Wendy's Co 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. Introduction This “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of The Wendy’s Company (“The Wendy’s Company” and, together with its subsidiaries, the “Company,” “we,” “us,” or “our”) should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and the related notes included elsewhere within this report and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 29, 2024 (the “Form 10-K”). There have been no material changes as of June 29, 2025 to the application of our critical accounting policies as described in Item 7 of the Form 10-K. Certain statements we make under this Item 2 constitute “forward-looking statements” under the Private Securities Litigation Reform Act of 1995. See “Special Note Regarding Forward-Looking Statements and Projections” in “Part II. Other Information” of this report. You should consider our forward-looking statements in light of the risks discussed in “Item 1A. Risk Factors” in “Part II. Other Information” of this report and our unaudited condensed consolidated financial statements, related notes and other financial information appearing elsewhere in this report, the Form 10-K and our other filings with the Securities and Exchange Commission (the “SEC”). The Wendy’s Company is the parent company of its 100% owned subsidiary holding company, Wendy’s Restaurants, LLC (“Wendy’s Restaurants”). Wendy’s Restaurants is the parent company of Wendy’s International, LLC (formerly known as Wendy’s International, Inc). Wendy’s International, LLC is the indirect parent company of (1) Quality Is Our Recipe, LLC (“Quality”), which is the owner and franchisor of the Wendy’s restaurant system in the United States (the “U.S.”) and all international jurisdictions except for Canada, and (2) Wendy’s Restaurants of Canada Inc., which is the owner and franchisor of the Wendy’s restaurant system in Canada. As used herein, unless the context requires otherwise, the term “Company” refers to The Wendy’s Company and its direct and indirect subsidiaries, and “Wendy’s” refers to Quality when the context relates to the ownership or franchising of the Wendy’s restaurant system and to Wendy’s International, LLC when the context refers to the Wendy’s brand. Wendy’s is primarily engaged in the business of operating, developing and franchising a system of distinctive quick-service restaurants serving high quality food. Wendy’s opened its first restaurant in Columbus, Ohio in 1969. Today, Wendy’s is the second largest quick-service restaurant company in the hamburger sandwich segment in the U.S. based on traffic and dollar share, and the third largest globally with 7,334 restaurants in the U.S. and 35 foreign countries and U.S. territories as of June 29, 2025. Each Wendy’s restaurant offers an extensive menu specializing in hamburger sandwiches and featuring chicken sandwiches, which are prepared to order with the customer’s choice of toppings and condiments. Wendy’s menu also includes chicken nuggets, chili, french fries, baked potatoes, freshly prepared salads, soft drinks, Frosty ® desserts and kids’ meals. In addition, Wendy’s restaurants sell a variety of promotional products on a limited time basis. Wendy’s also offers breakfast across the U.S. system and in Canada. Wendy’s breakfast menu features a variety of breakfast sandwiches such as the Breakfast Baconator ® and sides such as seasoned potatoes. The Company is comprised of the following segments: (1) Wendy’s U.S., (2) Wendy’s International and (3) Global Real Estate & Development. Wendy’s U.S. includes the operation and franchising of Wendy’s restaurants in the U.S. and derives its revenues from sales at Company-operated restaurants and royalties, fees and advertising fund collections from franchised restaurants. Wendy’s International includes the operation and franchising of Wendy’s restaurants in countries and territories other than the U.S. and derives its revenues from sales at Company-operated restaurants and royalties, fees and advertising fund collections from franchised restaurants. Global Real Estate & Development includes real estate activity for owned sites and sites leased from third parties, which are leased and/or subleased to franchisees, and also includes our share of the income of our TimWen real estate joint venture. In addition, Global Real Estate & Development earns fees from facilitating franchisee-to-franchisee restaurant transfers (“Franchise Flips”) and providing other development-related services to franchisees. In this “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” the Company reports on the segment profit for each of the three segments described above. The Company measures segment profit using segment adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”). Segment adjusted EBITDA excludes certain unallocated general and administrative expenses and other items that vary from period