Prepared remarks
Good morning. Welcome to the Wendy's Company Earnings Results Conference Call. Thank you. You may begin your conference.
Good morning, and thank you for joining our fiscal 2026 second quarter earnings conference call. After this brief introduction, Bob Wright, President and Chief Executive Officer, will provide a business update and then Steve Cirulis, Chief Financial Officer and Chief Strategy Officer, will review our second quarter results as well as our capital allocation priorities. From there, we will open up the line for questions. Today's conference call and webcast includes a presentation, which is available on our Investor Relations website, ir.wendys.com. Before we begin, please take note of the safe harbor statement that appears at the end of today's earnings release. This disclosure reminds investors that certain information we discuss today is forward-looking and reflects our current expectations about future plans and performance. Various factors could affect our results and cause those results to differ materially from the projections set forth in our forward-looking statements. Also, some of today's comments will reference non-GAAP financial measures. Investors should refer to our reconciliations of non-GAAP financial measures to the most directly comparable GAAP measure at the end of this presentation or in today's earnings release. If you have any questions following today's conference call, please contact me. I will now hand the call over to Bob.
Good morning, everyone, and thank you for joining our call today. Let me begin by saying how happy I am to be here. Wendy's is an iconic brand with distinctive attributes that have traditionally set us apart from our competition. We're at our best when we leverage those distinctions to the advantage of our customers, our franchisees and our business. Today, we are not performing at our potential. Traffic is down. Our value proposition has slipped and franchisee economics are under pressure. That said, I've seen this brand at its best, and I know we can fix these issues. I'm incredibly optimistic about the power of the Wendy's brand and the future success we can create. I'll start by sharing a little bit of my background. I spent my entire career in the restaurant industry, including previously serving as Executive Vice President, Chief Operations Officer and International here at Wendy's. I've seen firsthand the strength of our franchise system, the capability of our restaurant teams and the power of our differentiated quality position.
More recently, I served as CEO of Potbelly Sandwich Works. You'll hear from our new Chief Financial Officer and Chief Strategy Officer, Steve Cirulis in a few moments. Steve and I worked together at Potbelly, where we drove meaningful sales growth, margin expansion, franchise unit development and created significant shareholder value. That experience reinforced an important lesson. Successful turnarounds are achieved through a focused strategy, guided by clear principles and executed with discipline and accountability. That philosophy will guide how we lead here at Wendy's. Returning to Wendy's is especially meaningful to me. My first day with the company was over 28 years ago. In those days, I had the privilege to work alongside our founder, Dave Thomas. That experience shaped how I think about this business and helped me understand the foundations of our brand from Dave himself. Wendy's is a brand rooted in quality in everything we do.
We have exceptional assets, a differentiated brand, a strong franchise system with an international footprint, talented restaurant teams and passionate employees. Those strengths provide us with a solid foundation on which to build. At the same time, we're not executing to the standards we know we're capable of. Our quality differentiation has eroded. Our value proposition has weakened and we have not consistently delivered the experience customers expect from Wendy's. These issues have weighed on traffic and created pressure on the restaurant economic model, which is the heartbeat of this business. And this is reflected in our latest results. Today, I will briefly review our second quarter performance. My main focus, however, is to give you an assessment of where the business is today, followed by an outline of the initial strategic focus areas needed to improve performance. And what near-term actions we will take to execute, then Steve will take you through the second quarter results in more detail.
In the second quarter, Global systemwide sales decreased by 6.5%. U.S. same-restaurant sales were down 7%, and International same-restaurant sales declined 2.3%. This sales decline drove lower adjusted EBITDA and adjusted earnings per share. These results reinforce the work needed to sharpen our execution across the system. Now there were some bright spots during the quarter. U.S. customer satisfaction scores improved and U.S. company-operated restaurants outperformed the broader system in same-restaurant sales by 280 basis points. We also opened 21 new restaurants in the U.S. Internationally, systemwide sales grew as we continued to expand our footprint with 27 restaurant openings during the quarter. Now let me share my assessment of where the business is today. I've invested a significant amount of time visiting restaurants, speaking directly with our customers, meeting with franchisees, listening to our restaurant support center teams and talking to employees across the system.
