Wendy’s Franchise Fight Raises a Bigger Question: Why Aren’t Franchisees Fighting Harder to Make the Brand Relevant Again?

 

A franchise agreement should be more than a license to display a familiar logo. It should be an investment in a brand that continually earns consumer attention, delivers compelling food, justifies its price, and gives customers a reason to return according to Steven Johnson, Grocerant Guru® Founder, at Tacoma, WA based Foodservice Solutions®.

Yet the Chapter 11 battle involving Wendy’s and one of its largest franchisees, Meritage Hospitality Group, raises a question that reaches well beyond bankruptcy court: Why are franchisees spending so much energy fighting over which restaurants to close when the industry needs an equally serious fight over how to make the restaurants worth visiting in the first place?

According to the supplied report, Meritage entered Chapter 11 after a difficult financial period, with additional restaurant closures under consideration and a dispute with Wendy’s over franchise terminations, potential damages, and which underperforming locations should shut down. Meritage’s restructuring team argues that keeping deeper-loss restaurants open undermines the purpose of its closure program. Wendy’s, meanwhile, argues that its preferred closures would better serve the overall restaurant portfolio.

Both parties have financial arguments to make. But from the perspective of the Grocerant Guru®, the larger strategic issue is what happens when a legacy brand’s consumer proposition fails to generate enough sales to support the economics of the franchise system.

Closing restaurants can reduce losses. It does not, by itself, rebuild consumer relevance.

The real question is whether franchisors and franchisees are working together aggressively enough to create more reasons for consumers to choose the brand, more often, at a price they believe is worth paying.

The numbers tell a story beyond bankruptcy

The figures in the supplied report illustrate the challenge facing Meritage and the broader strategic question facing Wendy’s.

The report states that Meritage was closing 41 additional restaurants across five groups, following 60 earlier closures. The 41 locations in the current closure process reportedly averaged $1.15 million in annual sales while losing approximately $127,000 per restaurant over the preceding 12 months.

Wendy’s proposed alternative list reportedly averaged $1.07 million in annual sales and lost approximately $114,000 per restaurant over the same period. The report also puts Wendy’s national average annual restaurant sales at approximately $2 million through 2025.

Those figures are reported numbers, not independently audited conclusions presented here. Nevertheless, the gap deserves attention.

If the figures are comparable, the restaurants under discussion are generating substantially less revenue than the reported systemwide average. That is a signal to investigate location economics, local competition, operating execution, consumer demand, and the strength of the brand proposition in each market.

The figures alone do not prove that Wendy’s brand messaging, food, pricing, or service caused those restaurants to underperform. Restaurant-level results can also reflect occupancy costs, labor expenses, traffic patterns, management, competition, and other market-specific factors.

But the strategic question remains: When a restaurant generates substantially less sales than the system average, what is the plan to make it more relevant to the consumer before the only remaining plan is to close it?

That question deserves just as much attention as the closure schedule.

1. Brand messaging: Familiarity is not the same as relevance

Wendy’s has a recognizable brand, a distinctive square hamburger, a long-standing fresh-beef message, and a history of irreverent advertising. Those are assets. But legacy brand equity is not a permanent guarantee of consumer preference.

Consumers do not buy a brand’s history. They buy what the brand delivers today.

Wendy’s own management acknowledged the need for change when it introduced Project Fresh on October 9, 2025. The plan called for strengthening brand positioning, improving marketing effectiveness, assessing the U.S. restaurant system, elevating the customer experience, and prioritizing average unit volume growth. The company specifically identified a need to connect more effectively with the next generation of customers..

That announcement is significant. It demonstrates that brand relevance and restaurant productivity are not simply complaints raised by struggling franchisees; they are issues Wendy’s corporate leadership has publicly identified as priorities.

The performance numbers add urgency. Wendy’s reported U.S. same-restaurant sales declined 5.6% for full-year 2025, following growth of 1.4% in 2024 and 3.7% in 2023. U.S. franchised restaurant average unit volume also declined, from approximately $2.086 million in 2024 to $1.984 million in 2025..

These results do not establish that advertising or messaging alone caused the decline. They do establish that a recognized national brand experienced a meaningful reversal in sales momentum.

The question for franchisees is straightforward: Are they getting the brand-building, marketing, menu innovation, and customer traffic support they need to compete effectively in their own markets?

Franchisees should demand measurable answers, not simply more promotional calendars.

