Good morning. Welcome to The Wendy’s Company Earnings Results Conference Call. All lines have been muted to minimize background noise. After the speakers' presentations, there will be a question-and-answer session. Thank you. Greg Lemenchick, Senior Director of Investor Relations and Corporate FP&A, you may begin your conference.

Thank you, and good morning, everyone. Today’s conference call and webcast includes a PowerPoint presentation, which is available on our Investor Relations website, irwendys.com. Before we begin, please take note of the safe harbor statement that appears at the end of our earnings release. This disclosure reminds investors that certain information we may discuss today is forward-looking. 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 our earnings release. Lastly, I wanted to point out that our 2020 results contain a 53rd operating week. We have included a listing of the financial impact in our earnings release as well as in the appendix of this presentation. Please note that our 2021 outlook items excluded the impact of the 53rd week. On our conference call today, our President and Chief Executive Officer, Todd Penegor, will provide an update on our accelerating growth initiatives; and our Chief Financial Officer, Gunther Plosch, will review our fourth quarter and full year 2020 results as well as our 2021 outlook. From there, we will open up the line for questions. With that, I will hand things over to Todd.

Thanks, Greg, and good morning, everyone. I could not be more proud of our results and the work that was done by the Wendy System across the globe in 2020 with all the challenges we faced and overcame during the year. I am confident that we have emerged as a stronger, more unified brand that is poised to deliver outsized growth. I want to send a heartfelt thank you to all of our employees and franchisees for our ongoing partnership as we navigated through 2020 and, in turn, delivered a very strong performance. One of the things that we pride ourselves on has been our ability to deliver accelerating same-restaurant sales year after year, and this continued again in 2020 with our 10th consecutive year of U.S. growth. This was driven by our highly successful breakfast launch and a significant acceleration in our digital business. An outcome of our success has resulted in us leaping into the position of the number two QSR hamburger chain in the U.S., which highlights our momentum and strengthening brand presence. On top of our growing sales, we continue to see underlying strength in our restaurant margin, which grew to almost 18% in the fourth quarter. Our focus remains on ensuring we have a strong restaurant economic model across our system, and we are delivering. We also made good progress in expanding our footprint in 2020 by opening approximately 150 restaurants, which was quite the feat in the face of COVID. As we look to the future, we remain committed to our long-term growth initiatives, which are to significantly build our breakfast daypart, drive our digital business and expand our footprint across the globe. Our goal remains the same, which is to invest in driving efficient, accelerated growth, and we are delivering on that commitment. We are extremely pleased to say that we have achieved our 10th consecutive year of U.S. same-restaurant sales growth, which is a streak we plan to keep alive in 2021 and beyond. We firmly believe that this is just the beginning of our growth journey. Remarkably, the third and fourth quarters of 2020 were our two highest global same-restaurant sales growth quarters and over the last 15 years. And this was on top of very strong results in the back half of 2019. The momentum has continued into 2021. Through the week ended February 21st, our U.S. same-restaurant sales were up approximately 6% on a one-year basis and almost 10% on a two-year basis, despite an approximately 1% adverse impact from weather. And our global same-restaurant sales were up approximately 5%. Given the strong start to the year, we are expecting Q1, U.S. same-restaurant sales growth of approximately 10%. We are heading into 2021 from a position of strength with the full support of the franchise system behind us. We believe that we are well positioned to win now and over the long-term as we can deliver on the consumer need for speed, convenience and affordability while separating ourselves with quality. Our system is engaged and we are excited about our plans for the future. With that, I will now hand things over to GP, who will provide a few more details on our 2020 results.