What encourages me most is the passion I see throughout the Wendy's system. Our franchisees and employees care deeply about this brand. They're eager to sharpen our strategic focus on what makes Wendy's great, drive historic levels of performance and return to sustainable growth in traffic-driven sales, profit and cash flow for the company and franchisees. This level of commitment gives me confidence in what we can accomplish together. Recommitting to quality is essential to rebuilding our competitive advantage. Customers recognize it, franchisees believe in it, and it's at the heart of what Dave Thomas built. Wendy's quality heritage provides a strong foundation for the turnaround, but success will depend on translating that equity into a proposition that's relevant for today's fast-evolving QSR landscape. That heritage is a meaningful asset, but we need to be clear-eyed about the issues weighing on the business today.
Based on what I've seen so far, several themes stand out, which together have contributed to our recent performance. They include quality degradation, challenges around our value offerings, inconsistent operations and marketing that is not driving customers to our restaurants. I'll walk through each of these in turn. Wendy's has always been known for quality, fresh, never-frozen beef, hamburgers made to order, bacon cooked in our restaurants and fresh produce prepared daily. But over time, we've drifted away from some of the standards that made Wendy's distinctive. While we've maintained core practices in some areas, we've led cost and efficiency driven decisions that weakened that differentiation. On value, the Biggie platform was built for value-conscious consumers, but the offering has become increasingly complex and value diluting, making it less compelling and less effective as a reason to visit Wendy's. Operationally, our execution has become inconsistent and our performance management processes are not fully addressing the underlying challenges.
Drive-thru is a good example where we need to better manage peak hour traffic, ensure restaurants are staffed appropriately for demand and equip teams with the training, tools and systems they need to deliver consistently. And we need to sharpen marketing. We've been over-reliant on a calendar of one-off promotions and collaborations rather than a consistent, relevant brand narrative grounded in our equity and what Wendy's stands for. All of these factors combined have created persistent traffic pressure, particularly among our most frequent and loyal customers. It's going to take time, but these issues are within our control. In my conversations with franchisees, restaurant employees and customers give me strong conviction that attacking these issues head-on will yield results. In addition to acknowledging where we are and how we got here, turnarounds also require deep understanding of what needs to be done to improve performance.
Next quarter, we'll share more detail around the specific actions we're taking to drive our turnaround. But I can tell you already, we've aligned to five areas we believe are most critical. First, strengthening our menu with quality food at a compelling value. We win when we have fresh, craveable food that our customers identify as distinctively Wendy's. We will rebuild the menu at the ingredient level, at the menu item level and the category level while also addressing the menu price architecture that brings value to our customers. Second, distinct branding and marketing that drives demand. We have one of the most recognizable brands in the industry, and we need to make our messaging, media and creative drive a meaningful connection with our customers and drive traffic to our restaurants. Third, driving operational excellence that delights customers. We must set clear performance standards, establish the processes and procedures needed to meet them, provide training that enables every team member to execute consistently and ensure the organizational structure supports our restaurants and reinforces our commitment to excellence.
Fourth, creating a digital experience that builds frequency. There are significant opportunities to improve analytics, customer-facing digital assets, fully-integrated restaurant technology solutions and our customer loyalty approach along with the integration with third-party aggregators. Lastly, we must ensure our most visible and prominent brand asset, our restaurants, are leveraged as an engine for growth. Ultimately, that means getting back to market expansion and unit growth domestically. More immediately, our focus must ensure we have compelling four-wall operating economics and a consistent deployment of high-return investments at existing restaurants. We must also have a franchise system that is well capitalized and poised for growth. This applies to every restaurant in the system, whether company or franchise owned. Now in addition to adding Steve to the management team, I've already invested in critical professional services and utilized the expertise of several outside brand, business and strategy resources.
This has been beneficial in accelerating the strategy development and organizational development work to this point, and it will be of great value in compressing the time to impact. Equally as important to developing our strategy is having the right structure and talent to deliver upon it going forward. This means ensuring the organization is aligned and able to deliver on these strategic focus areas with meaningful impact. In some areas, that means enhancing existing capabilities. In others, it means building new capabilities that are essential to the work ahead. We've already started looking at necessary restructuring and reorganization efforts, and I look forward to sharing more details with you as they develop. I'll be closely engaged in key decisions across the organization and ensure we are moving with focus, speed and accountability. In addition, we need to ensure we have the right level of funding for our strategic initiatives.
