Fast-food chain Wendy’s announced they are planning to close 140 underperforming stores by the end of 2024. The proposed closures are for stores in low-growth locations with less than $1 million in annual sales and older stores that the company considers “outdated.”
At the same time, Wendy’s is planning on opening many new locations over the next few years in locations that they believe will be more profitable. The end result will be a 3% to 4% increase in the total number of stores nationwide.
Wendy’s move comes on the heels of other restaurant chains, such as Denny’s and TGI Friday’s, announcing multiple store closures and potential bankruptcy filings. Overall, restaurant sales have been growing over the past several years. So, it is likely that these realignments will increase profitability for Wendy’s and other chains.
Discussion Questions:
- What is the shut-down rule and how is it related to sales volume?
- What are some items that Wendy’s would consider variable costs?
- Discuss the difference between accounting profit and economic profit and the role it plays in Wendy’s decision to close some stores and open others.
Sources| Resturant Dive: https://www.restaurantdive.com/news/circana-top-50-chains-consumer-spending-up-7-percent/711309/; WFLA: https://www.wfla.com/news/national/wendys-is-closing-140-outdated-restaurants-by-end-of-year/; USA Today: https://www.usatoday.com/story/money/food/2024/10/22/dennys-closing-stores-2024/75799420007/; KTLA: https://ktla.com/news/nationworld/tgi-fridays-abruptly-closes-roughly-50-restaurants-could-soon-file-for-bankruptcy-reports/ fbclid=IwY2xjawGPk_BleHRuA2FlbQIxMQABHYljZtj9eU9Ss7LkTPCIV7XRaNrJ3GueXtYxuy604Zdec46LN2eWFFgsIA_aem_dd446NM5BLKjWO1bj3AwEQ&sfnsn=mo; Unsplash: Photo by Siyuan Lin on Unsplash