got the full that's Ultimately, what to we down really is how a have the pricing across people control experience we discussion create bring the working to consumer you to all reimage things of invest the experience smart of on more menu, prospects with to it ultimately still more what a continue little system? a future, our continue those we at customers? community, and pricing. to to bit mix nice to of realistic but on be in technology the environment the consistent All in those do the need into lot to front lapsed driving How and growth bring do have. franchise that, play doors passed we we opportunities we've pricing to into to will an to pricing. And of more we're are create be about things do we balance the often? to be us. do our we It restaurants in big across to around also continue comes be do connect think new realistic up but often. those needs How So, that if But of there And needs to needs in more about pace

Gunther Plosch

is cost commitment stuff side would labor and and the like really the our we the also restaurant following we them the labor the convention economic to management, to on side other on stuff showcased Yeah, we the Jeff, also pricing do on the suggestions and the at all do really thing but economic on add not model, franchisor, all from guide I help just compliance the structure with restaurant model. design-to-value,

Jeffrey A. Bernstein

Thank you.

Operator

Bittner Brian Oppenheimer. Your next from come will question from

Your line open. is

Brian Bittner

Thanks. two I also – I have questions.

moving if just would the and G&A in but CapEx First, there's imagine all just have the how me Correct do I'm a I not probably now, the sense of here. targets lot changed. that pieces you want us thinking about XXXX expectations the wrong,

be what $XX be helpful, a that should to today and reset? likely would the is conversation So, other on this any And billion-dollar have suggest we take follow-up. system-sales I that needs target color to

Gunther Plosch

as the right? at moment. the Brian, of updated said, We've call, XXXX our have We I Hey, on moving leadership, international are a outlook, pieces just under couple obviously Abigail's and reviewing our plans. we

pieces moving there's there. So

goals. that call, actually this. right? So, our of happened, And, clear, XXXX said We think point And we again, need of the best I model, the have flow annual to the is through on without flow. wishful And flow think it's are company just work And, changing, final not we know year-to-date cash are not right? have reminder track bit then little basis, growth are on outlook. also, to year our mean be free because as thinking. our cash delivery. free our same-restaurant But You On a to lowered through cash about of our resilience the totally a example really, free XXX restaurant-count efficient to them. probably is that impact by the If guidance a lower. that cash of $X basically an the actually is restaurants sales generates just a international, reaffirming happen about free a up We million. time Same really, of on million were flow of we lot X% what I SRS doesn't we in free given it on that, it fiscal thing impact about cash somewhat flow. creating worth basis, is with $X in

position just So, pragmatic that took digest what kind it's of a we to happened.

Todd A. Penegor

on to drives sales really on a focused that about of through and what combination those And, drives total know, that it GP numbers success got our elements, free to you then, think talked down as we've a we when tools lot sales, growth systemwide driving been comes all about the just for you really we've cash talking And had Brian, us, long-term about. to the of flow be ultimately, targets.

those So most are talk and the and different and where about the focus we can of that's that, bookends that get to is. all variety you a matter that ways. of the in us, supplement else Everything there real helps support

Brian Bittner

have after if Inspire capital a or GP. for wondering actually, follow-up upping the It you plans capital plans situation. buyback, very any Okay. just, of was leftover second And Thanks, even and from the on lot was this just and I leftover other Brands That, sale helpful. the is seems Todd capital? like reinvestment any question there is

Gunther Plosch

now and a mean, Inspire of I proceeds, a invested we've big bit. portion two-thirds Brian. Thanks,

our the abatements side on talked new flexibility. We royalty our to cash talked investments to accelerate provide about today, build growth. bit right? little a left increasing about We we incremental So, further

of $XX You seen our after optimize spent in market. more order to company's footprint, million kind today Columbus have that consolidate to we

run don't want little to Have visibility our with back And want cash. all to to the bit that and a bit share we hand that. that authorized, little our have we really more from of of a mouth on we just the So, giving have have shareholders. flexibility, majority to are cash to demonstrated repurchase the we

Brian Bittner

Thank sense. Makes you.