That may include targeted investments alongside our franchisees, technology that elevates customer experience and improves efficiency, restaurant investments or acquisitions or actions that strengthen the balance sheet. Our decision to reduce the dividend creates additional flexibility to invest in initiatives to support the turnaround and create sustainable long-term value for shareholders. I look forward to sharing more details on those strategic initiatives and the funding of our investments in them soon. We are committed to providing a full strategic plan by our next quarterly update. We're in the early stages of this work, and meaningful change won't happen overnight. What you should expect from us is transparent communication and measurable progress that builds over time. We'll measure our progress through the indicators that matter the most, including traffic, customer satisfaction, franchisee economics and return on the investments we choose to scale.
You should expect to see clear connection between the actions we take and the operating metrics and financial results we deliver. That's how we'll measure success, and that's how we expect you to measure us. Now I'll turn it over to Steve to discuss the quarter and our financial outlook and then come back with some final thoughts.
Thank you, Bob. Good morning, everyone. I'm honored and excited to be here for my first earnings call as Wendy's Chief Financial Officer and Chief Strategy Officer. I have experience with turnarounds and transformation, and I look forward to partnering with Bob and the team to strengthen Wendy's performance and return the brand to growth. I'll begin with our second quarter results and our decision to withdraw our full year outlook, then touch on our capital allocation and balance sheet priorities before turning it back over to Bob. Our second quarter performance fell short of prior expectations and reinforced the need for a thorough revision of the path forward. Global systemwide sales declined 6.5% on a constant currency basis, primarily driven by U.S. same-restaurant sales, which declined 7.0% and the impact of 289 U.S. restaurant closures in the first half of the year. The decline in U.S. same-restaurant sales was driven by a 12.5% decrease in traffic, which included the impact of less discounting and reducing or eliminating breakfast operating hours at certain locations, partially offset by a 5.6% increase in average check.
While our new product innovation and collaboration with the Minions & Monsters movie delivered average check benefit, traffic did not increase as expected. The U.S. business did see sequential improvement in same-restaurant sales of 80 basis points from quarter 1 to quarter 2 this year. International systemwide sales grew 3.4%, supported by continued new restaurant development. This was partially offset by softness in same-restaurant sales, which declined 2.3%, primarily driven by a challenging consumer and competitive environment in Canada. Excluding Canada, International sales grew 8.6%, including positive same-restaurant sales. Turning to the company P&L for the second quarter. Total adjusted revenue was $443.2 million, a decrease of $6.4 million, down 1.4% compared to the prior year. This was primarily driven by lower franchise royalty revenue and lower rental income. These were partially offset by higher company-operated restaurant sales following the acquisition of franchise-operated restaurants during the third quarter of 2025.
Global company-operated restaurant margin was 13.6% for the second quarter and U.S. company-operated restaurant margin was 13.8%. U.S. company-operated restaurant margin declined compared to the prior year, primarily due to commodity cost increases of approximately 9%, including both continued inflation in beef prices and investments in upgrading our products, a decline in traffic and labor rate inflation of approximately 4%. These were partially offset by higher average check and labor efficiencies. Adjusted EBITDA was $124.1 million, which was down $22.5 million versus the prior year. This was driven by lower franchise royalty revenue, an increase in general and administrative expense, a decrease in U.S. company-operated margin and lower net franchise fees. Adjusted earnings per share was $0.18 in the second quarter. Moving on to capital expenditures and free cash flow. During the second quarter, we invested $26.0 million across capital expenditures and restaurant development.
Capital expenditures included $8.3 million in technology initiatives, including enhancements to the user experience and enabling more targeted marketing within our app. We also invested $12.8 million in restaurant development, including the Build-to-Suit program. Turning to free cash flow. We generated $120.3 million of free cash flow through the first half of the year, an increase of $10.8 million versus the prior year. The increase was primarily driven by a decrease in cash taxes, capital expenditures and investments associated with the company's franchise development fund, partially offset by lower net income adjusted for noncash items. Moving on to capital allocation and our balance sheet. Our priority is investing in the key focus areas Bob described earlier to create durable performance improvements. As we continue to develop our strategic plan, we will provide more detail on how that funding will accelerate the turnaround.
Every dollar of capital will be evaluated against one question, will this materially improve traffic, restaurant economics or long-term shareholder value. On shareholder returns. Today, we announced a quarterly dividend payment of $0.07 per share. While we do not anticipate repurchasing shares in 2026, future buybacks will remain a component of our capital allocation framework as appropriate. We have approximately $35 million remaining under our existing authorization, which expires in February 2027. Turning to the balance sheet. We ended the quarter with approximately $380 million in cash and a net leverage ratio of 5.0x. Given current performance, we expect leverage to remain elevated in the near term. As we improve operating performance, leverage should trend lower over time. Later this year or in early 2027, we anticipate refinancing approximately $430 million of debt that matures in March of 2028.
