0000030697-26-000060
SEC filingGlobal same-restaurant sales fell 6.8% while revenue rose 3.3%, driven by franchise acquisitions and fee hikes, offsetting margin compression.
In Q1 2026, total revenue increased 3.3% to $540.6 million, driven by a $13.6 million contribution from franchise acquisitions in Q3 2025, net new restaurant development ($3.1 million), and a $8.3 million rise in franchise fees from system optimization actions. These gains were partially offset by a $9.4 million decline from lower global company-operated same-restaurant sales (-4.8%) and a $2.1 million impact from refranchising. Global same-restaurant sales fell 6.8%, with U.S. down 7.8% (franchised -8.1%, company-operated -4.7%) and international down 0.4%, primarily due to decreasing traffic partially offset by higher average checks.
Cost of sales as a percent of company-operated sales increased 350 basis points to 89.2%, driven by higher commodity costs, labor rates, and occupancy expenses, partially offset by menu price increases and labor efficiencies. Global company-operated restaurant margin contracted to 10.8% from 14.3%, with U.S. margin at 11.4% (down from 14.8%). Operating profit fell 21.9% to $64.9 million, and net income declined 42.1% to $22.7 million, reflecting margin compression and higher interest expense. The effective tax rate rose to 33.5% from 28.6% due to lower pre-tax income.
Wendy's U.S. segment revenue increased 3.4% to $444.2 million, but segment profit decreased 9.2% to $109.9 million as higher franchise fees and advertising fund revenue were outweighed by increased cost of sales and franchise support costs. Wendy's International revenue grew 6.6% to $37.0 million, driven by new restaurant development, with segment profit up 12.8% to $10.6 million. Global Real Estate & Development revenue edged up 0.7% to $59.5 million, while segment profit rose 13.8% to $28.1 million, benefiting from gains on sales-type leases and favorable lease modifications.
Management notes ongoing inflationary pressures on labor and commodities, expecting them to persist through the remainder of 2026. The company aims to mitigate these through selective menu price increases, product mix optimization, and operational efficiency. The Project Fresh initiative continues, focusing on brand revitalization, operational excellence, system optimization, and capital allocation to drive profitable growth. A franchise agreement to build up to 1,000 restaurants in China over the next decade was announced on May 8, 2026, signaling international expansion. No specific quantitative guidance is provided for future periods.
Total liquidity (cash, cash equivalents, and restricted cash) was $362.0M as of March 29, 2026, compared to $357.7M at year-end 2025. Restricted cash includes $24.0M in advertising fund assets. Total debt (current and long-term) stood at $2,754.6M, while stockholders' equity was $115.6M, down from $117.4M due to dividends and other comprehensive loss.
The Notes disclose lease guarantees of $94.7M for franchisee-operated locations extending through 2045. Outstanding letters of credit totaled $29.0M. No material purchase commitments for inventory or capacity were reported.
No share repurchases occurred in Q1 2026, leaving $35.0M remaining under the January 2023 Authorization. Dividends totaled $26.6M ($0.14 per share), a decrease from $49.4M ($0.25 per share) in the prior year. Net debt repayments were $7.4M (including proceeds of $15.1M and repayments of $22.5M). Capital expenditures were $11.9M (2.2% of sales).
Revenue by segment: Wendy's U.S. $444.2M (+3.4% YoY), Wendy's International $36.9M (+6.4%), Global Real Estate & Development $59.6M (+0.7%). Segment adjusted EBITDA totaled $148.5M, with Wendy's U.S. contributing $109.9M (74%), Wendy's International $10.6M (7%), and Global Real Estate & Development $28.1M (19%). International growth was driven by higher franchise royalty revenue.
Net income of $22.7M is only 38% of operating cash flow ($59.4M), but this is typical due to non-cash items like depreciation ($40.6M) and amortization ($4.8M). Total D&A of $45.3M exceeds capex ($11.9M), indicating low maintenance spending. Operating cash flow declined 30% YoY, partly from a $2.5M net reduction in deferred vendor incentives vs a $11.2M receipt last year, and a $1.6M system optimization gain vs a $0.1M loss. Working capital used $9.6M (vs $11.5M prior).
Capex of $11.9M is $5.8M lower than prior year, reflecting disciplined spending. Investing activities also included franchise development fund outflows ($4.6M) and dispositions ($2.8M). Financing activities show no share repurchases (vs $122.8M last year) and lower dividends ($26.6M vs $49.4M). Debt proceeds of $15.1M were offset by repayments of $22.5M, resulting in net debt reduction. Overall, free cash flow (CFO minus capex) would be $47.5M, but the company does not report it.
None significant; the decline in operating cash flow is primarily attributable to the change in deferred vendor incentives and system optimization gains.