Thanks, Todd. We were very pleased with our fourth quarter results as we closed out the year on a high note with core earnings growth that was ahead of our internal plan. Our global SRS remains strong on a one- and two-year basis in quarter four. Breakfast contributed approximately 6.5% to our U.S. same-restaurant sales, and our digital business accelerated across the globe. Once again, with two-year SRS growth in the U.S. of 10%, which was driven by the launch of our new classic chicken sandwich, which added to the momentum from our Pretzel launch. Adjusted revenues increased by approximately 12% to $382 million driven by higher sales at company-operated restaurants and an increase in franchise royalty revenue. These increases were due to the impact of the 53rd week and an increase in same-restaurant sales. Year-over-year company restaurant margin increased by 330 basis points to almost 18%, primarily driven by a higher average check and low insurance costs as the result of better claims management. These benefits were partially offset by customer count declines as a result of the pandemic and labor cost increases, largely given the higher rates. The increase in G&A was driven by higher professional fees related to IT-related costs and a $2.5 million impact of the 53rd week. This was partially offset by reduced travel expenses. Adjusted EBITDA increased by almost 40% to $115 million. This was driven by higher franchise royalty revenues and fees, lower franchise support costs as we lapped our investment to support our breakfast, lunch and an increase in company-operated restaurant margin. These benefits were partially offset by our incremental investments in breakfast advertising of $6.3 million in 2020. Adjusted earnings per share increased over 100% to $0.17 driven by our higher adjusted EBITDA. Now let's turn to our full year results. We are very proud of our 2020 results, which showcase the resiliency of our business model. Global same-restaurant sales grew 1.2%, which marks a significant improvement in SRS in the back half of the year as we were down approximately 3% to the end of the second quarter. Adjusted EBITDA increased 2% to approximately $420 million, which is remarkable given the pressures we had from the pandemic. Adjusted earnings per share decreased $0.02 to $0.57. This was driven by an increase in our tax rate and lower other income, partially offset by fewer shares outstanding and an increase in adjusted EBITDA. Free cash flow came in at approximately $182 million. The year-over-year decrease resulted from higher reorganization and realignment payments, a higher incentive compensation payout for the 2019 fiscal period paid in 2020, and rental payment timing. To round things out, I would like to highlight the progress we made on development throughout the year. We ended the year with net new unit growth across the globe, which was well ahead of our expectations post-COVID in March. We also sustained momentum in our Image Activation program, as 64% of the system is now on the new image, which is ahead of schedule. Our 2020 results continue to showcase our ability to drive momentum on the top and bottom line as we move forward into 2021. With that, I'll pass things back over to Todd to talk about our plans to continue accelerating growth in 2021.