With the second quarter behind us and our attention directed on the strategic focus areas of our turnaround, let me spend a moment on what investors should expect. The trajectory of the business in the first half of the year suggests similar sales performance in the back half of the year. Traffic in July was consistent with second quarter trends. And as a result, we expect continued traffic headwinds to impact our ability to return to year-over-year system-wide sales growth in either the third or fourth quarter. We expect continued pressure on company-operated restaurant margin and adjusted EBITDA in the second half of the year from sales deleverage, full year commodity inflation of approximately 5% to 6% and a step-up in G&A driven by investments in our people and in professional services in support of our turnaround plan. This will also pressure adjusted net income as we work to refine and deploy elements of our plan.
Traditionally, the dividend payout was 50% to 60% of adjusted net income. Today's dividend announcement implies an annualized rate slightly above this range for the year. As noted in our press release this morning, the company is withdrawing its 2026 financial outlook. As a new leadership team, we are fully assessing the business and our opportunities within a comprehensive turnaround plan, including the optimal deployment of capital. At the same time, we are continuing to take actions to improve performance with a focus on strengthening our core value perception, elevating restaurant operational performance and enhancing the digital experience for our customers. Before I turn the call back to Bob, I want to emphasize that we are approaching this next phase with an objective view of both the challenges and the opportunities ahead. As we move forward, our priorities will be maintaining financial discipline, making thoughtful investment choices and supporting the actions needed to improve performance across the system.
My role in this organization is to bring these disciplines to life, both as we plan strategically and as we execute on behalf of every stakeholder in the business. With that, I'll now turn it back over to Bob.
Thank you, Steve. As I said, Wendy's is an iconic brand built on quality with talented people, committed franchisees and a strong foundation to build from. At the same time, we have been clear today that our performance is not where it needs to be, we have plenty of work ahead. But I'm confident we are focused on the right priorities and taking the decisive actions needed to drive meaningful change and restore our performance. We've been deliberate and meticulous in our diagnosis to ensure we have a deep understanding of those issues. We've already begun taking the right steps to shape the path forward on a turnaround and have identified five key strategic focus areas that will support growth and value for our franchisees and shareholders. You can expect us to communicate transparently, execute with discipline and accountability and work to earn your confidence through consistent, measurable progress over time. Before I close, I want to thank our employees, franchisees and restaurant teams for their continued commitment to Wendy's and for the important role they play during this time. Their feedback, partnership and willingness to confront challenges directly are essential as we work to turn around the business. With that, operator, I'll turn the call over to you so we can take questions.
Questions and answers
Your first question comes from the line of David Palmer with Evercore ISI. We will maintain discipline and accountability and work to earn your confidence through consistent, measurable progress over time. Before I close, I want to thank our employees, franchisees and restaurant teams for their continued commitment to Wendy's and for the important role they play during this time. Their feedback, partnership and willingness to confront challenges directly are essential as we work to turn around the business. With that, operator, I'll turn the call over to you so we can take questions.
Thanks for all the detail in your opening comments, Bob. A lot of us remember you from happier times at Wendy's, and I know you have a great reputation, especially in the system, and that's obviously a great start. But investors are probably also thinking this is the third CEO in about as many years and the challenges are much different than the last time you were there. So could you perhaps give a little bit more detail on why you think a turnaround can happen now and under your leadership? And I'll have maybe a quick follow-up.
Sure. Thanks, David. Good to hear your voice again. Look, the thing I would say about that confidence measure is that I think there's something we have to really understand about the restaurant business and restaurant companies in general. They are so dependent upon execution. It's a very execution-dependent industry, from the customer experience all the way to the support center, every level of the organization. It isn't just about developing a strategy and understanding what needs to be done; it's also about knowing how to get it done. This is my 40th year in the restaurant business. This is all I've ever done. I started with Wendy's 28 years ago, and I knew Dave Thomas before he passed. The other thing is that I have turnaround experience. Steve and I worked together on a very significant turnaround at Potbelly over the last 5.5 years. What you heard in my remarks is step one is making sure you have a clear diagnosis of what's going on, then being clear and candid about what those issues are and developing a plan that will address the core issues that will turn performance around.
