Wendy's US Footing Looks Solid Although International Prospects Murkier

Wendy's is the second-largest QSR burger chain in the US behind wide-moat McDonald's, sporting a value proposition 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 decent cash-on-cash returns have underpinned mid-single-digit annual US revenue growth since 2019, with the firm prioritizing its breakfast business, unit development, and international expansion to drive its next leg of growth. 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 the Wendy's brand could prove strong enough to make a small foray into emerging international markets. We still view success as unlikely in those markets where both wide-moat McDonald's and Burger King already maintain a strong position.