Operator

from John Stanley. Your question will Morgan next from come Glass

open. line Your is

John Glass

was that back traffic it a to Thanks understand very much. to what's drag. your because still like make just I to American quarter. at least It I sounded sure the just I wanted was commentary or sales North positive, wasn't me since happened go want same-store last to

that plans that? to more; offers, better now get you to on you So all that in fourth see of the still that's X as Are and What of just the quarter? to working the $X and trying that, a understand fourth for premium? how there much quickly you're resolved end there to place get through because the by mix is quarter? change And a the does or didn't going is is something already is this because this bundled I'm hope sold there the you dynamic decline, and

Todd A. Penegor

John, Yeah, questions a couple couple thoughts. of a or of just

good folks individual think the to XX-cent hamburger really some promotional driving but a add-ons Ranch add-ons. about do says We look sure that you at, QSR actually promotions with didn't others on is add them Frosty. are share Chicken. job What we a the another core we were quarter, have U.S. bring as did the entrees that on up. to that at the had we that do got as trading them as balance dollar, purchases. we in good value we make did and nice If do $X We share we good had they're need QSR lose that in rather Which front. than a add-on with the calendar restaurants, right just to And had third others have that into category, the dollar the Crispy the items, some we Buffalo hamburger category on gain within the

see did to quarter. competitive you a lot So in mix the pressure the relative on set of

Gunther Plosch

Yeah.

think to that a $X Last trade-up program, year, year, slightly a obviously to different drove thing Last we low program. had down we year-over-year is, lapping. had a high like, mix. other JBC and through the The

for we three As consumer-wise. this obviously the and well. quarter, tested dreams, program designed All promotions these we had financially operationally,

environment we are get the check in it in we to past. Just accretion there have seen the the us didn't that in,

John Glass

CapEx think growth. international I And likely, number still But in to think in you in you understand for about change may possibly just I a is about CapEx markets? investment a sales lower or international meaningfully XXXX people been differently your that change now? comments, system anchoring you're play long the But your Is as XXXX you've unit understand as going in through piece time. to working plans. view,

Gunther Plosch

to The bit more just We year, not this decision obviously goals. a the more taken wouldn't made anything we that guidance the but right? reaffirm favorable, than read have right, XXXX it. – Again little any trajectory down capital is for I into

John Glass

thank Okay, you.

Operator

next will from come question Your Jake SunTrust. Bartlett from

Your line is open.

Jake Rowland Bartlett

Thanks for questions. the taking

could positive you the traffic on if I traffic. whether was maybe quarter. again, sure were slightly you the that confirming the in Todd, First, commentary just wasn't clarify

implies you that. at quarter, believe annual I premium launched. in I'm guidance, then looking wondering and could you've the due from to some new the confirm If the promotion an that's success improvement that fourth whether maybe S'Awesome that And

Todd A. Penegor

quarter, in I'll traffic But were – traffic we this: was you at a down our comments the third gained look start so within share. were slightly. the Yeah, category the we hamburger hamburger where with category, tenth. when up We actually

the sure then hamburger continue do how of comes we back do do to Et you QSR? How speed And the two cetera. which to, service? you how that well, says, category are cetera, make those continue technology? So grow continue to bookends, within improve to to et leverage continues that

as quarter, the work as to the to have what especially third So, reimage opportunity just we really promotion in of comment as all Way to think talked behind and about we're to experience, continue growth, about the restaurants. customer very on bullish don't we Wendy's drive I of we the interquarter about the continue we think on performance, running you want a our about challenges but The we you today, got folks think favorable the that were you to mix, where add-on quarter. promotional relative we purchases our strong nice that Bacon on Any message third you when a them to Cheeseburger. we're high the then drive driving driving And S'Awesome sure up, we Size about with making We where performed adjustment low would $X on a trading right? in, and subtle calendar a that We Fries. got is message in say on still food, work to elements