We outlined those five strategic focus areas, and I'm confident that with the brand that we have and a clear understanding of the issues that are facing us we can win. A mentor of mine told me a long time ago, when you have a strong brand and you have a strong culture, you have the opportunity to do something really special. It becomes a performance issue. That's what we're facing. The things we own are within our control. I'm delighted to see when I came back that we still, in fact, have every bit of that strong brand at the core and the foundation, whether it's our employee base or the franchisees — the culture is still intact, and we can build from that.
I just wanted to ask you about the marketing side. Often these franchise turnarounds start with innovation and marketing to jump-start traffic, which you can build upon and then pursue operational wins. How is the pipeline of innovation and marketing as you see it today? Are there any near-term wins that might bend the trend perhaps in the second half?
Yes. In my comments, I talked about where I think we stand and the efforts we need. It's not just marketing; it's branding and marketing that draws people in. I'm not satisfied with how effective our marketing has been. The question is: what are we marketing? Is there breakthrough product innovation or improvements to the core menu? We're focused on rebuilding the menu at the item level, the ingredient level and the category level to break through to the customer. It's a very competitive environment. We can't just do what we've always done better. We have to innovate and lead in areas that are core to the brand. We also have to stay close to home. Our marketing has been somewhat focused on promotions and collaborations without the continuity of brand building underneath it and a story that customers connect with and that draws them back to Wendy's. That's ahead of us, but we have everything we need at the core of the brand to do that.
Your next question comes from the line of Brian Mullan with Piper Sandler.
Thanks for the prepared remarks. You talked about the quality differentiation having eroded. Could you unpack that a little? How much do you think is actual product quality versus a marketing or messaging issue where consumers aren't aware of Wendy's quality? Any comments would be helpful.
It's always a multi-variant equation. Marketing and how we present the brand are important, but I want to be clear: my comments about quality relate directly to the quality of our food. In the diagnosis phase, we looked at ingredients. There are issues we've created by decisions made in the interest of cost and efficiency that have degraded some quality. There are execution elements as well. And there's the innovation component: are we bringing our food to life in the best way possible? Those are things within our control. The good news is we still own the core elements of the Wendy's brand — fresh, never-frozen beef, prepping vegetables inside our restaurants and handmade sandwiches made to order. We can leverage those far more than we have and focus on operations, systems, processes and oversight to execute more consistently. Customers notice when you make changes, and we need to put the experience ahead of everything else when it comes to quality.
Your next question comes from the line of Danilo Gargiulo with Bernstein.
I wanted to ask about the U.S. system and whether the number of stores and the distribution of units per franchisee is healthy. Should we expect additional restaurant rationalization as part of the turnaround, or is the portfolio already optimized and we're going to grow from here?
That's a great question. As we plan strategically, we have to consider the health of the system and our capabilities to execute. I've spent a lot of time in the field with franchisees, the Board and employees. This system is largely family-owned, not private equity, and I know many of these franchisees personally. The health of the system is a personal matter. Franchisees are pressured by sales declines — when sales decline it affects restaurant profitability and creates fragility. Previously, closures were treated more as a program. We'll take a much more targeted approach. We'll come alongside franchisees if they need help. If closing a few restaurants improves a franchisee's portfolio — for example, if a trade area has moved on and a location is no longer viable — we'll help them make that decision and close that restaurant to get their portfolio healthier. Overall, the health of the system is tied to the health of the brand. Franchisees are invested in the work we're doing and excited about efforts to improve the top line, because top-line growth cures financial health in the restaurant system. Everything we're doing is pushing toward that.
Your next question comes from the line of Margaret-May Binshtok with Wolfe Research.
I wanted to ask how comps progressed through the quarter on a monthly basis. Relatedly, what are you seeing across different income cohorts? Are you seeing the gap between higher- and lower-income consumers widen?
Thanks, Margaret-May. Stepping into this role and reviewing sales progression in the quarter, the early part of the April period saw U.S. same-restaurant sales drop 6.4%, which was in keeping with the trend coming out of March. In May, that slipped to negative 7.5% same-restaurant sales in the U.S. Some of that was due to promotions from the prior year that were tougher to lap, such as a strong $3 Son of Baconator promotion. Moving into P6, we expected improvement. We launched our new Chicken Sandwich platform and the Minions & Monsters promotion, but those did not perform as expected — they pushed average check slightly but did not drive traffic. While comps bounced around a little — negative 6.4%, negative 7.5%, back to negative 7% — the traffic trend is the one we pay the most attention to. We had negative double-digit traffic each period of the quarter and it did not improve; we ended at negative 12.5%.
