The Wendy’s Company (WEN): A Bull Case Theory

We came across a bullish thesis on The Wendy’s Company on slo capital’s Substack by Justin. In this article, we will summarize the bulls’ thesis on WEN. The Wendy’s Company's share was trading at $9.09 as of September 23rd. WEN’s trailing and forward P/E were 9.47 and 8.87 respectively according to Yahoo Finance.

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Wendy’s (WEN) stands out as a resilient quick-service restaurant (QSR) with a business model built on habit, strategic real estate, a limited but memorable menu, and a franchise-heavy structure. With roughly 7,166 restaurants in FY24, approximately 84% are franchised, meaning the parent company primarily earns fees, royalties, and rent rather than cooking burgers directly.

This “light-asset tollbooth” model generates high owner earnings that grow faster than GAAP revenue, benefiting from pass-through advertising dollars that do not belong to owners. The company’s moat combines brand recognition, long-tenured franchisees, drive-thru locations, and a growing digital/loyalty platform, while Next Gen restaurant designs improve throughput and franchise ROI.

Growth is driven by digital engagement, high-capacity restaurant operations, international expansion, and new dayparts like breakfast. Digital and loyalty programs have created millions of active members, while international system sales are offsetting soft U.S. traffic. Menu simplification and operational enhancements further strengthen throughput and margins. Near-term risks include U.S. comparable sales volatility, labor and beef costs, and disciplined execution of promotions. Wendy’s capital allocation strategy prioritizes dividend credibility, opportunistic buybacks, and reinvestment in remodeling and international expansion, while leverage remains structured and manageable.

Financially, FY24 revenues were $2.25B with $355M in operating cash flow, translating to free cash flow of ~$261M and owner earnings around $299–318M, implying a 16–18% yield at current prices. A two-stage DCF model suggests intrinsic value near $17 per share, with a conservative buy zone of $9–$12. Wendy’s represents a low-capital, high-cash-flow business whose disciplined, fee-driven model offers a compelling risk/reward opportunity, particularly given the market’s mispricing of its durable, everyday cash engine. Execution and U.S. comps remain key near-term variables, but the investment thesis rests on reliable cash generation, not heroic growth.

Previously we covered a bullish thesis on McDonald’s Corporation (MCD) by David in October 2024, which highlighted the company’s strong free cash flow, disciplined share repurchases, and steady dividends. The company's stock price has appreciated approximately by 1.54% since our coverage. The thesis still stands as MCD continues to deliver value. Justin shares a similar perspective but emphasizes Wendy’s (WEN) franchise-heavy model, digital engagement, and international expansion.