Jake Rowland Bartlett

had Got it. the a International. on follow-up I And question

that pause been your the or there? wrong drying up? sharply. is guess growth why was approach something maybe the pretty was or help of the had reassessing is going for us pipeline What understand unit working, Just You internationally. of wasn't implication for reason approach the the the I accelerating re-evaluation the

Todd A. Penegor

We've of there's One, Yeah, some isn't a we've created much couple got higher things. every got some equal. think lower I market markets. AUV AUV markets and

we've focus that driving make systemwide So really sales our sure we got around resources as are focused to growth. on the globe appropriately

that first out thing put the would I probably that's there. So

work to to we and ourselves have growth? really set one life that? still think how markets. all about that you enter in that do, the we've really we is have and we're do while, accelerated this for to is, we And do for bringing really at questions, a markets. looking new question the through work is, different talked up earlier bringing of why that order. thing new to kind do And those and the that short could ways life, right to partners, Second need or approach we to two to what Do we the And about that's

had International, And that new recruiting, with can new So, confident, we're on around practices fresh front. all the those that's development, American North construction, pause. of around the Abigail as the development lot around success and best a a the incenting with very around franchise we've bit we look. I'm leadership, International on of And apply taking takes design, to

Jake Rowland Bartlett

very Thank much. you

Operator

of from Francfort Gregory America. Bank next comes Your question from

is line Your open.

Gregory R. Francfort

questions. Hey, guys. I two have

Why the a first and was was me, your Day, up, and more ago, Can it step then to ago, program. at going you couple two remind think advertising-weighted? or on years you is X%, guys doing basically Investor X.X%. I royalty were it The like years the one's be it incentive

Gunther Plosch

question. the for thanks Greg,

three-year a a then cumulative We Your of over two-year to is recollection right. accelerated X.X% over program kind X% period. We period. this a had previously

now up side. stepping really two is points we're on royalty where So another the

point So point relief. one, another again, we're royalty In relief. adding year in on year-two, another royalty on

creates, that bit are company But hoping, little builds So in obviously, accelerating. our return, P&L. obviously, it new are we of a headwind in the

very our a good for should franchisees. overall, So, And importantly, financial return financial a even that very us. return then investment also good more for create

investment levels actually, As with build, we returns at really build about and design-to-value, for with $X.X new combined abatement, is you restaurants new pipeline. even franchise community XX.X% our now driving further should million. of know, starting accelerate better our That, are to an

Gregory R. Francfort

timing to And more the you're And the of that we building considering it you're kind my on that sounds is a I take markets and more G&A Is of of team side there it? the is investment just should the world. of of is some address guess to question a Is out evaluating? potential this Understood. re-evaluation around on International. openings? Or me then pacing other what like a how International

Todd A. Penegor

at doesn't business on really Abigail's years. gathered, with But, resources synergies, be American the there's from practices a of world that's can choices the put her work the across most do of really separate doing first big do support best best internally mean is there's we to portfolio. lot do we're strategic the we a talent. our We necessarily new help Do and development What design. growth start future? really business importantly, we ran is our the some right? the us in with International restaurant common we It's into create talent our that to And group opportunity want completely especially North looking to G&A. And synergies, growth? franchise a team. to have our International running trying and many as together of And for a more really business. as development that bring what lot to that our for And drive recruitment, Where think we're we

have those across bringing groups a shift as mean there's be It some resources of portfolio, necessarily we the could it So G&A. then offsetting with of more that of that synergies our and doesn't as well the together. some delivery

Gregory R. Francfort

Understood. Thank thoughts. the you for

Operator

Dennis Geiger open. your comes Yes, line UBS. from from is question Your next

Dennis Geiger

Great, thanks just sneak two for the could question, in. and I maybe if

outside the broadly share from mentioned performed could you think that first, et the quarter. about competition the then, QSR, Todd. you over address you category cetera, a if gain if last to Just traffic we hamburger have in for data, a Wondering thinking more few question, just months? And second as how about categories just chicken, you those relative other categories, the

improving could of You then just comment just it's perhaps a But most what's going on the there key some gave detail with calendar bit value, day-part you over delivery, some digital drivers currently. about Thanks. balanced perhaps, the XQ, XXXX, good more next same-store sort high-low you're on sales if the IA, quarters? color excited on on what, opportunities, wondering – into and strategy, whether few

Todd A. Penegor

Yeah, Dennis.

