Wendy’s Completes System Optimization Initiative

Wendy's Completes System Optimization Initiative

Announces Sale of 104 Company-owned Restaurants in Four U.S. Markets

Company Expects to Generate Higher Operating Margin, Stronger Free Cash Flow, and Enhanced Quality of Earnings

The Wendy’s Company (NASDAQ: WEN) today announced the completion of its System Optimization initiative, launched in July 2013, with the sale of 104 restaurants in four U.S. markets – Phoenix, Los Angeles/Palm Springs, Hawaii and Albuquerque.  The buyers are strong, highly capable franchisees, who are committed to restaurant growth and reimaging along with delivering ‘A Cut Above’ customer service.

In total, Wendy’s has sold 418 Company-operated restaurants concentrated in 13 U.S. markets, primarily in the West, as part of a strategy to geographically align its restaurant ownership for efficiencies, while generating a more predictable revenue stream.

Wendy’s has received total proceeds from System Optimization of approximately $235 million, including $138 million in 2013. The latest transactions include the sale of:

  • 40 Phoenix area restaurants to Arizona Restaurant Company, LLC, led by veteran Wendy’s franchisee Richard Holland and John Peters, who previously served as Wendy’s Senior Vice President of North America Operations. In addition to the Phoenix market, Holland operates 73 Wendy’s restaurants elsewhere in Arizona and seven other states.
  • 32 Los Angeles/Palm Springs area restaurants to Cotti Foods California, Inc., along with seven restaurants in Hawaii to Cotti Foods Hawaii, Inc.  Both entities are headed by President and CEO Peter Capriotti II, whose organization is based in Rancho Santa Margarita, Calif. and specializes in operating quick-service restaurants.
  • 25 Albuquerque area restaurants to JAAB Restaurant Holdings, LLC, led by partners Andres Garcia, Jhonny Mercado, Murshed (Ben) Mansoor and Angelo Freites.  In addition to the Albuquerque market, Garcia, Mercado and Freites also operate JAA Restaurant Holdings, LLC with 36 Wendy’s restaurants in Florida, along with restaurants in Panama.

“We are proud of our team that has diligently worked to complete the sale – faster than our original plan — of the 13 total markets to excellent franchise organizations that are fully committed to building the Wendy’s brand through restaurant reimaging, new development and other growth initiatives,” said Wendy’s President and Chief Executive Officer Emil Brolick.

“This is an important step for the future of our business. It’s another example of the Brand Transformation under way at Wendy’s, with breakthrough new products; innovative marketing; operations, restaurant team and customer service initiatives; and the continued acceleration of our ‘Image Activation’ restaurant reimaging program,” Brolick added.

In total, the purchase agreements for the 13 markets include commitments to reimage about 180 restaurants in Wendy’s contemporary Image Activation restaurant design, as well as development plans for about 100 new restaurants.

As a result of System Optimization, the Company expects to generate a higher operating margin and stronger free cash flow, along with further enhancing the quality of its earnings with a more predictable revenue stream from a higher percentage of royalty and rental income.

With the completion of the System Optimization initiative, the Company will now operate about 1,000 restaurants in the United States and Canada, comprising approximately 15% of Wendy’s restaurant system.