Thanks, GP. As we move into 2021, our playbook of investing to drive accelerated growth behind our three long-term pillars remains the same. We have plans in place to significantly build our breakfast daypart, drive our digital business and expand our footprint across the globe. We have been investing in growth over the last several years with significant investments made across our growth pillars. For breakfast, we invested nearly $20 million to ready the U.S. system for its launch and invested $15 million in incremental advertising in 2020 and plan to do the same in 2021. In the area of digital, we have made investments to build out our mobile app, launch our loyalty program and bring in top-notch talent. In terms of development, we invested millions early in our reimaging program and have continued to make substantial investments through our new restaurant incentive programs and by developing innovative design solutions to fit the needs of any trade area, enable our growing digital business and improve returns. Underneath our growth pillars are three foundational items; the first is fast food done right, which is our team focused on food that is fresh and craveable at a competitive price, the second is operational excellence, which is running consistently great restaurants every day, and lastly, good done right, which is our commitment to do the right thing in the area of environmental, social, and governance. I did want to mention that we will be releasing our annual CSR report in April, where we plan to announce new goals and report our progress against industry-accepted reporting frameworks. We are excited to continue to share the important work we are doing in this area. Our plans remain deeply rooted in the foundation of the restaurant economic model. We believe that with the addition of our breakfast daypart and strong restaurant margins in the back half of the year, our franchise system has never been healthier. The combination of strong sales and margins fuels reinvestments into people, technology, reimaging, and new development, which drives our confidence in growth for the future. With that, let's talk through our strategic growth pillars. We were thrilled with the launch of our breakfast daypart in 2020, and we know that we are just scratching the surface of its potential, as we continue to believe that we can get to 10% plus of sales relatively quickly. Through our marketing efforts and high-quality offerings, we have grown our awareness to very solid levels, seen strong customer repeat, and customer satisfaction has been overwhelmingly positive. In the fourth quarter, breakfast remained solid at approximately 7% of sales and drove a meaningful increase to restaurant AUVs in 2020. We believe that breakfast has been and will be transformative to our overall restaurant economic model, giving us fuel for growth into the future. On top of an increase to restaurant AUVs, breakfast remains profit-accretive, which is a game-changer for our economic model. This will be a benefit to overall franchise health and should be a tailwind to new restaurant development as unit economics have improved significantly as a result. As we turn the page to 2021, we are expecting this business to grow by 30% through a combination of year-over-year same-restaurant sales growth through higher average weekly sales and rolling over two months where we did not have breakfast fully launched across the U.S. system. We plan to continue to support breakfast with more advertising dollars year-over-year to drive trial and frequency as we continue to ingrain Wendy's into morning routines. This higher spend will be supported by a $15 million company investment and the resumption of marketing contributions on breakfast sales as the abatement offered as part of the COVID relief package has ended. The great news is that we are seeing the marketing messaging around the quality food we deliver at breakfast, haloing back to support our rest-of-day business. We said that we are going to bring America the breakfast it deserved, and we have delivered on that promise. Getting this business to 10% plus of sales remains our goal, and we are confident this will happen by the end of 2022. The key to this business moving forward will be improvements in mobility as consumers return to their daily routines. We believe this, coupled with our incremental investment in marketing, will unlock this daypart to drive significant growth in 2021 and beyond. Our digital business was another bright spot for us in 2020 as it saw meaningful acceleration as the result of additional delivery partners and the launch of our loyalty program. In the fourth quarter, our digital business grew to over 6% of sales in the U.S., which was more than double the amount we had in the prior year. And our digital traffic share growth reached double-digits, which is ahead of our key competitors. We also continue to see expansion in our delivery business on the strength of strong promotions with our delivery partners as well as momentum in our loyalty program. Since the launch of loyalty in the third quarter, we have seen significant increases in our monthly active users by about 25%. And at the end of the year, we had approximately 3 million active users to go along with 12 million total members. We believe that this business is going to continue to accelerate meaningfully to reach 10% of sales by the end of 2021. As GP will talk about later, we are making significant investments to drive this business and partnership alongside our franchisees. As a company, we will continue to make incremental investments like we have over the past years in our technology infrastructure to ensure that this business can thrive. We are hyper-focused on turning our restaurants into what we call frictionless transaction centers. We launched curbside and mobile grab-and-go in 2020 and expect both to grow significantly in 2021 as we build awareness around these new ordering platforms. At the core of our digital business is the opportunity that exists to build one-to-one relationships with our customers. Under the leadership of Kevin Vasconi, our new Chief Information Officer, we are investing in data analytics and are building what we believe to be a best-in-class digital organization to take this business to another level across the globe. We made significant progress in digital in 2020, but we are just getting going in this area. As consumer behaviors continue to change, along with the investments we are making as a brand, we expect to see this business grow meaningfully for years to come. Our third strategic growth pillar is expanding our footprint. And just like our other two pillars, we have momentum. In 2020, we opened almost 150 new restaurants. And we ended with positive net unit growth, which exceeded our expectations after we allowed franchisees to delay new unit commitments as part of our COVID relief package. In a lot of cases, franchisees said, thanks, but we want to keep growing and continue to build new restaurants, which shows their belief in the Wendy's brand. Under the leadership of Abigail Pringle, who leads our global development organization, we have built a very strong team that is driving growth in many ways. We have expanded our new franchise recruiting resources and accelerated these opportunities. The team has also built strategic relationships with capital and financing partners and has launched a conversion task force that is transforming numerous locations into a Wendy's. We believe design creates a competitive advantage, like you've seen with our image activation program and the evolution of our new restaurant designs in recent years. We have enhanced our offerings to include smaller, more efficient prototypes that improve returns and allow us to solve for any potential growth opportunity. This same creativity and flexibility led us to launch a new drive-thru-only design and a new traditional freestanding solution that better enables our growing digital and delivery business. Innovation has continued, with the opening of numerous dark kitchens globally. All these efforts have helped us increase our non-traditional pipeline to about 30% of our 2021 development plan. The solid development foundation that we have built is setting us up for substantial unit growth in 2021, as we are expecting to open about 250 new restaurants, which is an increase of 65% and are projecting to have about 7,000 restaurants globally by the end of 2021. We also recently announced a new incentive program that we expect to drive unit growth meaningfully. In fact, we believe it should accelerate our global unit growth in 2022 to more than 3%, and we also expect to have approximately 8,000 global Wendy's restaurants by the end of 2025. Our new incentives reward franchisees for new restaurant growth, accelerated timing, and making multi-year commitments to grow their operations. Franchisees can also earn more incentive value by doing conversions, which we think is a huge opportunity for us, not only to grow new units but to do so more quickly than a traditional new build. Turning now to international, where we plan to leverage the global development strategies that I've just outlined to significantly expand our footprint. Our leading markets, which represent about 80% of our same-restaurant sales, finished with positive same-restaurant sales in 2020 on the strength of their drive-thrus and the fact that our digital business has doubled to approximately 10% internationally. We also finished the year with positive net unit growth, which showcases the belief that our franchisees have in the brand. We are very pleased with how we have navigated COVID in our international business, where restaurants weren't deemed to be an essential business in many markets. We are confident this momentum will continue into 2021, where we are expecting outsized growth. At our Investor Day in late 2019, we had announced a target to grow net new units to 10% plus a year internationally, and we are expecting to return to that growth rate this year. In doing so, we expect to far surpass the 1,000 international restaurant mark by the end of 2021. We are already seeing strong growth in India and the Philippines, two markets where we have signed large development agreements over the last couple of years. We also expect our largest growth in over a decade in Canada, which is our largest international market. We continue to make great progress towards our plan to expand into Europe and remain on track to begin opening restaurants in the U.K. in the first half of 2021. We have built a top talent team on the ground, have multiple locations secured, and are engaging with several potential franchise candidates to build out this market alongside us. International expansion remains critical to growing our Wendy's footprint. And we believe that we have the plans and the partners in place to make this happen. I'd like to close my remarks today with the Wendy's vision as it is important to remember that our goal is to become the world's most thriving and beloved restaurant brand. Everything we do at Wendy's is focused on bringing our vision to life as we work to build an even stronger brand. We believe that we have the right plans in place to significantly accelerate growth in 2021, which are to build our breakfast daypart sales by 30%, to drive our digital business to 10% of sales and to expand our footprint with 250 global new restaurant openings. We have emerged from 2020 as a more resilient, more unified Wendy's brand that is poised to deliver outsized growth. With that, I will hand things back over to GP to take us through our 2021 outlook.