Almost of see if look Mexican So, still been, look some category the if at at people's The has you biggest, have been you XX% QSR growing, hamburger category, competition pressure you it right? the But set so all of right? it's we've results, the in far where in other by points category. the hamburger businesses got there.

way. game American growing some and North a the beef a we the these strong good products never to a continues with against of of And compete great-tasting that continue play sandwiches other and portfolio from of entrants grow. along big along a and chicken way. great-tasting variety we menu you nice value across folks can to the our good fresh, in that And hamburgers, to then frozen salads lineup have the chicken-player expand The got news a Mexican low high is

And a to speed the to opportunity. our in is We second part take those to question consistent enabler. up we're big of technology our to win with to to about continue of mixes one food. across making we're which restaurants, more trade play folks to how technology, initiative to really to continue have all think have in what going us to consumer be in generation on to drive have us, about about got future. differentiation the when quality and including we've we that but behind excited going it's your things technology need that focused drive you be of as going our gets We a to talk price, the then what of and service, long-run, brand is We're can is a our experience that. connect big really next The the going of and competitive lot a of on for investments role the be a to

that excited quarter. And drive So, really business. had consecutive those that about growth of quarters when continue our you are can same-restaurant flat a sales to get the we it, we XX think until things us

that's momentum of and a a in we've a opportunities lot lot long even the time, be of better for So, future. to with had

Dennis Geiger

Thank you.

Operator

Your comes from Haskett. Farmer next question Jeff from Gordon

is Your line open.

Jeff D. Farmer

Thanks.

you it sales – but and, I'm a were value. again, touched guys that curious little by the guess item, a on mind? sounds sales greater-than-expected touched What like surprised You you for it, it that on bit, I quarter single drove promotions? mix was mix in acknowledge just in I of items this X the driven your $X, collection by for meaning the value on

Todd A. Penegor

how got Yeah. is Really, you any restaurant the they the the we actually as how combination there. check they into together they once wouldn't particular pinpoint and It of their customers brought promotion. it worked to premium particular work any eater or one one value promotion

the forward items. partnership going of news and what is had good we happened, franchise The great know in it it understand to we're do we So, with combination going our those community. what about was

Jeff D. Farmer

And a just to follow-up your response then, there.

the to share But us you coming in response on this. touched you forward? this what move can just strategic quarters, again, promotional So, with you as

Todd A. Penegor

mix drivers. on but we've only It's but Yeah, got been making as traffic-drivers, being at, that looking really sure balanced focused our calendar gotten not we've we've

the to tailwinds to on that, us a a nice And the little sure in have And service service the frequency to the go make comes like to restaurant. feel loyalty to So, we with and We we we where back. able why And create and to and connect more them our want engage well things as want want to that can consistency to and to forward, get of future. trade experience to our little continue to able that's will brand on the continue those to up. consumer bring light. them them technology all be we that's be way into more we're be

Jeff D. Farmer

Thank you. All right.

