In 2015, Wendy’s (WEN) plans to add 80 new restaurants to its system. The company also plans to reimage 450 of its restaurants. All this requires capital, and the company expects a capital expenditure of $250 million–$260 million during the year. By 2020, Wendy’s expects about 60% of its franchise to be reimaged.
Wendy’s is also on track to complete its recapitalization on June 1. The proceeds from the recapitalization will be returned to the shareholders through its share repurchase program, and these proceeds will be used toward the company’s System Optimization program. Under this program, the company plans to sell ~500-plus company-owned restaurants to franchisees by the end of 2016.
Change in strategy
The company’s strategy shift highlights the change in Wendy’s business model to lean more toward franchised restaurants. Dunkin’ Brands (DNKN) operates on a fully franchised model. The benefits to this model include allowing the company’s management more time to focus on building the brand and products, with a reduced burden of managing its capital requirements.
McDonald’s (MCD) and Yum! Brands (YUM) have a mix of both company-owned and franchise restaurants, whereas Chipotle Mexican Grill (CMG) does not franchise at all. To invest in a mix of these restaurant companies, you may consider the Consumer Discretionary SPDR ETF (XLY), which holds 1% of Chipotle Mexican Grill and 4% of McDonald’s.