- Earnings call transcript Q3 2022

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Operator

Good morning. Welcome to The Wendy's Company Earnings Results Conference Call. [Operator Instructions] Thank you. Kelsey Freed, Director of Investor Relations, you may begin your conference.

Kelsey Freed

Thank you, and good morning, everyone. webcast Investor PowerPoint Relations and available which call our on website, conference includes presentation, a is Today's irwendys.com.

results earnings the Before of we we could of may at Various is Chief certain affect the directly business our comparable On today, Chief our for and XXXX our note the disclosure our we end end factors safe harbor our line discuss of statements. review measure investors outlook will begin, measures. and statement that information Penegor, to things that, the Todd. call will to the our please projections our Gunther over third will year. that earnings non-GAAP release. This take for on Officer, our Plosch, provide set there, give will forward-looking. reminds this Executive questions. today should appears our forward-looking and presentation update; Financial reference will to Todd the I a forth release. comments today's financial From quarter at or from cause Also, differ those an Officer, reconciliations of hand materially financial conference update Investors the in results refer up President GAAP measures non-GAAP With some most in our open of and to results

Todd Penegor

basis. on one-year of system for Wendy's a am delivering the and same-restaurant Kelsey, proud everyone. significant sales morning, Thanks, acceleration I good a

continue brand These expectations, against consecutive how deliver customers fans’ than sales of making high-quality same-restaurant Our results resulted consistent double-digit sales relevant growth fourth basis. ever. and our the compelling ability value our a with our underscores quarter highlight two-year Wendy's convenience food on and resonate more to brand's in our to our global

amongst performers in QSR day our the share the quarter, our ranked U.S. and set, and traffic maintained dollar the the burger our dollar in category total we competitive top third traffic growth During and of

breakfast Sticks, Toast the innovation we which course the meaningful the launched U.S., a On our over French drove in U.S. menu of first front, breakfast sales the the major in quarter. acceleration

an proving growth positive at daypart. received is us have overwhelmingly the from We how just breakfast our ahead much reception of customers,

we XX%, digital we sales strong fully close breakfast committed global our three digital expect business, our restaurant heightened as remain to to momentum model and the held digital expand our out daypart, of economic even year. the further a through approximately growth global grow driving We and mix delivered initiatives: to to focus marketing and digital accelerate long-term Our this business with delivery on our footprint. build

with united a are sales We our and business system third We quarter franchisees basis significant same-restaurant delivered in on for well. compete to continued to continue our to come. growth one-year U.S. the global one as both, as delivering international years acceleration

widespread quarter Our sales business with growth same-restaurant achieved two-year international of and outstanding sixth reaching a success, growth two-year XX%. marking consecutive over one- quarter another double-digit with

by compounded due dollar We QSR Republic, breakfast was the continue Latin strength share part region year-over-year the across we America Dominican like faster Caribbean in burger Canada, and launch. results are to competitors with our markets in where of remarkable acceleration. ongoing This our see Bahamas our traffic than and growing showcasing to any strong and growth

traffic we percentage QSR category. the dollar business of versus points over one-year and U.S. a Our accelerating strong on share prior held X delivered within our same-restaurant position sales as basis, the X.X% quarter burger

and the pricing continued sequential calendar, and our in across of compelling favorite system's to and strong customers price record quarter, to $X testament our customer Peppermint variety a much products track with check consistent QX drove to fall. build ownable for in balanced occasions, our we the a QX counts mozzarella by points strong fan craveable a further a loved in delighting of Throughout actions. improvement including average addition We continuation to Pub, Bag which the Our the to strong fresh is our strategic a Italian launch for results a promote marketing the positioning of and our of Frosty, sandwiches on and year. us Biggie Pretzel Frosty, the the momentum with of plan Bacon relaunch Strawberry sales close supported

to turn Now, let's our breakfast business.

customers to to sales breakfast deserve. for still offering they be our will profits are the franchisees. daypart the addition hard give our pleased and and of our confident with we working habit journey, breakfast ingrain Canadian We in We're significant drive performance that early this Canadian Canada in the and breakfast but remain continue high-quality our

Turning U.S. to the

momentum confidence by committed craveable are $X our $XX number sales million the our share maintain to the strong $X,XXX Sticks category our We digital QSR gives mix U.S. average with held global with dollar Toast of goal morning The just proud investment success, treat We of approaching the global we year-end. of selling our QX. in become meal launch remain to this This we our breakfast launch. weekly in us our holding of quarter for of as incredibly as acceleration XX%. sweet over remain meaningful breakfast This breakfast quickly has committed X us French the approximately course helped breakfast share success We drove launched item. fighting in a our alongside in third promotion, sales recently year fair at weekly the quarter QSR in burger croissant reaching advertising breakfast digital sales our $X,XXX and business. the exited average sales morning

mix Our was international all sales across regions. approximately of results our exceptional by XX%, bolstered digital

we the even ago, to accelerated our loyalty days the excited exiting launched our Canada almost further in X.X% the accelerate about. of just expect results overall program coming we throughout these incredibly U.S., quarters in mix are sales We which digital as at sales. quarter, In

the fourth momentum quarter when throughout delivery into several are successful Our peaks. was typically by seasonality lean which continuing delivery we driven demand promotions, to

a members to XX% in We high. also total new approximately of sequential record rewards drove a increase

even to delivery globe. to committed our accelerate are access further user and We marketing our efficiency, mobile digital our order fine-tuning across expanding the further program one-to-one experience business and developing and

continue to our approximately in the the couldn't make expansion new during and of difficult opened environment. franchisees XXX year. for this quarter in be We restaurants prouder our unit against again I growth team global now having the progress achieving once third