They should ask corporate leadership to demonstrate which campaigns generate incremental visits, which messages convert younger customers, which promotions bring in new customers rather than discount existing purchases, and which marketing investments produce sustainable increases in restaurant-level sales.

A franchisee paying royalties and contributing to marketing funds should expect more than brand awareness. The objective is to generate profitable transactions.

2. Product: Does the menu fit the way consumers eat today?

The burger business has changed. Consumers still buy burgers, but they also compare chicken, snacks, beverages, breakfast, customizable meals, delivery options, and food that fits a particular occasion.

That is where the Grocerant Guru® perspective becomes important. Consumers increasingly construct meals across multiple channels and formats. A restaurant is not competing only with the burger restaurant across the street. It competes with convenience stores, supermarket prepared foods, delivery platforms, and other destinations offering quick, portable meal solutions.

The National Restaurant Association's 2025 off-premises research reported that nearly 75% of restaurant traffic occurred off-premises, including takeout, delivery, and drive-thru occasions. Its research also identified convenience, quality, and price as important considerations when customers choose off-premises meals..

That is a major consumer behavior signal. A brand must deliver more than a recognizable product. It must make the product easy to purchase, transport, eat, and justify economically.

Wendy’s has taken steps in this direction. In February 2025, the company outlined plans to expand chicken and beverage offerings, strengthen its Biggie Bag value platform, improve loyalty engagement, and continue breakfast innovation. Restaurant Dive reported that Wendy’s SpongeBob-themed Krabby Patty promotion produced a 20% same-store sales lift at its peak, according to company commentary.

That promotion offers an important lesson: a distinctive product-and-marketing combination can generate a measurable traffic response. It does not prove that every promotion will work or that the effect will persist after the promotion ends. It does show why franchisees should insist on a pipeline of relevant products and compelling reasons to visit.

Three product questions franchisees should push corporate leadership to answer:

·       Which menu innovations produce repeat purchases and incremental traffic, rather than a brief promotional spike?

·       How quickly can local operators test products that respond to regional tastes, emerging meal occasions, and competitive gaps?

·       Does the menu offer enough flexibility for consumers seeking affordable combinations, portable snacks, chicken, breakfast, and beverages throughout the day?

A franchisee should not have to accept a stagnant consumer proposition simply because the brand has a famous hamburger.

3. Price: Value is what customers receive, not just what they pay

Price competition is unavoidable. But discounting without a clear value proposition can weaken margins while failing to build loyalty.

The National Restaurant Association's 2025 industry outlook found that 47% of limited-service customers said their dining experience mattered more than price. The same report said 47% of restaurant operators planned to introduce new discounts, deals, or value promotions to attract traffic.

These findings point to a tension: affordability matters, but price is not the entire experience.

For Wendy’s, the challenge is to communicate why its food deserves the customer's money while offering price points that make sense for different budgets and occasions. A value meal must feel like a genuine solution, not a complicated calculation involving add-ons, app restrictions, or an offer that disappears before the customer can use it.

This is where franchisees should demand a better balance between national promotional strategy and local restaurant economics.

A corporate offer can produce more transactions and still leave the franchisee with insufficient incremental profit if food costs, labor, discounts, and transaction mix are not properly accounted for. Conversely, a well-designed combination can improve perceived value, increase attachment rates, and encourage customers to purchase more than a single item.

Franchisees should insist that promotional evaluations include:

·       Incremental transactions and repeat visits.

·       Average check and food-cost impact.

·       Profit contribution after discounts and labor.

·       New-customer acquisition versus subsidizing existing purchases.

·       Performance by daypart, market, and customer segment.

The objective should be to grow profitable unit sales, not simply to advertise a low price or defend market share.

4. Service: The promise is made at the drive-thru window

Brand messaging creates an expectation. Product delivers the promise. Price frames the value. Service determines whether the customer wants to repeat the experience.

A national advertising campaign cannot compensate indefinitely for inaccurate orders, inconsistent food, long waits, or an unfriendly interaction.

Wendy’s itself placed customer experience and operational execution among the priorities in its Project Fresh plan. Its investor-day strategy also emphasized more consistent execution, digital convenience, and improved hospitality..

That matters because service is not merely an expense to manage. It is part of the product the customer buys.

Franchisees should push for store-level reporting that connects speed, order accuracy, food quality, customer complaints, digital ordering, and repeat visits. They should also have a voice in determining whether corporate initiatives make operations easier or add complexity during already difficult service periods.

