Dublin, Ohio-based The Wendy’s Co. (WEN - Analyst Report), completed the divestiture of 23 company-operated units in Oregon and Washington to Group W Partners, LLC. The financial terms of the deal were not disclosed.
These restaurants will be remodeled on the basis of Wendy’s’ contemporary Image Activation format. The first of these renovated units is slated for a mid-December opening in Vancouver, Washington. Group W Partners has associated with Steve Harris for appointing him as the Director of Operations for these 23 units.
Wendy’s’ relationship with the owners of Group W Partners — Dan O'Brien and Doug Rich — stretches for more than two decades. Apart from Group W Partners, they also operate another firm — Bodan Incorporated — which franchises 18 Wendy’s units across Colorado, Wyoming and Nebraska. The franchisee’s adequate local market knowledge makes it a perfect fit for franchising in greater Portland, Oregon and Southwest Washington.
These divestments were in line with the System Optimization Initiative started in July by Wendy’s. As per this initiative, the company seeks to divest 425 company-operated restaurants in 13 U.S. markets, mostly in the West, by the second quarter of 2014. Year to date, the company has sold 233 restaurants.
Under this initiative, the company also plans to renovate some of its existing units based on the Image Activation format. Operators with a proven track record and conforming to the company’s reimaging program are being chosen for this transition.
Additionally, the brand transitioning initiative includes expansion, closure of underperforming units and several other growth initiatives. With these moves, the company intends to improve its operations and operating margin.
Moreover, this will help the company to grow through franchising thus driving earnings per share and top-line expansion in the form of royalty and rental income. Alongside, free cash flow continues to grow, allowing reinvestment for increasing brand recognition and enhancing shareholders’ return.
Other Stocks to Consider
Wendy’s holds a Zacks Rank #2 (Buy). Investors interested in the restaurant industry may consider stocks like Buffalo Wild Wings Inc. (BWLD - Analyst Report), DineEquity, Inc. (DIN - Snapshot Report) and Darden Restaurants, Inc. (DRI - Analyst Report). While Buffalo Wild Wings carry a Zacks Rank #1 (Strong Buy), DineEquity and Darden Restaurants hold a Zacks Rank #2.
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