As dark date. They franchisees omnichannel market, to we upon quarter. by are India our dark will near XX of of have This into the visibility approximately few into developing XXXX. dark shift kitchens supplemented an that a fourth who which for leaning one new approach Foods, in a be the Rebel impacting India our in year-end, approximately was with with now we plans expect XX increased agreed are We into adjustment kitchens. timing traditional strategy additional then restaurants successfully more operates kitchens term, factors

reduction are bring and will expect that primarily development restaurants. part the these growth X.X%, a our U.S. the to and strategic how that changes, life. X% we concepts forward Due contributing believe stemming we in to moving unit of targeted nontraditional story of slight in growth from kitchen Additionally, to we concepts openings to nontraditional experience industry, continue be entire REEF in XXXX the now these continue and reduction impacting to We to be will in still in delivery delays traditional development XXXX.

to growth our versus represent our net outlook historical unit X% to unit increase continues in an X%. of XXXX rate Our

new our to make growth long-term expect and progress pipeline third We accelerate continue team against our our net throughout continued XXXX, will the through fortifying to development quarter.

restaurants of in XX traditional UK with company-operated a We restaurants the X continued quarter at total and expansion our end. market

first our Additionally, traditional restaurants, location coming we the franchisees expect our begin including months. first drive-thru opening in will

are which believe excitement global and system We restaurant will next-gen returns. the we unit on improve economics increase garnering from our design,

remains and this we strong increase to ever-expanding Opportunity candidates, XXX at campaign. pipeline Your over expect to to response franchisee potential continue our Own with Our

actively uptick finally, XX%, program. We pipeline us that our plans. the our have is approximately in development percentage an at a are seen more commitment into confidence recruiting our build-to-suit remains the goal giving in expansion And long-term franchisees of under and

our of breakfast our business daypart, drive investing across build and same. growth Our the drive playbook our pillars to globe expand long-term footprint remains three behind the accelerated our digital to

we restaurant growth crews celebrate to financial of this thriving where for be rating September continue able more survey, look recently another paces which These the the our results over our world's dedication to have the a satisfaction, all ahead year in forward franchise still will becoming exceeding We Review and relationships of brand. GP reflecting was industry the the growth would to at person the to teams, I our partnership our in and vision Wendy's franchisees. and both, our the together success how brand. Business center XX with continued have annual benchmarks. in been firsthand most the to ahead. overall percentage franchise beloved this Franchise hand Wendy's XXXX through results. we of industry of the And talk differentiator and to U.S. that's third march restaurant now of than wins highlight Through Our experience our with strong towards not year results on towards have support the received the things pleased opportunity and come system achieving and possible will I I without our quarter over convention points our particularly partnership once internationally. the again am

Gunther Plosch

Thanks, Todd.

our financial global we quarter restaurant formula third in highlight acceleration sales Our of achieved margin. as maintained same-restaurant the consistency quarter-over-quarter and year-over-year company-operated results significant

and supported sales both, systemwide international segments our by growth. strong growth continued U.S. almost sales same-restaurant X%, net unit and global across Our grew global

a was held and higher and to in interest favorable due computing check from as EBITDA. company of by cash Please incentive flat XX of were salaries higher quarter, increased activity. offset These first out a our paid transaction of were that our of of partially of franchise we These separately ERP Adjusted result increase expense in a increase and tax note XX.X%. a offset of in restaurants by approached the franchise to franchise income. cloud rate. expansion. are and and almost a fees recoveries, due This expenditures. was the in prior The from results, was receipt the almost $XXX of improve In driven Florida franchisee year. Our investments breaking digital rental ERP commodity in year-over-year, adjusted development this to the subsequently, in G&A versus paid quarter the of our clarity EBITDA, timing shares a the transaction as by backing of increased primarily by UK expense quarter flow investments primarily other share of to in expenses for an our increases to organizations, to support royalty income pricing customer debt and beginning from lower in decrease resulted driven year, reaching an program the labor the compensation total G&A and share EBITDA implementation. amortization disclosure fiscal XXXX This persistent primarily arrangements respectively, partially the technology quarter compensation cloud our and increase primarily driven payments, with and, resources gain decrease plan insurance accrual benefits acquisition year. and revenue average in cost royalty the to impact for decreased declines third a result cumulative related change and results. despite pre-COVID count in our of XXXX offset offset to support related it as capital U.S., computing margin restaurant from almost our The out free increase to our raise entirely was of approximately Company's restaurant cash by in XX% travel lower in higher an driven interest over almost the implementation in prior adjusted company This our operating by million, higher and XX%. in by payments higher is third primarily XXXX, partially other levels area slight by adjusted XX% per arrangements, our decreases X%, for higher repurchase of earnings overdelivery ongoing The benefit fewer higher outstanding inflation result margin immaterial

no resolve expect all year. impacts timing-related the have that the full to fourth and We will quarter impact in

to Now, XXXX. outlook our let's turn for

X% due material to year. unit tightening drive As X% outlook restaurants the impact We global to in to a financial for sales approximately change driven we to are expect ranges. sales nontraditional XX%, and now and X.X% We to we our several unit XXXX the year, do close timing growth. system results of by not in expectations lower the the on of with remainder our outlook AUV in our same-restaurant by expect our growth the X% driven