Thanks, Todd. As we move into 2021, our playbook remains the same. We are poised to deliver meaningful growth in our breakfast daypart, we have a rapidly accelerating digital business, and we are expecting strong global restaurant expansion. Now let's take a deeper look into our key financial metrics, starting with global system-wide sales. We are expecting a significant increase in our 2021 global system-wide sales of 6% to 8%. We expect that same-restaurant sales will drive the majority of our system-wide sales growth in 2021. Most of this will come through core growth, which is being driven by lessened COVID impact, our marketing and product promotions, and a meaningful digital acceleration. The remainder of the SRS growth is driven by the anticipated 30% increase in our breakfast business by continuing to grow the daypart as mobility improves and picking up two incremental months to start the year. Finally, we expect a significant increase in net restaurant development, which is being driven by opening about 250 new restaurants around the globe. Now on to adjusted EBITDA, which we expect to grow high single digits. Our strong top-line is our biggest driver of growth, and we are also expecting an increase in net franchise fees in 2021. We expect these benefits to be partially offset by an increase in G&A. The increase in net franchise fees is being driven by a new technology fee that we have implemented in partnership with our franchisees to further accelerate our digital business. We have been collecting fees for technology for many years, but we have streamlined this process and increased the fee in order to further fund and grow our technology programs. These investments will show up as increased franchise support expenses and increased capital expenditures. The end result is that there is no expected cash flow benefit to the company. All the funds collected will be invested back into our digital business. We are also expecting a slight increase in company restaurant margin from the approximately 15% that we had in 2020. While margin is up year-over-year, restaurant EBITDA is about flat due to the expected sale of our New York market in quarter two and investment in the U.K. as we launch into Europe. Finally, we expect G&A to increase to approximately $220 million, driven primarily by company-specific investment in technology of about $10 million with the remainder being driven by increases to travel. The technology increase is driven by a multiyear enterprise resource planning implementation that we are beginning to work on in 2021 and investments in our digital organization. As we turn to our adjusted EPS, we are expecting a strong increase to $0.67 to $0.69. This is being driven by our expected increase in adjusted EBITDA in addition to a slight tailwind from lower depreciation. Finally, we expect free cash flow to grow significantly to approximately $230 million to $240 million in 2021, up 27% to 32% year-over-year. This increase in free cash is being driven by our strong expected core earnings growth, timing benefits related to rental payments, third-party delivery sales collection and the receipt of our 53rd-week royalty payment. We are also benefiting from lower reorganization and realignment payments, primarily related to our IT realignment plan that was announced in December of 2019. This is being partially offset by an increase in CapEx from about $70 million in 2020 to $80 million to $90 million in 2021 as we continue to make significant investments in growth. The primary driver of the increase is being driven by higher development capital, which is due to our investments to build company-operated restaurants in the U.K. In addition, CapEx is also being impacted by digital investments that are being made that are being supported by our tech fee. We are also making company-specific investments in technology to support our new ERP system, which will drive about a $10 million headwind to our operating cash flows in 2021 and about the same amount in 2022. To close, I would like to highlight our capital allocation policy, which remains unchanged. Our first priority remains investing in profitable growth. We continue to showcase this commitment with our incremental advertising investments for breakfast, our new build incentive programs, and increased investments in our technology platforms and capabilities. We announced last week the declaration of our first quarter cash dividend and that we are increasing it by 29% to $0.09 per share. Our strong liquidity position along with the momentum we are seeing in our business supports this increase. Lastly, we plan to utilize excess cash to reduce debt and repurchase shares. On the share repurchase front, we continue to expect that we will manage dilution and have $58 million remaining on our $100 million share repurchase program. We also plan to continue to pay down debt opportunistically if it provides a solid return for us. In the fourth quarter, due to our strong performance, our leverage ratio came down 0.5 a turn to 5.2 times. We would expect this ratio to continue to come down as we will naturally be paying down our debt and increasing EBITDA. We fully intend on delivering our simple yet powerful formula in 2021 and beyond. We are an accelerated, efficient growth company that is investing and driving strong system-wide sales growth on the backdrop of positive same-restaurant sales and expanding our global footprint, which is translating into significant free cash flows.

