Wendy's Hops On The Refranchising Bandwagon
Want to improve your franchise company’s stock price? Sell off company stores. That’s the lesson from Wendy’s this morning. The big Ohio-based QSR announced plans to sell off 425 company-owned stores by the second quarter of next year. Not surprisingly, its stock price shot up 9 percent despite mediocre quarterly financials.
Investors love franchisors that don’t own their own stores, preferring an “asset-light” model that relies on the higher-margin, low-risk business of living off royalties than the lower-margin, high-risk business of running restaurants.
Numerous franchisors have sold off company stores over the years, particularly as their development has slowed amid recession and market saturation. Many franchisees in these systems have taken advantage of these sales to get really, really big.
In fact, we’re guessing that a not-insignificant percentage of these restaurants will end up in the hands of Kansas-based NPC International. The big Pizza Hut franchisee recently broke into the Wendy’s system, and ushered in the refranchising this week with a 24-unit purchase of company locations in the Kansas City market.
Wendy’s said that it wants to sell the stores relatively quickly, by the end of the second quarter of 2014. The sales will bring its ownership percentage from 22 percent to 15 percent.
The announcement helped bury what was a pedestrian quarter for the Columbus, Ohio-based chain: same-store sales in North America increased 0.4 percent, though company store margin increased from 14.1 percent to 16.7 percent.