Our million range, sales outlook million. $XXX expectation $XXX EBITDA to adjusted updated to has flows which into narrowed

Our outlook insurance is higher company-operated be other expect approximately adjusted EBITDA recoveries which the now result XX.X% outlook as impact from to restaurant is The also revised margin recognized XX%. impacted third to by margin, quarter. from largely income our operating the offset gain by the in our we of

of as our $X.XX EPS outlook adjusted elevated by adjusted unchanged, Our outlook $X.XX higher on to cash interest offset remains EBITDA earned is balance. income narrowed our

close, CapEx I flow EBITDA $XXX the remains allocation to outlook $XX offset is million $XXX to of impact $XX unchanged. in outlook like which a to capital Finally, tighter policy, our outlook adjusted unchanged million to remains highlight free our our would as million reduction by To our cash million. of

priority first of with and of profitable this. to announced we declaration allocation our dividend than growth, ratio of Today, capital dividend in showcase aligns per are share, an more our remains XX%. we attractive quarter payout the investing policy to Our fourth which continuing $X.XXX sustain

Lastly, cash repurchase reduce excess allocation to and utilize debt. our policy flexibility to us the capital gives shares

accordance third we us our returns our of broader and had of cash over quarter with during the in authorization and pause through environment the million to allocation approximately flexibility manage of capital balance headwinds $XXX million, have which end At policy. quarter, third share provides $XXX the expires drive to our million in the February shareholder remaining continued XXXX. We that repurchases share in a of $XXX repurchase with

to formula. committed yet delivering We fully our are continue simple powerful

free upcoming efficient an IR growth growth our accelerated, which back same-restaurant things footprint, in sales hand over are significant is to translating I and walk is strategic on Kelsey backdrop of We that, calendar. With company sales investing systemwide pillars flows. and that our positive into driving our the global to store strong cash will expanding through

Kelsey Freed

things a the the off North by Wedbush Thanks, on Chicago GP. Virtual focused start on XXth NDR we the on To visit headquarter the on and virtual virtual followed with Cowen the a have XXth. in region with Coast November, XXth, Conference

the York on New to Boston for with Barclays we investor in before York returning the the in Gordon attend Haskett XXth, will we Xst. by the on Morgan Evercore of On will December, Across Stanley rest Conference call followed with an the December an NDR Xth on Xth Conference. have New the

the of Our quarter a final the be with NDR BMO focused on virtual Coast will event West on the XXth.

respective us joining the any please of in interested you're at equity If these events, sales analyst or the sell-side at contact firm. contact host

Lastly, conference that we earnings year day quarter and on Xst. host March report our and full call to plan same a fourth

one quarterly our on everyone ready in would focused will amended to we to Due that only. into to release. take note we on question transition questions we number analysts, any section, press limiting keep and covering further statement As we be have please results. that, of Partners Trian questions. our no are comment XXD your filing the refer Q&A you May to made Please XXth the our high With

Operator

Our from comes with UBS. Instructions] Geiger line of question [Operator first the today Dennis

Dennis Geiger

question. thought operators, side additional to impacting Thanks largely and I the little from for sounds could demand sentiment guidance cost changes sort pressures, timing-related. all there's color the development appreciate of the are the things. side It the Great. of the rising things, Wondering if their given the rates if year of speak any GP. now, the to more and right among for Todd a on end, like bit the franchisees current you

are current kind at demand Thank you the kind and if and that where at from you. all speak perspective. of to Just environment to of wondering heads could

Todd Penegor

for Dennis. the question. Thanks Yes,

the is, the with continue you XX-month lot But with grow, cautiously EBITDA trailing We've the continue the faced with we've the cases all think future. to about little As and in design. community the for about we think confidence outlook able and innovate to up. challenged on good commodities to brand front. be of development moving in there that the news out positioning they next-gen global headwinds invest more rates as we they Clearly, optimistic franchise our seen our the the seen headwinds of labor are to a a

franchise that that'd a that just over years that most partner community put sequencing couple make continue to the the we're not to do, pacing where us we continued for We in their position new they grills. development, all with sure we spot we're strong in franchise community last position the and to our industry. than to technology the confident in double-sided healthier And investments, that reimaging of feel in investment they're of a but our the and financial good that in going generated with position pretty need

chain year. So, shifts impact Yes, challenged. going test on front on supply lean There's in we'll the But to and to delivery has year investment. REEF. continue biggest to this lean to learn, with in from into nontraditional. some We're been continue really next is kitchens into kitchens in our dark development the India,

the for but work, builds. we'll pretty traditional with XX% of development our into some lean will But of strong our to development won't, for XXXX on in continue and pipeline agreement new things development under that. Some commitments learn is

Operator

line with question David is Evercore ISI. of next from the The Palmer

David Palmer

X% if to Thanks. that think I a targets. you could about your after be you year unit this XX get unit And will into as unit growth a to that, targets follow-up have to imply to make growth 'XX, comment X%

somewhat been you 'XX step of I'm the that that fact So, separately, traffic. degree you the to direction. It's spite for speak I wonder how you're could strangely step that, think increasing. Thank And industry the negative about you that thinking in more what work at wondering in do To if you. fast about attribute here are on back in food? making to the you traffic norm had that and think forces negative the would if would than in be some mobility