to period without correlation to 27 the Company’s core operating performance. See “Results of Operations” below and Note 17 to the Condensed Consolidated Financial Statements contained in Item 1 herein for segment financial information. The Company’s fiscal reporting periods consist of 52 or 53 weeks ending on the Sunday closest to December 31. All three- and six-month periods presented herein contain 13 weeks and 26 weeks, respectively. All references to years, quarters and months relate to fiscal periods rather than calendar periods. Executive Overview Our Business As of June 29, 2025, the Wendy’s restaurant system was comprised of 7,334 restaurants, with 5,967 Wendy’s restaurants in operation in the U.S. Of the U.S. restaurants, 387 were operated by the Company and 5,580 were operated by a total of 204 franchisees. In addition, at June 29, 2025, there were 1,367 Wendy’s restaurants in operation in 35 foreign countries and U.S. territories. Of the international restaurants, 1,354 were operated by a total of 112 franchisees and 13 were operated by the Company in the United Kingdom (the “U.K.”). The revenues from our restaurant business are derived from two principal sources: (1) sales at Company-operated restaurants and (2) franchise-related revenues, including royalties, national advertising funds contributions, rents and franchise fees received from Wendy’s franchised restaurants. Company-operated restaurants comprised approximately 5% of the total Wendy’s system as of June 29, 2025. Wendy’s operating results are impacted by a number of external factors, including commodity costs, labor costs, intense price competition, unemployment and consumer spending levels, general economic and market trends and weather. Wendy’s strategic framework includes providing fresh, famous food to consumers, delivering an exceptional customer experience through operational excellence and expanding the Company’s footprint across the globe. Our opportunities to execute on this framework for long-term profitable growth include (1) driving same-restaurant sales and market share growth, (2) accelerating digital growth, (3) improving restaurant profitability and (4) driving global unit growth. Key Business Measures We track our results of operations and manage our business using the following key business measures: • Same-Restaurant Sales – We report same-restaurant sales commencing after new restaurants have been open for 15 continuous months and as soon as reimaged restaurants reopen. Restaurants temporarily closed for more than one week are excluded from same-restaurant sales. This methodology is consistent with the metric used by our management for internal reporting and analysis. The table summarizing same-restaurant sales below in “Results of Operations” provides the same-restaurant sales percent changes. • Company-Operated Restaurant Margin – We define Company-operated restaurant margin as sales from Company-operated restaurants less cost of sales divided by sales from Company-operated restaurants. Cost of sales includes food and paper, restaurant labor and occupancy, advertising and other operating costs. Cost of sales excludes certain costs that support restaurant operations that are not allocated to individual restaurants, which are included in “General and administrative.” Cost of sales also excludes depreciation and amortization expense and impairment of long-lived assets. Therefore, as Company-operated restaurant margin as presented excludes certain costs as described above, its usefulness may be limited and may not be comparable to other similarly titled measures of other companies in our industry. Company-operated restaurant margin is influenced by factors such as price increases, the effectiveness of our advertising and marketing initiatives, featured products, product mix, fluctuations in food and labor costs, restaurant openings, remodels and closures and the level of our fixed and semi-variable costs. • Systemwide Sales – Systemwide sales includes sales by both Company-operated restaurants and franchised restaurants. Franchised restaurants’ sales are reported by our franchisees and represent their revenues from sales at franchised Wendy’s restaurants. The Company’s consolidated financial statements do not include sales by franchised restaurants to their customers. The Company’s royalty and advertising funds revenues are computed as percentages of 28 sales made by Wendy’s franchisees. As a result, sales by Wendy’s franchisees have a direct effect on the Company’s royalty and advertising funds revenues and profitability. The Company calculates same-restaurant sales and systemwide sales growth on a constant currency basis. Constant currency results exclude the impact of foreign currency translation and are derived by translating current year results at prior year average exchange rates. The Company believes excluding the impact of foreign currency