Thanks, GP. Due to the ongoing travel restrictions, all our investor meetings for the first quarter will be virtual events. We will be attending two conferences post earnings, which will be the UBS conference on March 10th and the JPMorgan conference on March 11th. Following the two conferences, we will be doing an NDR, focused on the New York market with Piper Sandler on March 16th. We will also be hosting an investor call on March 18th with Gordon Haskett and doing a virtual headquarter visit with AllianceBernstein on March 24th. If you're interested in joining us in any of these events, please contact the respective sell-side analysts or equity sales contact at the host firm. Lastly, we plan to report our first-quarter earnings and host the conference call that same day on May 12. As we transition into our Q&A section, I want to remind everyone on the call that due to the high number of covering analysts, we will be limiting everyone to one question only. With that, we are ready to take your questions.

The first question comes from Brian Bittner of Oppenheimer. Your line is open.

Thank you. Good morning. My one question is just going to relate to the restaurant unit growth that you laid out. This morning, you did say that you expect to have about an 8,000 global unit goal by 2025. Just a back-of-the-envelope math, I just want to confirm, does this suggest that you anticipate to be growing units in that 5% range after year 2022? Can you confirm that's what's implied? And if that is the case, maybe just a little more color around it. In that scenario, where are you growing 5%? Where is that coming from? Is it split between the U.S. and international? What's the U.S. playing in that growth? And just a little more specifics on the exact incentives you're doing to drive this improvement in unit growth. Thanks.

Hey, Brian, this is Todd. We have projected a net unit growth of 2% for 2021, with approximately 250 openings anticipated. This includes about 1% growth in the U.S. and over 10% in the international market. By 2022, we expect that growth to increase to 3%, while the international segment should maintain its growth rate of around 10%. From now until 2025, this translates to a compound annual growth rate of just over 3%, which would lead us to reach 8,000 units. Our franchise system is quite robust, having achieved strong profits last year and maintaining healthy balance sheets, and is eager to capitalize on opportunities arising from industry contractions to expand our brand access. Additionally, we have introduced a new incentive program designed to enhance the economics and generate excitement for further growth. I will hand it over to GP to provide more details on that.

Yeah. Good morning, Brian. Yeah. As you know, we have done a lot to stimulate development. Obviously, the addition of a profitable daypart with breakfast and really significantly increasing AUVs is obviously increasing returns. From an incentive point of view, it's the same as in the past. It's all abatement around royalties and/or marketing fund contributions. And the previous incentives expired at the end of 2020, we will put a new one out there, but really make sure that we have great returns for franchisees. So franchisees should be seeing cash-on-cash returns of about 15% to 20%, as they are taking advantage of the opportunity. What I would say is existing groundbreakers can re-up their commitments. And if they accelerate their development, they can get value of up to $250,000 for those commitments. Any new groundbreakers can get incentives of about $200,000. The really new thing is definitely conversion incentives. We think it's a big opportunity for us. As you know, we have a conversion task force and if you are converting a building, you are getting about $170,000 incentive and we like that a lot because these things normally are getting executed relatively quicker. So, all-in-all, we were working through with franchisees to write-up new agreements and again, it will generate cash-on-cash returns of 15% to 20% for our franchisees.