Gunther Plosch

This X,XXX XXXX. David. to Gunther. X,XXX unit is is But confident. we We're accelerating our growth factors restaurants morning, Good maintaining are XXXX, where as are there guidance into to for really not you're goal. several we right. give ready Obviously, And are obviously

the great in we're making think UK. I progress

there, a restaurants design, next-gen get would really have We of which restaurants, hopes XX%. are company to restaurants XX on XX right? you Previously, XX% return high cash-on-cash of

getting XX% actually a next-gen to With design, the you're step-up return. XX% of new cash-on-cash

So, that's positive.

have The franchisees globally. become franchisees Only that all interest of movement. will enable XXX They a with is franchisees. smaller pipeline from interest campaign outfits. of want also positive, to growth with is opportunity We to lots lot come development very restaurant

We know. build-to-suit have program, fund as you a program,

a spent this not lot money have year-to-date. We of on

a there's -- to to So, about pipeline, to be our restaurant into XX years lot committed the are of we overall, XX growth development And for about XXXX. XX% with had, out come.

you I the your take question. think to that's Todd, answer the think second? I first

Todd Penegor

Yes. No.

traffic I consumer on We've side David, bit So why has with the consumer. think be it state little question be quarters, a to sticky industry it the really more over on seen last of a seems the to the strapped. several and the negative do the little

You see a home the little the more the shifted consumers of continue more at as pre-pandemic. strapped. start to it during It's comes meals. to consumer's there being have been bit at-home XX% from meals basket to stuck That's meals XX% when up of pandemic. to kind about food, It

less little a seeing moment, across of is little traffic. you're at frequency bit putting on industry which pressure what is the So, a the

consumer, quarter-to-quarter, us, of And us, win nice continue prepared to customer under sequential proud, we XX,XXX commented remarks. traffic business, that customer important increases consumer. for For more little and an we've the and with in a XX% strapped our we which we’re our than more seen importantly, is in it's some is as

-- the highlights. some that those of So are big probably

also seeing front, the some are there You're trade-downs. on positive

seeing a you trade look mid-scale casual down fast casual, So some get QSR, total which is from industry into positive.

Gunther Plosch

correction, Just small misspoke. slightly Todd one

It -- sequentially count improved prior versus Our quarters. customer not did not increase. did traffic

I understood. still down. want this slightly sure just to are We make is

Operator

John is from Glass Morgan question with next Stanley. The

John Glass

but when given GP, you comment there's stock and your can't you and alternatives cash about. balance, But view between your allocation, back think I things about the won't have that buying buying delevering, just on -- on debt's understand changed capital some you same termed maybe the they the time, out future as in a the view It be as given that like rate there's rates your once well, advantageous at scenario? now were. looks

buybacks think So, about -- do reducing leverage? you debt about conceptually differently versus

Gunther Plosch

John, interesting No, question. not really.

then our is large, an debt moment, At X.X%, our do capital think happy levels with, X.X%. of growth, average attractive do investing are we allocation at repurchases. and servicing I cost extremely policy, Our are right? our favorable, debt share dividend the

refinance The to first time have again it we in is XXXX.

how So, see there. we'll from rates developing are

in nature moment, think the to rate with actually are not about we at the of our So, debt, that. fixed rush the really

Operator

Jon Citi. Tower with The next question is from

Jon Tower

expectations Just side factors you all inflationary could into piece labor pricing on cost the food the for of year what the fourth in the us also early the this and curious if kind give how you're of measures perhaps XXXX into thinking ahead? quarter in some for your the equation. plans of your And then on particular, but

Gunther Plosch

are inflation slightly two. commodity down XX% definitely in inflation trend the fourth XX% third quarter We a We already, in come that was to quarter, see that about started quarter had Yes. right? following to commodity in We the inflation expecting right?

labor side, of bit On Last X%. a the inflation were quarter, were We we XX% also -- slight the sitting labor was little got we to XX% a in range. north improvement.

commodities kind X% guiding the and on XX% For X% about we are year, labor. to XX% on of to

less going make it's to expect be So, experienced what XXXX. commodity will definitely -- we what too in we that We early slightly. on have than It's to come XXXX. comments down inflation specific

marching is pricing company profitability increases the Obviously, less this that are will objective done our we have in strive to our in of what would expect are result we than to for we be a take also As XXXX it, restaurants going that pre-COVID towards year. levels.

Operator

Stifel. with The Chris is next from O'Cull question

Chris O’Cull

with Toast forward? I sales Sticks. going of Do terms the in French be that breakfast you sales accelerated so, think for believe build is to quarter breakfast necessary in of you to in indicated innovation the additional And advertising year? next product your investment that launch need going U.S. change the does if breakfast Todd, thinking the weekly the

Todd Penegor

I'll believe We advertising now can I breakfast across it where do part the of a business start to built sustain that can moving with the I own investment forward. question, size its our second we've up Chris. significant rest across the breakfast. compete always on good moving dollars forward. all But make a think having choices the of portfolio, day dayparts we're in do and enough to spot

