3 Signs Wendy's May Be Struggling

While the restaurant was not included in our list of fast food chains that are seriously struggling (establishments like Burger King and Pizza Hut did make the list), Wendy's has definitely seen better days. The restaurant first burst onto the scene in 1969, and is credited with innovating the drive-thru window, which is now a staple of virtually all fast food joints. While Wendy's can still capture the attention of consumers, as evidenced by its largely successful SpongeBob Krabby Patty collaboration, there are a few signs that trouble may be brewing on the horizon. 

For instance, the chain appears to be contending with numerous closures, lagging net income, and questionable food quality. Even the most successful restaurant chains experience ups and downs, but remember that the climate surrounding fast food restaurants is especially volatile these days. Although ongoing worries about inflation have definitely played a role, many consumers are avoiding fast food restaurants due to increasing prices, which means that quick fare is no longer the economical option it once was. It's true that Wendy's still operates over 6,000 locations throughout the U.S., but recent developments could ultimately jeopardize the iconic chain. 

Restaurant closures are never a good sign, so Wendy's announcement that the chain plans to close hundreds of locations due to poor performance indicates that it could be in trouble. It's not entirely clear where the closures will take place, but all told, Wendy's will likely shutter a whopping 240 locations. The chain has expressed plans to build up to 300 new restaurants to take the place of the soon-to-be defunct ones. These upcoming spots are expected to feature new designs and AI technology. In that, sense, Wendy's is evolving with the times like its competitors. (An updated McDonald's value menu and an upgraded Popeyes kitchen are some other big changes you can expect from fast food chains in 2025).

Based on the addition of the new restaurants, Wendy's is looking at these closures as a good thing. More precisely, Kirk Tanner, president and CEO of Wendy's, believes the closures represent a strategic move to capitalize on the anticipated success of new locations. "Our focus is on building new restaurants because we know they deliver well over the average of these poor-performing restaurants," claimed the CEO (per U.S. News & World Report). Only time will tell if this strategy pays off in the long run.

Financial stats are often a good way to take the temperature of a business when it comes to overall health. Wendy's experienced a small revenue bump of 2.9% and a boost in same-restaurant sales (0.2%) during the third financial quarter of 2024. Nevertheless, the restaurant's net income decreased by 13.4% in the same quarter when compared to figures from the previous year. Net income accounts for all the sales made by a business with various expenses, such as operating costs and the cost of goods sold, deducted. Wendy's attributed this dip in net income to two factors: an increased effective tax rate (meaning the rate that determines the amount a business pays in taxes) and lower operating profits (which is a business's gross profit minus operational expenses and other costs).

On the other hand, the company said that its 2.9% revenue growth came from income generated by franchise royalty and advertising revenues, as well as fees paid by franchisees. However, it's worth noting that the minor increase in same-restaurant (meaning restaurants that have been up and running for at least one year) sales was not entirely sufficient, as the chain has failed to meet sales goals over the last six financial quarters. Despite the bump, the value of Wendy's stock actually decreased after the chain's financials were announced due to this ongoing diminished performance.

No one goes to a fast food joint expecting a world-class meal, but customers will naturally have expectations when it comes to quality. For fans of Wendy's, there's some debate as to whether the quality of the chain's menu items have decreased over the years. One Reddit user asserted, "The quality of Wendy's product has significantly gone down over the past five years while price continues to increase." This statement was co-signed by a self-described former manager at the chain who said, "It's like the company has given up." Another Reddit thread implored, "Bring back the old Wendy's." Commenters named multiple menu items — including burgers, chicken sandwiches, chili, and even barbecue sauce — that they believed were superior before.

Taste is subjective, so there's no clear way to determine whether Wendy's food has diminished in quality based on complaints alone. The chain did make a well-publicized alteration to its French fry recipe and claimed that the new fries would remain crisp for longer thanks to the addition of batter. According to one Redditor, the new formula wasn't an improvement over the previous recipe. As they put it, "Tried these a couple times. They are absolutely horrible."

Overall, Wendy's remains a strong contender among notable fast food chains, all of which have experienced plenty of ups and downs over the years. Despite this, the sheer number of obstacles faced by the chain could prove problematic in the coming years.