translation provides better year over year comparability. Same-restaurant sales and systemwide sales exclude sales from Argentina due to that country’s highly inflationary economy. The Company considers economies that have had cumulative inflation in excess of 100% over a three-year period as highly inflationary. The Company believes its presentation of same-restaurant sales, Company-operated restaurant margin and systemwide sales provide a meaningful perspective of the underlying operating performance of the Company’s current business and enables investors to better understand and evaluate the Company’s historical and prospective operating performance. The Company believes that these metrics are important supplemental measures of operating performance because they highlight trends in the Company’s business that may not otherwise be apparent when relying solely on GAAP financial measures. The Company believes investors, analysts and other interested parties use these metrics in evaluating issuers and that the presentation of these measures facilitates a comparative assessment of the Company’s operating performance. With respect to same-restaurant sales and systemwide sales, the Company also believes that the data is useful in assessing consumer demand for the Company’s products and the overall success of the Wendy’s brand. Second Quarter Highlights • Global systemwide sales decreased 1.9% to $3.66 billion in the second quarter of 2025 compared with $3.73 billion in the second quarter of 2024; • Revenues decreased 1.7% to $560.9 million in the second quarter of 2025 compared with $570.7 million in the second quarter of 2024; • Global same-restaurant sales decreased 2.9%, U.S. same-restaurant sales decreased 3.6% and international same-restaurant sales increased 1.8% compared with the second quarter of 2024. On a two-year basis, global same-restaurant sales decreased 2.1%; • Global Company-operated restaurant margin was 15.6% in the second quarter of 2025, a decrease of 20 basis points compared with the second quarter of 2024; • Income before income taxes increased 1.4% to $75.9 million in the second quarter of 2025 compared with $74.8 million in the second quarter of 2024; • Digital sales increased to approximately 20.5% of global systemwide sales in the second quarter of 2025 compared with approximately 17.0% in the second quarter of 2024; and • Systemwide restaurant count increased by 26 net new restaurants in the second quarter of 2025. Year-to-Date Highlights • Global systemwide sales decreased 1.8% to $7.05 billion in the first six months of 2025 compared with $7.18 billion in the first six months of 2024; • Revenues decreased 1.9% to $1.08 billion in the first six months of 2025 compared with $1.11 billion in the first six months of 2024; • Global same-restaurant sales decreased 2.5%, U.S. same-restaurant sales decreased 3.2% and international same-restaurant sales increased 2.1% compared with the first six months of 2024. On a two-year basis, global same restaurant sales decreased 1.6%; 29 • Global Company-operated restaurant margin was 15.0% in the first six months of 2025, a decrease of 30 basis points compared with the first six months of 2024; • Income before income taxes decreased 1.1% to $130.8 million in the first six months of 2025 compared with $132.3 million in the first six months of 2024; • Digital sales increased to approximately 20.4% of global systemwide sales in the first six months of 2025 compared with approximately 16.9% in the first six months of 2024; and • Systemwide restaurant count increased by 94 net new restaurants in the first six months of 2025. Results of Operations The tables included throughout this Results of Operations section set forth in millions the Company’s condensed consolidated results of operations for the second quarter and first six months of 2025 and 2024. Second Quarter Six Months 2025 2024 Change 2025 2024 Change Revenues: Sales $ 232.9 $ 237.4 $ (4.5) $ 452.4 $ 462.7 $ (10.3) Franchise royalty revenue and fees 156.2 157.6 (1.4) 301.4 304.2 (2.8) Franchise rental income 60.4 60.6 (0.2) 118.9 118.6 0.3 Advertising funds revenue 111.4 115.1 (3.7) 211.7 220.0 (8.3) 560.9 570.7 (9.8) 1,084.4 1,105.5 (21.1) Costs and expenses: Cost of sales 196.5 199.9 (3.4) 384.7 392.0 (7.3) Franchise support and other costs 17.1 16.2 0.9 33.7 31.0 2.7 Franchise rental expense 32.6 32.4 0.2 63.3 64.2 (0.9) Advertising funds expense 111.4 120.8 (9.4) 212.9 228.2 (15.3) General and administrative 59.5 61.5 (2.0) 127.7 125.3 2.4 Depreciation and amortization (exclusive of amortization of cloud computing arrangements shown separately below) 37.0 37.5 (0.5) 73.5 73.0 0.5 Amortization of cloud computing arrangements 4.1 3.5 0.6 8.2 7.1 1.1 System optimization gains, net (0.4) (0.3) (0.1) (0.3) (0.2) (0.1) Reorganization and realignment costs 0.2 2.5 (2.3) (0.5) 8.1 (8.6) Impairment of long-lived assets 1.7 0.7 1.0 3.1 2.7 