Wendy's recently lost the No. 2 spot among big burger chains, by U.S. sales. Burger King took it. On Wednesday, Oct. 28, Nelson Peltz made his move. His fund, Trian Fund Management, offered about $1.4 billion to take Wendy's private, with a group of partners.
The offer is $7.35 a share in cash, Lauren Thomas reports in the Journal. That's a 20% premium to the prior close. Wendy's stock closed up 15% at $7.07 after the Journal's first report. Trian argued that Wendy's is “at a critical juncture.” It says the fix needs years and a lot of money, and that's easier to do away from the stock market. Trian and related parties own about 16% of Wendy's. Peltz's son Bradley is on the board and runs Wendy's restaurants in three states. The board set up a committee and hired Morgan Stanley to weigh the bid.
Wendy's own CEO had already named what went wrong. Robert Wright came back in May after running the sandwich chain Potbelly. He told franchisees and investors the chain skimped on ingredient quality to save money. Service got uneven. The chain leaned too hard on deals. Those missteps cost it the No. 2 spot, the Journal says. Before the offer, the stock had fallen roughly 70% over five years. Trian pushed for a possible sale in 2022 and backed off in 2023. Now it's back with a check.
The $5 meal that won
Burger King's side of the story ran in Friday's Journal, from Adriano Marchese. Its U.S. same-store sales, or sales at locations open a year or more, rose 8.4%. A year ago the gain was 3.1%. The chain fixed up stores and sold $5 and $7 value meals. It ran promotions with Dragon Ball Z and Hello Kitty, too. CEO Josh Kobza said the results lifted Burger King to No. 2 in U.S. burgers. The parent company, Restaurant Brands International, still fell short. Same-store sales at Popeyes U.S. dropped 1.8%. Revenue of $2.53 billion missed the $2.55 billion forecast. The shares fell 2% to $73.01.
Jersey Mike's tells a similar story from the sub counter. The chain went public in July. It opened 80 stores in the quarter, for 3,456 in all, Rob Curran reports. Same-store sales rose 3%, short of the 3.4% Wall Street wanted. It also cooled its forecast. It now expects same-store sales to grow at least 2.5% this year. Before, it said 2.5% to 3%. The Journal points to a problem across the industry. Customers are short on cash, and ingredients cost more.
Our read
This is a Cash Flow · M5 story dressed up as a deal. The $5 meal is a price signal. Burger King leaned on value tiers and fixed-up stores, and it won the quarter. Wendy's leaned on deals but cut quality. It lost its spot and may lose its stock listing. That fits a picture of households trading down. None of the three chains is in our model books. McDonald's (MCD) is the burger name we hold, at weight in 6 books, and nothing was added. None of these stories names it. One more thing for anyone who's held Wendy's for years. A 20% premium on a stock that fell 70% in five years doesn't make you whole. What you paid was never the stock's value.
Your version of this story is on your card statement. Pull up last month's statement this week and add up every drive-through and takeout charge. Then count the visits and work out the average ticket. If it's well above the $5 or $7 the value menus charge, the chains are telling you where the savings are. If the monthly total surprises you, that's the same squeeze Jersey Mike's is seeing, from your side of the counter. Bring the number to your next review and we'll find it a place in the budget. You clear the gutters before the rain, not during it.