Your next question comes from the line of Dennis Geiger with UBS.
Bob, without wanting a rigid timeline, can you help us think about the timing or cadence of implementing the turnaround plan across the five focus areas? From your experience, where does traction come first versus what takes longer?
Happy to. We're moving with urgency. Establishing the strategy is the first step. We're already working on the strategic initiatives that underpin those five areas, the specific actions we will take, the estimated cost and expected returns. Often the biggest initiatives take longer to develop, but we will pursue quicker wins in parallel. Our franchisees, investors and employees expect action and results. We committed to provide the full strategy at our next update and will give more clarity than today. We plan to develop a pattern of talking about what we are doing, not just what we will do. Once we start working on something, we'll prove the model, demonstrate returns and then scale. That's our process for operating the strategic plan in a turnaround and as an ongoing management discipline.
Your next question comes from the line of Brian Bittner with Oppenheimer & Co.
For those of us who may not have been close to Potbelly's turnaround, can you touch on specific skills or experiences from Potbelly that you can apply here? And regarding improving quality degradation, is that something you've done before? Can you describe steps to take that idea into action to actually improve product quality?
Yes. There are similarities in starting positions. Potbelly was a great brand that had been off track for some time — years of traffic losses but a culture and connection to customers. There were significant issues with quality and value when we walked in, and the strategic approach we used there is the same approach we will use here. Steve and I worked together on that turnaround. The learnings include understanding past decisions around food quality, portions, ingredients, menu lineup, price architecture and promotions — we had to rebuild the menu from the bottom up at Potbelly and did so successfully, delivering strong results and over 40% more sales over five years. I'm not promising the same here, but customers respond to a great brand when you fix problems in that relationship. A difference here is that Wendy's has a mature, storied franchise system that understands the business and can be a massive advantage as we make improvements.
Your next question comes from the line of Jim Salera with Stephens, Inc.
Bob, given a challenging macro backdrop, has that reshuffled the priority of what you address first to bend trends toward the right direction?
We must take a near-term and long-term approach. Strategic initiatives will be year- and multi-year-long, and if we are too reactive to macro pressures, we can stray off strategy. Consumers are extremely value conscious today, and we think about value differently. Traditionally, value was boxed in one corner of the menu, but today's consumers look for value everywhere. The menu must be infused with intrinsic value — customers should feel they got a good deal from the core menu. There's everyday value like the Biggie platform and promotional value driven by digital and national promotions. All three must work together. Our approach to value addresses these customer need states and should help us meet consumer pressures while staying on strategy.
Your next question comes from the line of Lauren Silberman with Deutsche Bank.
You mentioned potential targeted investments. Can you expand on whether this is franchisee support through royalty relief, investments in assets, or more about marketing? Also, Wendy's previously announced plans to close about 5% to 6% of the store base. Do you see potential for additional closures beyond what's already been identified?
We're not making a lot of news on targeted investments today. The main point is that in our strategic focus areas we see opportunities that will require investment. Some targeted investments will be initiatives we do with and alongside franchisees to make restaurants more profitable and grow restaurant-level business. We will work to prove those models before scaling. There will be unique situations with franchisees where we may need to come alongside and do things to help their business. On closures, previously the approach felt programmatic. We'll use a targeted approach: if closing a location makes a franchisee's portfolio healthier because trade areas moved on, we'll support closing that location. The toolbox we'll use to help franchisees could include investments. Regarding restructuring and reorganization, that doesn't always mean cuts. It can mean creating new capabilities and adding talent where needed to deliver the strategic plan. Any investments will have to stand the test of providing returns for franchisees and the company.
Your next question comes from the line of Chris Carril with KeyBanc Capital Markets.
Thanks. Curious about breakfast: given you mentioned pressure on comps in the second quarter from reducing or eliminating breakfast hours at some locations, how are you thinking about breakfast as part of the business going forward? Any detail on breakfast sales mix would be helpful.
Breakfast is important and a complex topic we're still analyzing. It can't be disconnected from the broader strategy. The large majority of the system continues to serve breakfast, but we had some opt-out activity which was helpful for franchisees that found breakfast to be a drag on their business. Opt-outs provided a relief valve for some. Breakfast remains under evaluation, and we need to get our footing on the remainder of the strategy before deciding exactly where breakfast fits.