Your next question comes from Eric Gonzalez of KeyBanc Capital. Your line is open.

Hey, thanks and good morning. If we go back to your Analyst Day a couple of years ago when you were laying out the case for breakfast, you cited some frequency data that showed Wendy's customers visit, I think you could get five times to six times per year, which compares to your largest competitor, about 25 times a year. So, I think the point you're trying to make back then was breakfast visits will not cannibalize the rest of the day. Can you reflect on that one year later? And do you think that thesis played out? And do you think breakfast was as incremental to sales than you previously thought, given the mix does imply slightly negative growth for the rest of the day? Thanks.

Great question, Eric. And on frequency, it's a little bit interesting as we've gone through the pandemic. So, if you look at overall QSR frequency year-on-year as more meals have been sourced from home, you have seen frequency of visits come down. We've seen nice average check growth to offset some of the traffic. But if you look at total frequency and we talked about five and a half visits per year at a Wendy's restaurant that had ticked down just slightly in 2021. But our decline in frequency in total was less than half of what the industry had declined. So, we were down in that five to six range. The industry was down in the low-teens range. Clearly, breakfast had added to that, and that's why we've seen that less of a decline than the industry. But if you strip out breakfast and you look at the rest of the day frequency, our declines were much better than the overall industry. So, we do feel really good that we're driving frequency and incremental visits through breakfast. We feel good that it's not coming from the rest of the day and that really bodes well for the future. We think we can build on that platform.

And as we guided, it manifested itself in market share gains, right? We gained traffic and dollar share in the fourth quarter. So, we have now a track record of having gained traffic share the last four quarters and dollar share the last six quarters.

Your next question comes from Andrew Charles of Cowen. Your line is open.

Great. Thanks. You guys previously spoke about franchisees' decision to renew breakfast in February 2021 around the one-year anniversary of the launch. And I'm curious, what is the mix of domestic stores that will continue breakfast in the second year? And as a follow-up, how does that influence the decision to contribute $15 million for breakfast advertising in 2021? Thanks.

Yes. Everybody is all in, Andrew, on breakfast. We've got less than a handful of franchisees that are even talking about potentially having a hiatus on breakfast and it's not even a discontinuation. It's just give me a little bit of a break here in the near term because I'm near a campus with no students or I'm in a trade area that just doesn't have folks coming into the office at this point in time. So, everybody is all in on breakfast. There is a lot of excitement across the system. We think the opportunity as mobility comes back and morning routines get more ingrained, that we can continue to drive this daypart. And the system is fully aligned behind that. As we looked at the incremental $15 million of breakfast advertising that we're supporting from the company side, we really looked at our total market pressure. We looked at our marketing pressure for the breakfast daypart. We looked at our marketing pressure for the rest of the day. And as we think about now collecting ad fees against our breakfast daypart, we've got even more fuel in that mix. And we looked at really what pressure did we need across all of those dayparts. And we felt that was appropriate to add another $15 million to that, primarily focused on breakfast. And when you look at our all-in breakfast marketing support in 2021, we'll be up over 10% plus versus our lunch weights that we had in 2020. So we feel good that we've got the pressure to really drive this business into 2021 and beyond. GP?

Yes, Todd. I think you said it all. The only other color I would add is that for 2022, year three of our launch, we do expect that our investment posture will be comparable to 2021 at around $15 million as well.

Our next question comes from John Glass of Morgan Stanley. Your line is open.

Thanks very much. There's been a theme in earnings for quick-service restaurants about G&A investment to support technology and other facets of the business. You've talked about that this quarter. How do you think, GP, about G&A longer term? Do you still think you can get to this 1.5% of sales, system sales that is still the goal? How do you think about beyond 2021 that needs to reinvest in G&A? And is it rethinking about your efficiency ratio for G&A longer term?

