Wendy's Strategy Is Cogent, but Intense Burger Category Competition Looks Daunting

Wendy's is the second-largest QSR burger chain in the U.S. behind wide-moat McDonald's, sporting a value proposition built around fresh and craveable products at competitive price points. The banner has benefited from a resurgence over the last few years, driven by the renewed launch of its breakfast platform, store reimaging, and strong value positioning. Stable same-store sales growth and reasonably competitive cash-on-cash returns have underpinned mid-single-digit annual U.S. revenue growth since 2018, with the firm prioritizing menu development, augmented digital capabilities, and an uptick in unit growth as its key strategic priorities. We continue to view international expansion as the least likely of the firm's initiatives to bear material fruit, but note that sizable development agreements in Asia-Pacific suggest that Wendy's brand could prove strong enough to make a small foray in emerging international markets—though we still view success as unlikely in those where both wide-moat McDonald's and Burger King already maintain a strong position.