Back to top

Analyst Blog

As a part of its brand revitalization initiative, The Wendy’s Co. (WEN - Analyst Report) recently divested 24 company-operated restaurants together with two future locations in the Seattle market to Cedar Enterprises, Inc. The financial terms of the deal were not disclosed.

Wendy’s shares a longstanding relationship with Ohio-based Cedar Enterprise, its third largest franchisee operating 170 restaurants across five U.S. states, with 47 units in Washington.

Cedar Enterprise has been active in Washington for more than 15 years and has adequate local market knowledge. This makes it an ideal candidate for franchising the Seattle market in Washington.

As per the National Restaurant Association, the restaurant industry in Washington contributes considerably to the state’s revenues. According to the research organization, Washington’s restaurants are expected to record $10.9 billion in sales in 2013.

The latest deal is aimed at optimizing the company’s restaurant portfolio. Wendy’s seeks to franchise about 425 company-operated restaurants in 13 U.S. markets.  The entire process is expected to end by the second quarter of 2014. Operators who have a proven track record and conform to the company’s reimaging program are being chosen for this conversion. The company continues to divest units, mainly in the West, with qualified buyers expressing interest.

Franchising has got a boost of late, given the benefits of this business model amid an anemic economy. We believe franchising a large chunk of the system will provide another opportunity for margin expansion. Also, the company’s efforts to reduce its capital requirements will ensure steady free cash flow generation.

Many operators in the restaurant sector including Burger King Worldwide (BKW - Analyst Report), McDonald’s Inc. (MCD - Analyst Report) and Yum! Brands Inc. (YUM - Analyst Report) have franchise-centric business models.

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
UNITED THER… UTHR 117.83 +28.51%
TRIQUINT SE… TQNT 20.67 +6.52%
VASCO DATA… VDSI 14.77 +4.68%
BANCO DO BR… BDORY 15.53 +3.95%
STRATTEC SE… STRT 80.24 +3.00%