Yes. We're going to stay efficient and disciplined on G&A. Nothing has really changed. There's a couple of things where we needed to invest in 2021. We've talked about a $10 million increase year-over-year on technology expenses. Half of it is really to set up and strengthen our data and data insights, and the other half is really ERP. That is short-lived. That's going to be in 2021 and 2022, creates, obviously, a little bit of headwind for us. But we totally expect that, with the growth that we have and the discipline on G&A that we are going to glide down eventually to 1.5%. I think it's also worth pointing out that the 1.8% that we are sitting on, we are definitely efficient. We're in the top-third of the peer group.

Okay. Thank you.

Your next question comes from Jeffrey Bernstein of Barclays. Your line is open.

Great. Thank you very much. Just continuing on the longer-term outlook. I think your guidance for this year on EBITDA is 6% to 8% similar, I guess, to what your prior long-term guidance was for high single digits. Just wondering, as you think about over the next few years, is that high single-digit long-term guidance still reasonable? It seems like most people are looking through 2021 and into 2022. And just because you did withdraw most of your long-term guidance at the start of COVID, which I think most believe was prudent, I'm just wondering whether any of those targets you think now look conservative or aggressive perhaps, having gone through COVID over the past 12 months, perhaps the G&A you just mentioned. So, any color on the longer-term EBITDA and any unusuals that would make any of those components aggressive or conservative going forward? Thank you.

Good morning, Jeff. Yes, we have not reinstated the long-term guidance. There's still a little bit too much uncertainty. We are confident about 2021. That's why we have put the guidance out there. But we obviously try to help you guys with a couple of markets here, right? So as Todd said in his prepared remarks, where we are, all the three growth levers that will drive sales growth and accelerated profit growth are all intact, right? I want to summarize for you a couple of those markets. On breakfast, we are saying we're going to achieve 10% of sales level by the end of 2022. So that points towards we continue to accelerate sales. We are also saying that on the breakfast side, we are going to continue invest in 2022 comparably about $15 million. And we also said, year four, so 2023 and beyond, our contribution to invest in breakfast is going to disappear. So that the same shape that we had in Investor Day is going to happen in terms of earnings tailwinds on the breakfast side. Digital, we are three years ahead of plan, right? We are basically saying that by the end of 2021 we are getting to 10% of sales. And we have a promising progress, right? We exited the fourth quarter at about 6.4%. As we launch into the first quarter, we have actually accelerated versus the exit rate in December as well. So we are very confident that the goal of 10% at the end of the year is achievable. That, obviously, throws off nice sales growth and profit growth. And then, unit development, right? We were accelerating and maintaining post-2021, a 3% growth rate. That, obviously, is driving a decent amount of royalty revenue income for us. It will drive earnings growth. So we are high single-digit of EBITDA growth in 2021. We see no reason that that should change significantly over the outer periods.

Your next question comes from Dennis Geiger of UBS. Your line is open.

Great. Thanks for the question, and Todd and GP, thanks for the color on breakfast and some of the moving pieces this year. Just wondering if you could touch a little bit more on some of the drivers this year. It seems like improved consumer mobility and the marketing, presumably, are some of the biggest drivers. But curious how important digital and loyalty efforts have been and will be this year? And for this year, will promotions, perhaps any new items to that menu be relevant at all? And the last part of that, just curious if you think about breakfast daypart market share and what your assumptions might be this year for that? Do you grow it from where it was last year as we think about the competition? Curious, if you look at that at all. Thank you.

I think as we move into this year, we're quite optimistic as vaccinations increase and social activities resume. Our 2021 plan is primarily influenced by traffic returning and our average checks stabilizing. If these conditions don't materialize, there might be some upside to our plan this year. However, we are facing pressure, particularly in breakfast, despite the support we have and contributions from our ad fund. We expect to gain market share in the breakfast segment this year, as we have significant opportunities to increase awareness and encourage trial among current Wendy's consumers who haven't yet tried breakfast. At the beginning of the year, we launched a two for four breakfast promotion, and the good news is our sales for this segment have started to improve, exceeding a 7% sales mix. Our digital business is also performing well, bolstered by the loyalty program gaining a substantial number of users, and it has shown consistent growth since year-end. We're confident about our two main growth drivers. We're committed to bringing more innovations to our Made to Crave lineup, and we've seen strong performance from our premium items like the Pretzel Pub Cheeseburger and the revamped Classic Chicken Sandwich, along with ongoing development on the Jalapeño Popper Chicken Sandwich. The growth in our premium chicken and hamburger offerings exceeds 10%, ensuring our best food options reach consumers. Additionally, our efforts to enhance operational efficiency, improve productivity and speed at the drive-thru, and enhance customer satisfaction through digital solutions like mobile grab-and-go and curbside service are all designed to boost customer frequency, particularly through our loyalty program. All these elements give us a solid toolkit to drive substantial growth this year.