0.4 Other operating income, net (3.1) (3.5) 0.4 (9.3) (6.6) (2.7) 456.6 471.2 (14.6) 897.0 924.8 (27.8) Operating profit 104.3 99.5 4.8 187.4 180.7 6.7 Interest expense, net (30.9) (31.0) 0.1 (62.4) (61.5) (0.9) Investment loss, net — — — (1.7) — (1.7) Other income, net 2.5 6.3 (3.8) 7.5 13.1 (5.6) Income before income taxes 75.9 74.8 1.1 130.8 132.3 (1.5) Provision for income taxes (20.8) (20.2) (0.6) (36.5) (35.7) (0.8) Net income $ 55.1 $ 54.6 $ 0.5 $ 94.3 $ 96.6 $ (2.3) 30 Second Quarter Six Months 2025 % of Total Revenues 2024 % of Total Revenues 2025 % of Total Revenues 2024 % of Total Revenues Revenues: Sales $ 232.9 41.5 % $ 237.4 41.6 % $ 452.4 41.7 % $ 462.7 41.9 % Franchise royalty revenue and fees: Franchise royalty revenue 132.1 23.6 % 136.3 23.9 % 253.9 23.4 % 262.0 23.7 % Franchise fees 24.1 4.3 % 21.3 3.7 % 47.5 4.4 % 42.2 3.8 % Total franchise royalty revenue and fees 156.2 27.8 % 157.6 27.6 % 301.4 27.8 % 304.2 27.5 % Franchise rental income 60.4 10.8 % 60.6 10.6 % 118.9 11.0 % 118.6 10.7 % Advertising funds revenue 111.4 19.9 % 115.1 20.2 % 211.7 19.5 % 220.0 19.9 % Total revenues $ 560.9 100.0 % $ 570.7 100.0 % $ 1,084.4 100.0 % $ 1,105.5 100.0 % Second Quarter Six Months 2025 % of Sales 2024 % of Sales 2025 % of Sales 2024 % of Sales Cost of sales: Food and paper $ 72.7 31.2 % $ 73.6 31.0 % $ 140.4 31.0 % $ 142.7 30.8 % Restaurant labor 73.4 31.5 % 76.0 32.0 % 144.2 31.9 % 149.6 32.3 % Occupancy, advertising and other operating costs 50.4 21.7 % 50.3 21.2 % 100.1 22.1 % 99.7 21.5 % Total cost of sales $ 196.5 84.4 % $ 199.9 84.2 % $ 384.7 85.0 % $ 392.0 84.7 % Second Quarter Six Months 2025 % of Sales 2024 % of Sales 2025 % of Sales 2024 % of Sales Company-operated restaurant margin: U.S. $ 36.7 16.2 % $ 38.1 16.5 % $ 68.2 15.6 % $ 71.6 15.9 % Global 36.3 15.6 % 37.5 15.8 % 67.7 15.0 % 70.7 15.3 % 31 The table below presents certain of the Company’s key business measures, which are defined and further discussed in the “Executive Overview” section included herein. Second Quarter Six Months 2025 2024 2025 2024 Key business measures: U.S. same-restaurant sales: Company-operated (0.7) % (1.1) % (0.9) % (1.0) % Franchised (3.8) % 0.7 % (3.4) % 0.8 % Systemwide (3.6) % 0.6 % (3.2) % 0.6 % International same-restaurant sales (a) 1.8 % 2.5 % 2.1 % 2.8 % Global same-restaurant sales: Company-operated (0.8) % (1.3) % (1.0) % (1.1) % Franchised (a) (3.0) % 1.0 % (2.6) % 1.0 % Systemwide (a) (2.9) % 0.8 % (2.5) % 0.9 % Systemwide sales (b): U.S. Company-operated $ 226.0 $ 231.2 $ 438.7 $ 450.6 U.S. franchised 2,905.3 3,008.5 5,608.7 5,783.1 U.S. systemwide 3,131.3 3,239.7 6,047.4 6,233.7 International Company-operated 6.9 6.2 13.6 12.1 International franchised (a) 522.0 483.3 988.5 931.4 International systemwide (a) 528.9 489.5 1,002.1 943.5 Global systemwide (a) $ 3,660.2 $ 3,729.2 $ 7,049.5 $ 7,177.2 _______________ (a) Excludes Argentina due to the impact of that country’s highly inflationary economy. (b) During the second quarter of 2025 and 2024, global systemwide sales decreased 1.8% and increased 2.6%, respectively, U.S. systemwide sales decreased 3.3% and increased 1.7%, respectively, and international systemwide sales increased 8.7% and 8.3%, respectively, on a constant currency basis. During the first six months of 2025 and 2024, global systemwide sales decreased 1.4% and increased 2.6%, respectively, U.S. systemwide sales decreased 3.0% and increased 1.7%, respectively, and international systemwide sales increased 8.8% and 8.5%, respectively, on a constant currency basis. 32 Second Quarter U.S. Company-operated U.S. Franchised International Company-operated International Franchised Systemwide Restaurant count: Restaurant count at March 30, 2025 387 5,571 13 1,337 7,308 Opened — 21 — 23 44 Closed — (12) — (6) (18) Restaurant count at June 29, 2025 387 5,580 13 1,354 7,334 Six Months U.S. Company-operated U.S. Franchised International Company-operated International Franchised Systemwide Restaurant count at December 29, 2024 381 5,552 13 1,294 7,240 Opened 8 41 — 69 118 Closed — (15) — (9) (24) Net (sold to) purchased by franchisees (2) 2 — — — Restaurant count at June 29, 2025 387 5,580 13 1,354 7,334 Sales Second Quarter Six Months 2025 2024 Change 2025 2024 Change Sales $ 232.9 $ 237.4 $ (4.5) $ 452.4 $ 462.7 $ (10.3) The decrease in sales during the second quarter and the first six months of 2025 was primarily due to (1) a 0.8% and 1.0% decrease in global Company-operated same-restaurant sales of $2.0 million and $4.3 million, respectively, and (2) net closures of Company-operated restaurants of $1.4 million and $4.6 million, respectively. Company-operated same-restaurant sales decreased due to a decrease in traffic, partially offset by higher average check. Franchise Royalty Revenue and Fees Second Quarter Six Months 2025 2024 Change 2025 2024 Change Franchise royalty revenue $ 132.1 $ 136.3 $ (4.2) $ 253.9 $ 262.0 $ (8.1) Franchise fees 24.1 21.3 2.8 47.5 42.2 5.3 $ 156.2 $ 157.6 $ (1.4) $ 301.4 $ 304.2 $ (2.8) Franchise royalty revenue during the second quarter and the first six months of 2025 decreased primarily due to a 3.0% and 2.6% decrease in global franchise same-restaurant sales, respectively. Franchise same-restaurant sales during the second quarter and the first six months of 2025 decreased due to a decrease in traffic, partially offset by higher average check. The increase in franchise fees during the second quarter and the first six months of 2025 was primarily due to higher fees for providing information technology services to franchisees. Franchise Rental Income Second Quarter Six Months 2025 2024 Change 2025 2024 Change Franchise rental income $ 60.4 $ 60.6 $ (0.2) $ 118.9 $ 118.6 $ 0.3 The decrease in franchise rental income during the second quarter of 2025 was primarily due to the impact of assigning certain leases to franchisees in the prior year of $1.5 million. This decrease was partially offset by (1) entering into new leases of $0.6 million and (2) amending certain existing leases of $0.5 million. 33 The increase in franchise rental income during the first six months of 2025 was primarily due to (1) amending certain existing leases of $1.6 million and (2) entering into new leases of $1.3 million. These increases were partially offset by the impact of assigning certain leases to franchisees of $2.1 million. Advertising Funds Revenue Second Quarter Six Months 2025 2024 Change 2025 2024 Change Advertising funds revenue $ 111.4 $ 115.1 $ (3.7) $ 211.7 $ 220.0 $ (8.3) The decrease in advertising funds revenue during the second quarter and the first six months of 2025 was primarily due to a decrease in franchise same-restaurant sales in the U.S. Cost of Sales, as a Percent of Sales Second Quarter Six Months 2025 2024 Change 2025 2024 Change Food and paper 31.2 % 31.0 % 0.2 % 31.0 % 30.8 % 0.2 % Restaurant labor 31.5 % 32.0 % (0.5) % 31.9 % 32.3 % (0.4) % Occupancy, advertising and other operating costs 21.7 % 21.2 % 0.5 % 22.1 % 21.5 % 0.6 % 84.4 % 84.2 % 0.2 % 85.0 % 84.7 % 0.3 % The increase in cost of sales, as a percent of sales, during the second quarter and the first six months of 2025 was primarily due to (1) higher commodity costs, (2) an increase in restaurant labor rates and (3) a decrease in traffic. These impacts were partially offset by (1) labor efficiencies and (2) higher average check. Franchise Support and Other Costs Second Quarter Six Months 2025 2024 Change 2025 2024 Change Franchise support and other costs $ 17.1 $ 16.2 $ 0.9 $ 33.7 $ 31.0 $ 2.7 The increase in franchise support and other costs during the second quarter and the first six months of 2025 was primarily due to an increase in costs incurred to provide information technology services and other services to franchisees. Franchise Rental Expense Second Quarter Six Months 2025 2024 Change 2025 2024 Change Franchise rental expense $ 32.6 $ 32.4 $ 0.2 $ 63.3 $ 64.2 $ (0.9) The decrease in franchise rental expense during the first six months of 2025 was primarily due to the impact of terminating certain existing leases. Advertising Funds Expense Second Quarter Six Months 2025 2024 Change 2025 2024 Change Advertising funds expense $ 111.4 $ 120.8 $ (9.4) $ 212.9 $ 228.2 $ (15.3) On an interim basis, advertising funds expense is recognized in proportion to advertising funds revenue. The decrease in advertising funds expense during the second quarter and the first six months of 2025 was primarily due to (1) the same factor as described above for “Advertising Funds Revenue” and (2) a decrease in the recognition of the Company breakfast advertising spend in excess of advertising funds revenue when compared to the prior year. 34 General and Administrative Second Quarter Six Months 2025 2024 Change 2025 2024 Change Employee compensation and benefits $ 36.5 $ 33.5 $ 3.0 $ 75.0 $ 68.2 $ 6.8 Incentive compensation 0.4 5.5 (5.1) 8.0 12.5 (4.5) Other, net 22.6 22.5 0.1 44.7 44.6 0.1 $ 59.5 $ 61.5 $ (2.0) $ 127.7 $ 125.3 $ 2.4 The decrease in general and administrative expenses during the second quarter of 2025 was primarily due to a decrease in incentive compensation accruals, reflecting lower operating performance as compared to plan in 2025 versus 2024. This decrease was partially offset by higher employee compensation and benefits. The increase in general and administrative expenses during the first six months of 2025 was primarily due to higher employee compensation and benefits, partially offset by a decrease in incentive compensation accruals, reflecting lower operating performance as compared to plan in 2025 versus 2024. Depreciation and Amortization (exclusive of amortization of cloud computing arrangements shown separately below) Second Quarter Six Months 2025 2024 Change 2025 2024 Change Restaurants $ 23.0 $ 23.1 $ (0.1) $ 45.8 $ 45.6 $ 0.2 Technology support, corporate and