As do the around awareness, innovation, this role. role you Clearly, is innovation is with consumer. a Sticks French has driven more an time we some with about brought was think news. Toast that of started habit, the it resonated I We driving think the promotional important by driving the offers. ingraining it And first calendar and really was frequency,

saw quarter. As good said $X,XXX towards on we now. performing significant right our highest the on that the remarks, SKU is, we the by prepared news uptick it's of restaurant the breakfast in daypart And the end the

growth front. will into the And So, more That on QX. in got $X continue We've customers news out to that deal momentum croissant some we're often. continues marketplace. the nice more that into bring happy that

that's future. And prior for breakfast growth in for an some and into forward, innovate the about the talked We opportunity play As this daypart think opportunity talked innovation in brand. calls, our we've be an more about the the the could to morning beverage into we and on important we area. move category

Gunther Plosch

sense. to continue want add the invest we in said obviously that everything to years Chris, makes That's I to Todd point will growth. two right? of Canada, that in wanted I out

XXXX. making as we well. in the So XXXX go we will investment $XX to we have in million are in XXXX, definitely $X the million have zero in The investments base

Operator

The next is with from the of Credit Suisse. Lauren Silberman question line

Lauren Silberman

cohorts about tech seeing the different talk if what you behavior, any Can and with you changes or to And management? trade-down just relative that consumer are cohorts? higher so among seeing income then, are share lower respect you're there across

Todd Penegor

Yes.

we trade casual from in are down industry, QSR. down general So some mid-scale on the fast the trade casual, seeing question into

consumer, the good a that's are about business, When more under XX% So, benefit. think which you over strapped. seeing income XX,XXX our little you of is a cohorts,

good the in impacted is the got we're them with the other gain traffic but all that share restaurant a we seeing $XX,XXX lot of That little across but over income bit, under $XX,XXX You're over businesses. front, news means industry choices continue $XX,XXX losing that frequency to cohort. on a consumers

So, down little we bit well, consumer. a to with although that compete continue

really good We and calendar We $X a still at to on today. stand leverage often compete the restaurant is X folks calendar. back in some meals the those we the everybody be sure menu. some more offers have got Strawberry Frosty us presence out connect ultimately for our and digital great great But cool a calendar. key really at to for got would point like with fits to that compelling. Bag super program get industry well have with that a $X a well high-low for coming continued to all right the things home we that's we gains balanced We We've can Biggie where loyalty frequency. a the to and with now. brought eating drive croissant to in breakfast price And the start We've there from out $X make meal for continue little

Operator

The next Brian with Oppenheimer. question Bittner is from

Brian Bittner

to to bit. little back breakfast I wanted just a go

just the so third results we talk the can what breakfast of quarter, just day, accelerating the versus was you bit can we hoping better the into the As rest that you more dive unpack in comp can daypart's strength. Maybe momentum. about understand little breakfast the sales a

a where do what committed national to is here? it elevate what year your relative it very on seem to us really You you now accelerating awareness was that can help daypart. you can also breakfast to maybe ago? And And from understand

Todd Penegor

business per you and of And XX, I been Sticks whole confident $X,XXX the at our that was of it's Sticks. with par an momentum French The the great north that's with in our really perspective. the a hasn't has last of we're it week croissant is there the we're but awareness where from QX. French innovation will on out really a approximately lot, If awareness, in news of quarters, From an the look QX think healthy in nicely accelerated still continue we've on offer performing, Toast moved and a that Toast that great success restaurants. been $X with competitors, QX half breakfast as couple back spot

will bringing some So, the and accurate and a in to more come role. it's forward. about Innovation day that day customers drive will price our things role. a little we'll service often habit, of And points continue fast, a really play executing with Promotional out way. great ensuring play is to ingraining the success, along the those moving in restaurant critical all at news,

Gunther Plosch

worth are also noting actually That's They restaurants of actually $X,XXX. well a performance. It's breakfast posted in mix. about that XX% improved north the now quarter legacy third our

sign It's great. again, great that growth matter of for the just So, is it's a business to it. time a to potential get this

Operator

line from is Jeffrey next The of Barclays. question the Bernstein with

Jeffrey Bernstein

an in has the of parts. color over through landscape to starts thoughts XX% than others. you maybe there price that what and you quarter well, X.X% question but as maybe and clarify that could competitive might you're some change some you less any There comp, if see roll were? in Thank from Great. specific you can running Any within think U.S. negative And that, as you uptick rational are discounting very you sales about traffic. are much. said just the think components front components the a sequential -- terms two on competitors inflation the give A the been I roughly perspective? Maybe

competitive thoughts great. in the any would broader So, and into 'XX 'XX as terms be close landscape we of

Gunther Plosch

the U.S. system U.S. basically think the X%. XX%, bit priced That in about was means that was roughly our growth less negative, a about than X.X% system, the about little -- X%. So, unchanged. traffic Mix slightly

So, is innovation. had as that's the quarter callout accelerated business of towards steady are only our component third it. of The growth we that within that end breakfast the we quarter. our the We the making launched

is what competitive category that NPD As seen deal have happening levels far CREST not elevated the versus the as at pressure previously. look as we are I are data, in concerned,

top of to big Todd, you kind to are there add value that of signs want come do strong wars that? be any on anything seeing not would we're my So, perspective.

