Wendy's Confirms Aggressive U.S. Store Closures as Part of Risky Turnaround Amid Declining Sales

What happened

Wendy's is moving forward with its Project Fresh turnaround by closing hundreds of underperforming U.S. restaurants, as recently reported, aiming to refocus on everyday value to combat sales declines. This aligns with the DeepValue master report, which notes U.S. same-restaurant sales deteriorated to -4.7% in Q3 2025, with global margins compressing 270 basis points year-over-year. International growth and digital initiatives provide partial offsets, but the U.S. base remains pressured by consumer trade-down and intense competitive promotions. Management has already cut 2025 guidance, and high leverage at 6.6x net debt to EBITDA underscores the financial strain of this multi-year reset. While closures are intended to improve system economics, they introduce near-term earnings risk and potential franchisee distress without guaranteed traffic recovery.

Implication

Investors should brace for near-term earnings pressure from closure-related impairment charges and a reduced revenue base, as these moves are reactive to persistent underperformance. Success hinges on whether value messaging can reverse negative U.S. comps, which have worsened sequentially despite prior efforts. Elevated leverage limits financial flexibility, making international growth critical yet dependent on flawless execution amid global uncertainties. Franchisee health must be monitored closely, as mandated closures could strain operator finances and delay necessary reinvestment in remodels and technology. Upcoming quarterly results and 2026 guidance will be crucial to assess if Project Fresh is yielding tangible benefits or if further downsides are imminent.

Thesis delta

The new article confirms the closure plans already embedded in the DeepValue report's analysis, so no material shift in the investment thesis is warranted. However, it highlights the urgency and execution risks of Wendy's turnaround, reinforcing the 'WAIT' rating until U.S. same-restaurant sales show sustainable stabilization. Investors should remain cautious, as the propaganda around value focus masks deeper operational challenges and high leverage.