other 14.0 14.4 (0.4) 27.7 27.4 0.3 $ 37.0 $ 37.5 $ (0.5) $ 73.5 $ 73.0 $ 0.5 The change in depreciation and amortization during the second quarter and the first six months of 2025 was primarily due to depreciation and amortization for technology investments. Amortization of Cloud Computing Arrangements Second Quarter Six Months 2025 2024 Change 2025 2024 Change Amortization of cloud computing arrangements $ 4.1 $ 3.5 $ 0.6 $ 8.2 $ 7.1 $ 1.1 The increase in amortization of cloud computing arrangements during the second quarter and the first six months of 2025 was primarily due to amortization of assets associated with the Company’s digital investments. Reorganization and Realignment Costs Second Quarter Six Months 2025 2024 Change 2025 2024 Change Organizational Redesign Plan $ 0.1 $ 2.4 $ (2.3) $ (0.8) $ 8.0 $ (8.8) Other reorganization and realignment plans 0.1 0.1 — 0.3 0.1 0.2 $ 0.2 $ 2.5 $ (2.3) $ (0.5) $ 8.1 $ (8.6) During the first six months of 2025, the Company recognized costs under the Organizational Redesign Plan of ($0.8) million, which primarily included a reversal of a severance accrual as a result of a change in estimate. During the second quarter and the first six months of 2024, the Company recognized costs under the Organizational Redesign Plan of $2.4 million and $8.0 million, respectively, which primarily included severance and related employee costs. See Note 11 to the Condensed Consolidated Financial Statements contained in Item 1 herein for further information on the Organizational Redesign Plan. Impairment of Long-Lived Assets Second Quarter Six Months 2025 2024 Change 2025 2024 Change Impairment of long-lived assets $ 1.7 $ 0.7 $ 1.0 $ 3.1 $ 2.7 $ 0.4 The increase in impairment of long-lived assets during the second quarter and the first six months of 2025 was primarily due to higher impairment charges resulting from the deterioration in operating performance of certain Company-operated restaurants. 35 Other Operating Income, Net Second Quarter Six Months 2025 2024 Change 2025 2024 Change Claim settlement $ — $ — $ — $ 4.0 $ — $ 4.0 Lease buyout (0.1) 0.4 (0.5) 0.1 0.4 (0.3) Other, net 3.2 3.1 0.1 5.2 6.2 (1.0) $ 3.1 $ 3.5 $ (0.4) $ 9.3 $ 6.6 $ 2.7 The decrease in other operating income, net during the second quarter of 2025 was primarily due to a decrease in lease buyout activity. The increase in other operating income, net during the first six months of 2025 was primarily due to the settlement of a claim. Interest Expense, Net Second Quarter Six Months 2025 2024 Change 2025 2024 Change Interest expense, net $ 30.9 $ 31.0 $ (0.1) $ 62.4 $ 61.5 $ 0.9 The increase in interest expense, net during the first six months of 2025 was primarily due to lower interest income as a result of amending certain sales-type and direct financing leases. Investment Loss, Net Second Quarter Six Months 2025 2024 Change 2025 2024 Change Investment loss, net $ — $ — $ — $ 1.7 $ — $ 1.7 During the first six months of 2025, the Company recorded a loss of $1.7 million due to impairment charges for the difference between the estimated fair value and the carrying value of an investment in equity securities. Other Income, Net Second Quarter Six Months 2025 2024 Change 2025 2024 Change Other income, net $ 2.5 $ 6.3 $ (3.8) $ 7.5 $ 13.1 $ (5.6) The decrease in other income, net during the second quarter and the first six months of 2025 was primarily due to a decrease in interest income, reflecting lower balances of cash equivalents. Provision for Income Taxes Second Quarter Six Months 2025 2024 Change 2025 2024 Change Income before income taxes $ 75.9 $ 74.8 $ 1.1 $ 130.8 $ 132.3 $ (1.5) Provision for income taxes (20.8) (20.2) (0.6) (36.5) (35.7) (0.8) Effective tax rate on income 27.4 % 27.0 % 0.4 % 27.9 % 26.9 % 1.0 % The effective tax rates for the second quarter and the first six months of 2025 and 2024 were impacted by variations in income before income taxes, adjusted for recurring items such as non-deductible expenses and state income taxes, as well as non-recurring discrete items. The increase in the effective tax rate for the second quarter and the first six months of 2025 was primarily due to the tax effects of share-based compensation. The effective tax rate for the first six months of 2025 also increased due to a one-time adjustment to our deferred income taxes related to prior periods. 