Todd Penegor

all, I think GP. you said it

elements I on be and the guidance right, to is clearly, about business, news. continue breakfast the quarter. sandwiches And to and think we've expect we launch the U.S., and to to think growth that international ownable talked have you Mozzarella an and, Frosty and we momentum, again in the the Italian as promotional to we the continue are ongoing fourth think only digital in into roll the fresh quarter, calendar strong all that bring some momentum fourth about. have across Bag coming, sales on keep you Biggie got total, focus those double-digit delivery, of as we fourth provided important And compelling; Peppermint about the the same-restaurant piece in with the quarter, we

Operator

The next question is from Guggenheim Gregory Securities. with Francfort

Gregory Francfort

in that needle way, cost big a move I'm pressures point? delay as pre-COVID and year, to terms you question, or environment. comment the pricing clearly, the P&L can does when in the to made store-level of point? about ahead things this a took back inflation pressured I you at in on industry 'XX, Thanks. of pricing you inflationary run when inflation do mean of was to outside 'XX out the of look some big pre need some cost cost levels. guess response pricing ahead just 'XX a there I of does GP, at to need curious, versus ahead kind step of there are and earlier -- the can to getting margins pricing

Gunther Plosch

with system getting there, company the Yes. financial depending hovering -- builds for back end gets us of the since, returns and to better day, franchise of between XX% within point U.S. a rest restaurants right? posting We're view, you the we since better margin Pre-COVID, very at with pre-COVID the this from to on what XX.X% and confidence pick. are year XX.X%, we're quarter, the new in levels the the in definitely focused get

A into not the deploy I lever. stay, we out. to are would Commodity, labor far an to played. $X are to entices off. an we'll that especially There the costly have nuclear chain how with only without out cost positive as pricing partners a chain consumer specialists And to of That's and the benefit, more an obviously So, very system, pricing consumer is is not supply hired. is like sophistication consumer are a we, There's is mix we ESG Inflation supply third-party perceptions. supply the previous of improve impacting as out. And from perception But and offering stuff benefit. our X increases. Bag benefits point ones. for cups these reach with triple and actually than we've or that up example. working closely see from trade a on pricing that with cups lever better right? is rolling a improved into a $X the now think say less analytics brand, unnecessary benefit And our flow-through lot that value view example we price improve drive rates of great do should we sales to we our that we There's are take the that front. here Biggie of our plays could important marketing

the things highly we deploying are make of margin to concert stay restaurant sure our against in these are kind profitable. we that So,

Operator

question The with from next John is Ivankoe JPMorgan.

John Ivankoe

the of The cash. $XXX question on is million

on XXX% I they responsible that is some that of relates sold on be maintenance largely to for least have potentially Some remember, overall, shift expect case. building. part capital, we that kind you're system-wide that own used wanted franchisees years as their especially or the in or the to ago, a there's of you, from on basically to Thank the the what agreement rent about, you. strengthen company's initiatives any the if see thinking or previous at of that to the repair pay I remain units brand in reinvested it them and could get of and variety of some land when that if basis you accelerating done franchisees of XXX%, and be want refranchised kept may the a building you where capital around would Wendy's to should invest community franchise for

Gunther Plosch

line with allocation capital in stay strategy. our to going We're Yes.

to So, we're continue to growth. in going invest

use making So, abatement, royalty for abatements fund Examples new advertising are to growth. investments. are stimulate we

actually some $XXX so. aside set for of no no our are balance leaseholds burden, to to and taking business, franchisees out have help current the plans on unit development, and We intentions the million and and the build-to-suit on and specifically of capital there putting aspect do we sheet that program is then India helping stepping

Operator

from The with Brian Deutsche Mullan Bank. is question next

Brian Mullan

call you on Just question UK, specific take agreements related, on in market you're Europe. development you. other in that you'd could to focused is where which efforts there? you is a be in to stand the Europe, think or it expansion just your After on further a Spain Western any market expect to Western want attention they signed And that than year new over the Maybe longer international. a bit could XXXX update backdrop us to? given meaningful, a macro for Thank I market or development in

Todd Penegor

more restaurants the that market. building challenged, UK, company macro the little in backdrop out but nine Clearly, a Yes. open. still got is We've now to we're committed bit

got company up REEF coming to invest those new franchisees We've start signed opening in We've expect six the continue open. would franchisees got units months. and restaurants We in restaurants.

opportunity out to first. big UK in the is our So, build Europe

into leveraging that into and We Spain. time get in then we to think -- then continue the we supply chain Ireland, about into have the over UK how do

markets We those on it's grow to us. see. continue continue one we're going to to of watch all alongside good have and partners of for But to to prospect

we backdrop, the into guidance the longer that in provide take bit a we'll than we With backdrop Time the what had macroeconomic consumer longer-term And economic will tell. thought? as and get does little future. originally more updates

Operator

is with from next Jared Sachs. Goldman question The Garber

Jared Garber

on the market of we actually penetration to of and wanted talk seeing related UK made to that pre-COVID in the commentary bit market that a the stores the with given side as head about you maybe relates to in of impact then profitability Thanks. the the dynamic? stores about be margins. there back be should continue of the related seems to previous into 'XX on follow that number like market. levels drag how I as increasing margin U.S. the company up restaurant It Can on you cost it pressures relatedly you're what we in quite towards to and the question a getting some thinking

Gunther Plosch

Yes. UK. There's the cost several pressures in

what pretty seen slightly That XX%. that Would puts expected. Energy XX% definitely say to than to on are up headwind are also Some pressure. of them energy we a are unique hefty Europe, We right? have sales cost. had under margin lower costs obviously

that of much as a thought. we P&L result As it, not into getting leverage obviously, you're as

into think So Having is signing overall, of I as consolidating the XX for those points that, believe The all translating they evidenced basis UK potential are about compelling. that of entrepreneurs in this structural potential the market. franchisees by our growth UK into we margin up. since as temporary, are think headwind said this is we -- markets. the of economics up around It's

a not it's more. So, bump speed and

Todd Penegor

opening a key pillar go region. We're restaurants, really that it's driving do a have with to across GP. We playing key, that's costs long-term game. start-up the the think I growth but the

Operator

the Piper Wendy The with of Sandler. next Miller line question is from

Nicole Miller

you one. Hi. Can new It's is the Wendy Nicole. okay? me hear

Todd Penegor

Yes.

