Wendy's Is Scaling Back Plans for New Delivery Kitchens

The COVID-19 pandemic caused demand for food deliveries to skyrocket as customers couldn't escape their cravings for fast food even while confined to their homes. Wendy's attempted to capitalize on this demand in 2021, by inking a deal for 700 new delivery-only kitchens across the U.S., Canada, and the U.K. over the course of five years.

But the chain has now confirmed that it is pulling out of this expansion plan, which it had brokered with ghost kitchen startup REEF. During an earnings call this week, Wendy's president and CEO Todd Penegor said the burger chain does not believe delivery kitchens "will be a large element of our growth trajectory moving forward."

In 2022, the burger giant foreshadowed its plans to scale down the massive expansion. At the time, Wendy's anticipated opening a much smaller total of 100 to 150 delivery kitchens, the majority in Canada and the U.K., by the end of 2025.

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Penegor attributed the change in plans to "a change in REEF's growth strategy, which includes a shift to operating multiple brands from its locations." Additionally, he said that difficulties with obtaining permits had created challenges with opening delivery kitchens in some U.S. locations.

This week, Penegor stressed that testing out less traditional concepts is still an important learning experience for Wendy's so that "we continue to move the brand forward and have more access to our brand." But for now, the chain's focus lies in developing and opening traditional stores.

"As we turn toward the future, we'll have a disciplined approach on driving traditional restaurant growth across the U.S. and our key established international markets alongside continued expansion in the U.K. and broader Europe," Penegor said.

Wendy's had already established 16 REEF locations in the U.K. by the end of 2022, according to Penegor. While it remains unclear just how many delivery kitchens Wendy's will ultimately open over the next few years, the total won't come anywhere close to the 700 the original expansion plan called for.

The chain said in a statement that it expects a "small volume" of REEF openings in Canada and the U.K. this year. Additionally, while discussing Wendy's anticipated store count by 2025 during the earnings call, CFO Gunther Plosch noted that "it's really less REEF units than even previously contemplated as we reduced our outlook with REEF."

In the meantime, customers can rest assured that traditional Wendy's restaurants won't be overshadowed by delivery-only locations anytime soon.

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