36 Segment Information See Note 17 to the Condensed Consolidated Financial Statements contained in Item 1 herein for further information regarding the Company’s segments. Wendy’s U.S. Second Quarter Six Months 2025 2024 Change 2025 2024 Change Sales $ 226.0 $ 231.2 $ (5.2) $ 438.7 $ 450.6 $ (11.9) Franchise royalty revenue 112.8 118.0 (5.2) 217.2 226.8 (9.6) Franchise fees 20.9 17.8 3.1 41.8 35.7 6.1 Advertising fund revenue 101.4 105.6 (4.2) 193.1 202.3 (9.2) Total revenues $ 461.1 $ 472.6 $ (11.5) $ 890.8 $ 915.4 $ (24.6) Segment profit $ 137.2 $ 136.7 $ 0.5 $ 258.1 $ 262.5 $ (4.4) The decrease in Wendy’s U.S. revenues during the second quarter and the first six months of 2025 was primarily due to (1) a decrease in same-restaurant sales and (2) net closures of restaurants. Same-restaurant sales decreased during the second quarter and the first six months of 2025 primarily due to a decrease in traffic, partially offset by higher average check. The increase in Wendy’s U.S. segment profit during the second quarter of 2025 was primarily due to a decrease in the Company’s funding of incremental advertising. This change was partially offset by (1) lower revenues, (2) higher general and administrative expense and (3) higher cost of sales, as a percent of sales for Company-operated restaurants driven by the same factors as described above for “Cost of Sales, as a Percent of Sales.” The decrease in Wendy’s U.S. segment profit during the first six months of 2025 was primarily due to (1) lower revenues, (2) higher general and administrative expense and (3) higher cost of sales, as a percent of sales for Company-operated restaurants driven by the same factors as described above for “Cost of Sales, as a Percent of Sales.” These changes were partially offset by a decrease in the Company’s funding of incremental advertising. Wendy’s International Second Quarter Six Months 2025 2024 Change 2025 2024 Change Sales $ 6.9 $ 6.2 $ 0.7 $ 13.6 $ 12.1 $ 1.5 Franchise royalty revenue 19.4 18.3 1.1 36.7 35.1 1.6 Franchise fees 2.6 2.4 0.2 4.7 4.3 0.4 Advertising fund revenue 10.0 9.5 0.5 18.6 17.7 0.9 Total revenues $ 38.9 $ 36.4 $ 2.5 $ 73.6 $ 69.2 $ 4.4 Segment profit $ 13.2 $ 10.7 $ 2.5 $ 22.7 $ 21.4 $ 1.3 The increase in Wendy’s International revenues during the second quarter and the first six months of 2025 was primarily due to net new restaurant development. The increase in Wendy’s International segment profit during the second quarter and the first six months of 2025 was primarily due to higher revenues. During the first six months of 2025, this increase was partially offset by higher advertising fund expenses. 37 Global Real Estate & Development Second Quarter Six Months 2025 2024 Change 2025 2024 Change Franchise fees $ 0.5 $ 1.2 $ (0.7) $ 1.2 $ 2.2 $ (1.0) Franchise rental income 60.4 60.6 (0.2) 118.9 118.7 0.2 Total revenues $ 60.9 $ 61.8 $ (0.9) $ 120.1 $ 120.9 $ (0.8) Segment profit $ 27.3 $ 28.2 $ (0.9) $ 52.0 $ 52.2 $ (0.2) The decrease in Global Real Estate & Development revenues during the second quarter and the first six months of 2025 was primarily due to lower development-related fees. The decrease in Global Real Estate & Development segment profit during the second quarter and the first six months of 2025 was primarily due to lower revenues. During the first six months of 2025, this decrease was partially offset by lower franchise rental expense driven by the same factors as described above for “Franchise Rental Expense.” Liquidity and Capital Resources As of June 29, 2025, cash, cash equivalents and restricted cash totaled $330.1 million. In addition, the Company maintains a revolving financing facility, which allows for the drawing of up to $300.0 million. Based on current levels of operations, the Company expects that available cash and cash flows from operations will provide sufficient liquidity to meet operating cash requirements for the next 12 months. We currently believe we have the ability to pursue additional sources of liquidity if needed or desired to fund operating cash requirements or for other purposes. However, there can be no assurance that additional liquidity will be readily available or available on terms acceptable to us. Stock Repurchases In January 2023, our Board of Directors authorized a repurchase program for up to $500.0 million of our common stock through February 28, 2027, when and if market conditions warrant and to the extent legally permissible (the “January 2023 Authorization”). During the six months ended June 29, 2025, the Company repurchased 13.0 million shares under the January 2023 Authorization with an aggregate purchase price of $186.0 million, of which $0.2 million was accrued as of June 29, 2025, and excluding excise tax of $1.8 million and commissions of $0.2 million. As of June 29, 2025, the Company had $49.0 million of availability remaining under the January 2023 Authorization. Subsequent to June 29, 2025 through August 1, 2025, the Company repurchased 0.8 million shares under the January 2023 Authorization with an aggregate purchase price of $8.8 million, excluding applicable excise tax and commissions. Dividends On March 17, 2025 and June 16, 2025, the Company paid quarterly cash dividends per share of $.25 and $.14, respectively, aggregating $76.2 million. On August 8, 2025, the Company announced a dividend of $.14 per share to be paid on September 16, 2025 to stockholders of record as of September 2, 2025. If the Company pays regular quarterly