Overall, the daypart pressure to same-restaurant sales was about 120 basis points. Breakfast sales mix today is about 5% to 5.5% of overall sales. The specific opt-out actions impacted same-restaurant sales for the quarter by about 70 basis points. This will be evaluated as part of our overall approach to the brand, the menu and the strategy for where growth will come from.
Your next question comes from the line of Sara Senatore with Bank of America.
On intrinsic value, if customers aren't walking away feeling they got a good deal, is that driven by quality, service, production, or operations? How much of this is operational and fixable through process engineering or technology? I was surprised the Chicken Sandwich relaunch didn't move the needle, as it seems to address quality issues directly. Any thoughts on how much can be fixed by listening to franchisees and improving process?
It's all those things. We need to attack each component individually and then let them come together. There have been decisions on the menu we can fix on the core menu and through innovation to bring excitement. Price architecture is significant; reference pricing must make sense compared to competition and internally on our menu. Operational inconsistency is a challenge: as soon as we lose consistency as a brand, customers lose confidence and trust. Even digital orders end with human execution — fresh preparation, proper handling and correct fulfillment. There are tools, systems and processes and training opportunities. Training is a key area where we can create more consistency. The secret is to unpack all these elements, attack them individually to the best level, and then they come together for the customer.
Your next question comes from the line of Brian Harbour with Morgan Stanley. Hilary Lee is on for Brian Harbour.
How would you compare your plans to the prior Project Fresh? Is this a continuation, expansion, or a complete overhaul?
We're not talking about Project Fresh as a direct continuation. You may recognize elements in that prior work that overlap with the areas we're focused on — there are indisputable truths in the restaurant space and for Wendy's. We reviewed previous work, including Project Fresh, during our diagnosis. This is our strategy, developed here, and a declarative position on the things that will be most important to strengthen the company and the brand. You can draw a line between prior work and what we're doing now, but this is our focused plan.
Got it. As a quick follow-up, could you share any of the key talking points you've had with franchisees?
We've been doing a lot of work with franchisees in market and had many in-person and virtual meetings. We have our franchise leadership together next week to dissect the strategy and start working on initiatives. Franchisees are fully engaged. I mentioned my personal relationships with many of them; we've had numerous individual conversations, Board discussions and alignment with management and franchisees. This strategy was developed in partnership with franchisees; they have provided significant feedback and are pleased we see the business the way they do and that we've developed these five focus areas.
Your next question comes from the line of Peter Saleh with BTIG. Your next question comes from the line of Peter Saleh with U.S. Bancorp BTIG.
Bob, what's your view on the look and feel of the restaurants today? Do you feel more CapEx is needed to get up to par with the industry? How are you thinking about remodels going forward?
Our restaurants, our number one asset, must be an engine for growth. I don't want you to assume we have a remodel program to unveil immediately. In my field visits, the core asset base is still strong, though some locations are not being maintained and supported as well as they should be. We can lean on execution elements for near-term maintenance capital and support. Long term, our image activation is more than a decade old and we'll want to evaluate what we can do to present a better face on our restaurants going forward. Any dollars spent must provide returns for our franchisees and the company. Investments could span image, digital capabilities, transaction-driving equipment, or other items tied to the menu. We'll assess them by expected returns before moving forward. We're in a good place to start.
Your next and last question comes from the line of Jon Tower with Citi.
First, given you're unhappy with current marketing, should we expect a retrenchment in marketing dollars in the near term while you adjust messaging? Second, do you feel you currently have the right level of field leadership to execute the turnaround?
We are not planning to pull back on marketing spend. The issue is messaging, creative and media placement — getting out of a cycle of promotion and one-off collaborations and returning to a cohesive, long-term brand calendar that communicates what we want. Pulling back on spend would not make sense; we need to adjust messaging and media while maintaining investment. On field leadership, the company has made recent investments in field support. I've met many field leaders and I'm impressed with some of what we've done. This is an area of my experience — operations is my home base — and I want to ensure we have the right structure and balance of support for franchisees. Training is an area of significant opportunity. We may not need to invest a lot more in individual training headcount; rather, we can invest in training systems that give our field staff new tools and clear outcomes to drive consistency and performance. We have a foundation to build from but need to scale field capabilities.
That was our last question of the call. Thank you, everyone, for joining us this morning. I hope everybody has a great day. You may now disconnect.