Three practical tests should be applied to every major operating change:

1.       Does it make ordering easier for the customer?

2.       Does it help employees deliver a more consistent experience?

3.       Does it increase repeat business or profitable transactions enough to justify the cost?

If the answer is no, the system should reconsider the change.

The important point is not to demand fewer standards. It is to demand standards that improve the customer experience and the economics of the restaurant together.

5. Why don't more franchisees demand a growth strategy?

The Meritage dispute illustrates a fundamental imbalance in franchising. Operators may invest their capital, hire employees, manage local execution, pay occupancy and operating costs, and absorb the consequences when customer traffic weakens. The franchisor controls important parts of the brand identity, national advertising, menu direction, franchise standards, and systemwide strategy.

That division of responsibility can create tension when results deteriorate.

In Meritage's case, the supplied report describes a legal fight over termination, approximately $147 million in asserted claims, and competing views about which restaurants should close. Those claims and the parties' legal positions remain disputed; they should not be mistaken for final judicial findings.

But the broader lesson is clear: Franchisees need a stronger voice in the strategic decisions that determine whether their restaurants can succeed.

Why should operators settle for defending their share of a shrinking or stagnant market when they could demand a credible plan to expand consumer demand?

Market share is not the same as market growth. A brand can maintain its share while the category weakens. It can also gain share while individual restaurants struggle with unprofitable sales, excessive costs, or poor local execution.

The better measure is whether the brand is winning more relevant occasions, increasing repeat visits, and generating sustainable average unit volume and restaurant-level profitability.

Franchisees should organize around common business objectives rather than waiting until financial distress forces them into individual disputes. Within their contractual and legal rights, they can press for transparent performance reporting, franchisee advisory participation, evidence-based marketing tests, product-development input, and clear accountability for systemwide growth initiatives.

They should also ask corporate leadership to report progress against measurable goals, including:

·       Same-store sales and transaction growth.

·       Average unit volume by comparable market and restaurant cohort.

·       Customer satisfaction, order accuracy, and service speed.

·       New-product trial and repeat-purchase performance.

·       Promotional return on investment and franchisee profitability.

·       Digital engagement that converts into profitable visits and orders.

Not every weak restaurant can be saved. Some locations have structural disadvantages that no campaign can overcome. Nor should a franchisor be expected to preserve every unit regardless of its economics.

But closing restaurants should be part of a comprehensive strategy, not a substitute for one.

The goal should be to distinguish restaurants that need operational improvement, restaurants that need a stronger consumer proposition, restaurants that need local market repositioning, and restaurants that genuinely need to close.

That is a much more useful conversation than arguing only over which locations disappear first.

The Grocerant Guru® bottom line: Fight for relevance, not just survival

Wendy’s has publicly acknowledged the need to strengthen brand positioning, improve the customer experience, and increase average unit volume. Its reported 2025 U.S. same-store sales decline demonstrates why those priorities matter.

For franchisees, the Meritage situation is a reminder that contractual rights and financial restructuring are important, but they cannot replace consumer demand.

The brand they bought must continue to earn its place in the consumer's consideration set. It must communicate a relevant promise, deliver compelling food, provide credible value, and make the experience worth repeating.

Franchisees should not accept market share as the ultimate measure of success. They should push for a brand that grows transactions, strengthens customer loyalty, and improves unit economics.

Three Grocerant Guru® Insights

1. Relevance drives the visit; value helps close the sale.

Consumers do not owe a legacy brand their loyalty. They reward brands that meet current needs with the right food, price, convenience, and experience. Franchisees should demand evidence that marketing investments turn relevance into repeat purchases and profitable sales.

2. A closure plan is not a consumer-growth plan.

Closing money-losing restaurants may be necessary, but it does not answer why consumers are choosing competitors. Every turnaround should distinguish between a bad location, poor execution, an outdated offer, and a brand that is losing relevance in a particular market.

3. Franchisees bought a business opportunity, not a museum piece.

A legacy brand's history is an asset only when it helps attract today's customers. Franchisees should push harder for better products, sharper messaging, credible pricing, stronger service, and measurable unit-sales growth. The objective is not merely to defend a share of the market. It is to make the brand more relevant to an evolving consumer and grow the business profitably.

Steven Johnson is the Grocerant Guru® and founder of Tacoma, Washington-based Foodservice Solutions®. His perspective focuses on the convergence of restaurants, grocery prepared foods, convenience retail, and evolving consumer meal occasions.