cash dividends for the remainder of 2025 at the same rate as declared in the third quarter of 2025, the Company’s total cash requirement for dividends for the remainder of 2025 would be approximately $53.4 million based on the number of shares of its common stock outstanding at August 1, 2025. The Company currently intends to continue to declare and pay quarterly cash dividends; however, there can be no assurance that any additional quarterly dividends will be declared or paid or of the amount or timing of such dividends, if any. Long-Term Debt, Including Current Portion Wendy’s U.S. advertising fund has a revolving line of credit of $15.0 million, which was established to support the Company’s advertising fund operations. During the three months ended March 30, 2025, the Company borrowed and repaid $15.0 million and $8.5 million, respectively, under the revolving line of credit. During the three months ended June 29, 2025, the Company borrowed an additional $8.5 million under the revolving line of credit. As a result, as of June 29, 2025, the Company had outstanding borrowings of $15.0 million under the revolving line of credit. 38 Except as described above, there were no material changes to the Company’s debt obligations since December 29, 2024. The Company was in compliance with its debt covenants as of June 29, 2025. See Note 5 to the Condensed Consolidated Financial Statements contained in Item 1 herein for further information related to our long-term debt obligations. Cash Flows from Operating, Investing and Financing Activities The table below summarizes our cash flows from operating, investing and financing activities for the first six months of 2025 and 2024: Six Months 2025 2024 Change Net cash provided by (used in): Operating activities $ 146.0 $ 145.5 $ 0.5 Investing activities (52.3) (44.0) (8.3) Financing activities (272.7) (162.4) (110.3) Effect of exchange rate changes on cash 5.5 (3.3) 8.8 Net decrease in cash, cash equivalents and restricted cash $ (173.5) $ (64.2) $ (109.3) Operating Activities Cash provided by operating activities consists primarily of net income, adjusted for non-cash expenses such as depreciation and amortization, deferred income tax and share-based compensation, and the net change in operating assets and liabilities. Cash provided by operating activities was $146.0 million and $145.5 million in the first six months of 2025 and 2024, respectively. The change was primarily due to an increase in net income, adjusted for non-cash expenses. Investing Activities Cash used in investing activities was $52.3 million and $44.0 million in the first six months of 2025 and 2024, respectively. The change was primarily due to (1) an increase in expenditures associated with the Company’s franchise development fund of $5.0 million and (2) an increase in capital expenditures of $4.6 million. Financing Activities Cash used in financing activities was $272.7 million and $162.4 million in the first six months of 2025 and 2024, respectively. The change was primarily due to an increase in repurchases of the Company’s common stock of $152.3 million. This change was partially offset by (1) a decrease in dividends of $26.4 million and (2) a net increase in cash provided by long-term debt activities of $15.0 million, reflecting the impact of the draw on the Company’s U.S. advertising fund revolving line of credit. General Inflation, Commodities and Changing Prices Inflationary pressures on labor directly impacted our consolidated results of operations during the six months ended June 29, 2025, and we anticipate continued labor inflation throughout the remainder of 2025. We attempt to manage any inflationary costs and commodity price increases through selective menu price increases, product mix and focused execution of operational excellence. Delays in implementing such menu price increases and competitive pressures may limit our ability to recover such cost increases in the future. Inherent volatility experienced in certain commodity markets, such as those for beef, chicken, eggs, pork, cheese and grains, could have a significant effect on our results of operations and may have an adverse effect on us in the future. The extent of any impact will depend on our ability to manage such volatility through product mix and selective menu price increases. Seasonality Wendy’s restaurant operations are moderately seasonal. Wendy’s average restaurant sales are normally higher during the summer months than during the winter months. Because our business is moderately seasonal, results for a particular quarter are not necessarily indicative of the results that may be achieved for any other quarter or for the full fiscal year. 39 Item 3. Quantitative and Qualitative Disclosures about Market Risk. As of June 29, 2025 there were no material changes from the information contained in the Company’s Form 10-K for the fiscal year ended December 29, 2024.