Nicole Miller

morning. one, great. second, it are everything how want is Nicole brand all Is your need? of at to items housed partners? higher strategy, of that at are to I like you. getting kind in just then Thank any or supply getting just how inspirations, Good they side, time? Piper. the on aiding level? terms culinary And the on cuisine, Like, in chain, Number level tactical are two about your ask Okay, they It's parts. out they innovations,

Gunther Plosch

A couple view, chain food the of is supply point of and a side, things. paper From on tight. it

We out-of-stocks. have no noticeable

is our our to we're chain proud supply delivering about what really So franchisees.

so we I with builds, food us vendor say, On of and extra the specific items on. time would helping that much seen than on it's and tight. more probably past. the in the chain longer innovation would partners, that I for That's lead uncertainty new And picture supply had to our say definitely -- than are related what terms in definitely

our of R&D proud organization. are own we all, of First

Columbus, think, second providers work We and lot a business. supplier year are it in to third-party items. we summit of our can food working of quarter actually drive are next more have strategy, are potential And We having out how on They new we together acceleration turning food. better the, even in talk constantly here good Ohio. I in actually a with

Todd Penegor

And R&D national our our the could think collective be at leverage really partner the teams, do what convention We partners. end key both team, at both together our about their them us, as we we the with of They fronts, opportunities out suppliers in They the ahead. plans. really Las to had as our to at expertise on day, leaning just see R&D Vegas. teams look Nicole, try

Operator

from of The line next question is Gargiulo with the Danilo Bernstein.

Danilo Gargiulo

to digital if stores and you mix for new I global more your what's into attract I progress in -- these in was the traditional more higher your early development? global slot one have the can system? to details you the expecting like, mentioned been that, uplift initiative? form compared what provide your to wondering of on able if the may on on what's cash-on-cash the store. Your even have provide next-gen more next-gen know new design Own the of design? And Opportunity are new are the And you extent what can comp can generate? they expectations come the you franchisees And you To proportion stores you returns stores, I on that but then

Gunther Plosch

Okay. There one in question. were a lot of questions

I answer them whether see me Let can all.

what really our actually in building, still is compact for So, operational our about actually drives it friendly actually delivery does drivers digital more right? build rooms. -- XX%. of next-gen, -- in reduces dining that terms effectiveness. excited a cost And offers good-sized It It also more is business by on

to these you cost. and restaurants, staff So less need labor less have energy also you

business. the As of same you can maintain a result it,

in levels. and fast labor I we down XX%, the due tell which have because you to from a previously. energy, seen years too cash-on-cash that, lift combination It getting plus down, then, kitchen the are is So, result, what years. capital no constraint of one like compelling can XX% that payout operating is of AUV decent only thing. we seven our you about versus return is to costs going to six there to reduces smaller, a How spread? cannot a also the get And building is as

are super and Our better excited restaurant footprint to about franchisees because it's returns. great financial that operate a just

the The basis. new first open part one on of is will It in a go-forward the standard global XXXX. early

So, in that will the future, standard. all the new restaurants built be on

Todd Penegor

for the process I -- global through all the flight, in That of already in was is Anything key standard point. new working the that think new that's there probably new getting restaurants. it's it development, the won't be as able will that's We're to flip future really to built into design. out that that. excited next-gen But about be anything franchise is. global new the community out

Operator

with is Eric? from Markets. KeyBanc Capital next Eric The Gonzalez question

Eric Gonzalez

market, about strong trends. Thanks the outside one-year you Clearly, some UK. multiyear and that for very have comments the

international to And segment? the sense other the the in to where business, I'm call differences development America markets. you wondering, in performance wide out trends. strength accelerate out? can Perhaps Latin make regional given few regards Were a any might variations there and markets Caribbean calling with strong the those mentioned business worth it are you So there across other

Todd Penegor

in Latin us. perform international the heard America, very to you Canada As biggest prepared for is market. nicely remarks, our But Caribbean importantly, continued

traffic share. growing on and category. look one- a QSR You start basis than faster It's burger to a and at how performed other a any it's on three-year dollar

So, grow. to to those opportunities continue are

shifts fronts building where about talked sure have development strategy. on confident we Rubble the about is too make a freestanding little now Philippines they're traditional got the you big we our with in but a complete dark to market forward And in. moving really that the big kitchens with we also development lot of international in that's momentum out India, restaurants place, another agreements omnichannel a If bit agreement we a got think feel