Operator

The Matt comes next McGinley Evercore. from from question

open. is line Your

Matthew Robert McGinley

to And royalty International pretty more sure I to the is minimal and the in structure and sensitivity. bearing AUV small probably make make sure on just on flow, cash the one pieces begin understand the and pretty here. to would I understand with, investments have on the the Abigail's it free clear have GP, unit XXXX want want I'm comp I that moving I so But I guidance. aside.

at cash you full would So, then three XXXX, a in million, in point only XXXX if to again full below in $XX are you the missed point this about be full another only million and by $X and two comp that XXX year point and by flow? a then units the did cumulatively as free range

Gunther Plosch

$XX the cumulative your of is three SRS Yes, effect happens a flow. effect math us free it roughly years row, in in cash the million X% shortfall annual right. Matt, cumulative is to if an

your math yes, right. So, is

Matthew Robert McGinley

to the same at year lift embedded gone And about the you number this this why get challenge as had headwind what's does But look around XX%, you're Image create and an the of that I like the been so going year? as before units not to Activation XX%, it because projects this X%. the Is the did side, done have challenge year? comp didn't these the next thought because what's assumed? have And costs get it's you more year? image-activated think was it up? that on getting would with And you construction much by revise you you

Todd A. Penegor

per good to good, their at restaurants. this you really reimaged about year. feel And have the still end be been agreement our and about We with commitment XX%. at XX% reimaging them, No. our of really we're should And where feels by community franchise is, if they going think

we've brand well ground-breaking at and of we're conscious new that restaurant the about ahead we new We very more effort. is portfolio, talked look So, that. unit access the their providing sure to when drive development. part reimaging making and they a of really But incentive, and made

seeing to But a GP? sure strong and right balanced our the and seeing We're return. that nice we're with reimaging. has franchise nice what got still seeing we've we lifts. community sales, We're is between got we've about restaurant-building good return. feel reimaging make So, new a nice really

Gunther Plosch

as minimum is conversion we I really other a That view add XX% to from other franchise point. be thing have The per curve. is the are would point reimaged, agreement, and that of the is ahead of we basically

Matthew Robert McGinley

you. Thank

Operator

Your next from question Will comes Slabaugh from Stephens.

Your line open. is

Hugh Gooding

I follow-up, Will store are Wendy's on delivery, were third-party this or weaknesses wanted in where mixing and the a that if from a customers to are to maybe I geographical the a Hugh wanted delivery And likely orders quarter was the as also hurricane. impacts guest? any would And of the see future ordering you I Thanks curious just these and during percentage there is total more for questions, this after my taking strength to sales. just for start see more or then, call are delivery quick fickle fees these morning. as to with see, to these any out a Thanks. visit

Gunther Plosch

XX% to year great Hi, We the Hugh. achieve and XX%, now delivery, On penetration. the right? of about we're making at we end are progress, by forecasting are

is little faster that's So, going a clearly thought. bit we than

Second comes It's data on I what for see is We point X with check that the to X.X delivery point, times check. very size is good. these the have see satisfaction customer visits. we regular high you

believe clearly the repeat see on there's also especially day-parts. in business, we We and business, incrementality that evening

their we side investment about and and driven overall offer business. they deliveries as likes. jointly between DoorDash the delivery the good free on So, It's is DoorDash. making us feel really

our We DoorDash. talk are we with making side as about delivery investments airtime on offering to our are

Todd A. Penegor

more builds create about DoorDash continue every nice talking we on Whether we see here delivery, brand that's DoorDash delivery. time And awareness. the little to a support or

come don't skewed can And to people feel on little dinner a late-night. we but customer. a like So fickle we seeing feel like We it's day-parts, routine. into and across delivery all customers we're the get more in

Operator

Andrew Strelzik next will from Capital The question BMO from come Markets.

Your line is open.

Andrew Strelzik

good questions from Two Hi, morning. me.

entirely the We've that it's one or is Flips interest low-end conflicting are that question first companies, back? anything, Is the there seeing or rates Whether low-end the any maybe I improvement in consumer. timing, different in of this from leverage been you've on people on or around are dynamics kind you for and lowering about The talking of heard not my concern commentary market, think number some Franchise year. the consumer. seeing just anything that? a second And like out holding

still justifies So, what is seeing? that what And kind you are of that you're seeing perspective? that

Todd A. Penegor

Flips, to it's leverage and the Flip. the demand on want part, do company first Franchise the folks resources so the really a to Yeah, Franchise that just

sold way. we lot So right? Franchise of. still future. We along we that get of they're Flips we're get we where still have of there's franchise year, some lot that if an in some out work There's franchisee help the thinking the going back. get a turnover trying into think you the fee. the into there's other we exchange, transfers bought And have to the roughly But to the this middle We've circumstances there's system, not restaurants a where on of restaurants XXX as business, may the through about

bit change the hands a XXX north course misstated this of So earlier. And little of we'll restaurants during I see year.

than going little number. Flips As the is is XXX that we number. lower number, XXX a guys? bit go right, forward, XXX's our forward, the Franchise

Sorry for that.

front. of On the low end consumer the

we're growth, high We're economy of to households. unemployment confidence, XX If almost you you skewed right? income seeing a at households finally of time, that in consumer total, in it's there's levels. as record But years tailwinds, lot levels median long and higher at recovery, significantly great economic look look the income at a seeing lowest

workforce rise they're headway to XX% customer low-end, And growth accelerating $XX,XXX less. our you folks about participation QSR, that that rent got looking makes the And below costs wage the do of eating that for. making. real starting still that on and we You of not extent with all remaining had to at in have remember, we've are is And start healthcare really well some or pre-recession levels. hoped into the base

that's QSR all to to have in important depending and bring of a calendar, space mix the solid them month. to high-low calendar, time why the folks so us of So for in the across on the really is it allow

Andrew Strelzik

you. Thank Great.

Operator

from Ivankoe from comes JPMorgan. question next Your John

open. Your line is

Brandon Sonnemaker

food improved Great. quality, This Thanks. that on is faster other competition. and I improvements I remarks when And quarter than starting scores cetera? et begin notably exactly? experience, mentioned for as that these guess you perhaps in Brandon off, are the trend such cleanliness, in off-premise metrics, prepared John. on Sonnemaker, purely guest guess, did the or sat

Todd A. Penegor

satisfaction we No, been steady couple the been pretty metrics the for years. have track. that our overall Yeah. last improvements all And of in of across really it's

improved. you, performing you of you the customer having with and the gap. external a our matter flavor, demeanor on is, have continue want the how just the that saying study is on And speed of best a have restaurants overall of some our some work. make of The that opportunity pleasant happened a experience wide So fairly QSR go to you of To service And the satisfaction. sure saying raise experience? what that thank study consistency to a great continue have bit we is, we They opportunity things all no improved Wendy's to. low-end? talked please, give subset little within improve floor which smiling do top-end Our we really on around, we is the to of in have you same

the way. there's we're make progress that along validation third-party starting to So some the

Brandon Sonnemaker

And would I sorry to and then, But spend it Thanks. in looks implies D&A, And or then, one-time that's XXXX Was commentary whether missed quarter great. on our fourth similar D&A pretty XXXX Okay, low number if this pretty in quarter? normalized a there this. that be the number that like model. anything the relative quarter. was in helpful? any Guidance

Gunther Plosch

have, in so we little quarters, relatively spend. The far three clearly question on the capital D&A, first

pressure downward expense. has the obviously on D&A that So

quarter. the on was leases part true-up third assignments lease booked line as of that in some the re-assigned this we of was that kind a new Secondly, D&A

Brandon Sonnemaker

$XXX XXXX Whether Okay. XXXX? And or XXXX number on million is in then any XXXX, good commentary a D&A?

Gunther Plosch

We're going is right part to to guide the quarter which is earnings. whenever X time guide, of

Brandon Sonnemaker

thank Okay, you.

Greg Lemenchick

full-year GP, Todd you, when our participating thank on this look report and results. we next We quarter and with morning. you, you, Thank forward to everyone, speaking for again,

call Our now is concluded.

Operator

everyone. Thank you,

The Wendy's Company (WEN) 7 Nov 182018 Q3 Earnings call transcript