Operator

is question Setyan from next with line Nick Wedbush of Securities. the The

Nick Setyan

same was It quarter, still margins, relative were like it the like strong. on But at some company the time, incremental ease. drag from seems pretty Aside inflationary to the guidance there sounds still last headwinds headwinds. your U.K. company-owned comp

resulted I incremental expectations the that's going relative mix? it is to in months So, ago? is that on else headwinds mean, your three there what

Gunther Plosch

to little Yes. the a bit basically What forced was take guidance us factors. down two

First in in and all, actually points. our about of sales expected. in are company our an less didn't help That we like than was Ian a basis quarter. little on third of Hurricanes what we the bit company restaurants growing XX impact

So, we leverage lost there.

is labor market The second one tough. first and reason is

little fully well serve a we staffed on as to spend to keep the have we as can. more restaurants bit to overtime consumers money our So,

we these the slightly factors guidance. So, why are two reduced

Operator

line is with Gordon question Jeff Farmer of next Haskett. The from the

Jeff Farmer

the labor last big inflation. following QX and that you Just question on But on appreciate that. quarter-over-quarter in saw jumped drove lapping labor up inflation. is, inflation that I the meaningfully, summer what deceleration you're quickly pretty

from I fell like think the that? QX XX% to something What's driving it X% in in QX.

Gunther Plosch

inflation started labor then get right? a of you to That in up a Yes. quarter slightly XXXX. function base, had if stepped of the X%. It's in look in about in right? of And we the to comparison then -- about stepped of XX% in up to more difficult, third -- So That was So X% XXXX, back in the quarter north labor XXXX. third X%. inflation inflation kind XXXX

slightly So, down. if look you two-year actually sequentially of on kind inflation a it's at basis,

Operator

Sanderson Northcoast is Research. with The next question from Jim

Jim Sanderson

a basis having power ask States? the with have in more general you to realized Just or pricing. the net question you on constant Do flow-through rely on inflation wanted pricing discounting U.S. keep a without in about to to pace United here believe basis

Gunther Plosch

believe pricing We Yes. power. we have definitely

last pricing of have the significant now taken quarters. couple We

company We are restaurants. up to XX% in the

or our slightly sequentially it As Q&A, remarks in still It's think in prepared down. we traffic is the I said was even improving.

kind We're see less we seeing XX%. a about of flow-through. flow-through So, don't still of

have there reached there. we and not power is, therefore, breaking pricing more a we point, think yet So,

quarter said, We sophisticated and held category. in our but the is this just we have for price dollar of traffic consultant to not we with the are franchisees. our again third-party day, As in more even in we getting yet end for take the hired a the also at also share and have the right? that pudding, company were the proof And

we're are the pricing So, with well competing at. levels we

Todd Penegor

strong. optimistic side is the up, still moving wage forward is the inflation but think I of rates consumer we talked as about, are just

consumer, bodes industry. So subside there's on as the for income more disposable inflation to commodity for the front well that starts the and personal

start to and you out. at to get from away come those that As see consumer home. We'll continue healthier forward gains future, to home to food frequency food will the folks fast start into from

So, the bright. future very is

Operator

the Senatore today question Sara with line of from Bank comes last Our of America.

Sara Senatore

I on have of two we just questions that sort are follow-ups what heard.

been The running X,XXX first previous said quarters. -- is breakfast. from you sort running I a on had week of know

I year-to-date. you said that think X,XXX

versus nice have sounds back second first maybe understand half in lift the really softer a a bit it like is sticky you you but a launch? And business you lift maybe a the in. to of settles I'm the just do the getting So, how quarter it half. in had appealing think then trying when

have whether you talk about just can one changes any So, You mix seeing shift. but you're real disaggregation. order you're little no seem of sequentially the counts we What bit been a that's of customer seeing because be is, And follow-up. the the first eaten mix up improving mentioned second sort seeing mostly just order is effect in to sizes? in terms being it's then of

or there is as anything you to on can more drive-thru less Anything delivery. on normalization, the see of going that front? speak there it's So, less you whether

Todd Penegor

Yes.

to the front, launch French the Toast lapping throughout year croissant $X.XX a you promotion So with you breakfast also were Sara, quarter are the strong Sticks. sequentially It did remember, increase very of we But on ago. have right. a

advertising, out any were growth start to top any time putting happy promotion, breakfast our build some more highest able any more daypart you're we of awareness time So, news you build that we're And growth. a our time satisfaction you you overall And to got trial. build we to on but, there, is daypart. continue you're importantly, see

On per us, us average look order So, try size, at over our continue get into a opportunity bit you their time. earn to routine transaction, come when to has to down and it time. over the in, little folks then is get items frequency get

of been see mix. as quite height it's earlier, those in of pressures. pretty hang even we back orders GP COVID, there mix, been What’s to big bit. well on delivery were with in when some to But, continues there great a look is And you well in hanging the the at down we've that overall interesting shifted overall seeing said little all

$X to within you into go delivery, in one lean messaging quarter And Biggie delivery. try we’ve and very QX, as with well with around got So, create we'll consumer. continue some in and that we value promotion started is that the the DoorDash fourth the Bag thing in now with is to resonating

So we that, feel good about too.

Kelsey Freed

Thanks, call a and our and to last Sara. That Have the Todd great was our with on Thank participating fourth look call. again thank speaking March. We GP, of day. quarter this you morning. question forward you, in everyone, for you,

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The Wendy's Company (WEN) 9 Nov 222022 Q3 Earnings call transcript