Your next question comes from Nicole Miller of Piper Sandler. Your line is open.

Thank you. Good morning. I wanted to ask about protein. Can you talk about beef in terms of its percentage of the COGS basket inflation you're seeing and any protection you have? And can you talk about chicken in the same regard? And also, your experience with mix as you've launched some new chicken products? Thank you.

Good morning, Nicole. So as far as the commodity basket is concerned, about 20% of our commodity basket is beef and about 20% is chicken. From a pure inflation point of view, we don't expect too much inflation really next year, since we are having obviously at 2% fiscal year inflation in 2020. Our chicken business is, obviously, anchored all in the Made to Crave platform. We're innovating constantly behind it. We are really happy with the re-launches of our classic chicken. We are now in the Jalapeño Popper Chicken Sandwich and Salad. They're off to a good start in the first quarter. And we are going to continue to build that business. We are competitive there. And our consumers really like our fully differentiated in terms of what we offer.

And Nicole, just quickly on the proteins, as you talk about the outlook. We're largely locked in on chicken. So I know there's some inflation out there today. We've got that managed through the course of this year. And we buy a quarter out on beef. And as you look at beef inflation, we think it will be fairly moderate this year. Could jump around a little bit as we lap some of the high beef costs in the Q3 of last year, and then we saw deflation come into play in the fourth quarter of last year. So you'll see a little bit of shifting between those two quarters.

Your next question comes from David Palmer of Evercore ISI. Your line is open.

Thank you. Good morning. I have a question regarding your marketing strategy for this year. I understand you can't share all the details, but there seems to be some investor concern about new product launches from competitors, particularly in the chicken sandwich category. An investor might also think that this year's breakfast performance might not drive growth as much as anticipated. Could you provide insight on how you plan to maintain your market share amid increased competition? Additionally, do you believe that improving mobility could lead to breakfast making up 10% of your sales mix, assuming conditions were more typical? Would that 7% mix potentially have been 10% in a normal year? Thank you.

Yes, David, as we guided on the call, we now expect our breakfast business to be 10% of our sales mix by the end of 2022. So we should see a nice step-up as we continue to work through now and 2022, driving awareness, driving trial. As you think about breakfast, what's severely impacted? Morning routines have not been where they have been in the past. You think about mobility being down, and even think about how the breakfast daypart is being used, as it builds all morning long and seeing people eat breakfast more late in the morning as a snacking occasion. I think those are all opportunities for Wendy's. I think as the industry starts talking about more about breakfast and folks getting out, that can help a nice tailwind to help us drive our breakfast business. And you'll see us out there with a lot of pressure against breakfast. You saw us start the year with two for four. You see us as the official breakfast of the NCAA. So we feel very confident that continues. On the rest of the day business, if you really peel it down and you look at our rest of day business, mobility hampered us at the late-night business. We still have opportunities at the snacking daypart. And we feel really good about our chicken offerings. You know, with the revamp of the Classic Chicken Sandwich, it has helped drive our Made to Crave chicken premium lineup up north of 10%. We continue to bring news. So it's not just going to be chicken with the pickle. It's going to be great-tasting, craveable chicken. And you're seeing that with jalapeño popper. And we'll continue to bring news to make sure that we really differentiate the way Wendy's can with some craveable toppings and differentiated chicken offering. So we feel good that we've got a lot on both sides of the business to continue to lap our strong performance in the back half of 2020 as we go through 2021.

Your next question comes from Chris Carril of RBC Capital Markets. Your line is open.

So just on restaurant-level margins, can you provide any more detail just separating out the COVID-related impacts as well as how much of a benefit breakfast provided to margins? Just trying to get a better sense of how much of a tailwind margins received from the layering in of the breakfast business just as we're thinking about how or where margins can normalize and how much breakfast is benefiting unit economics?

Good morning, Chris. Yes, regarding restaurant margins, we are very pleased with our performance, particularly in the second half, coming close to 18% profitability in our company restaurants during the fourth quarter. We have certainly seen benefits from increased check sizes and the introduction of breakfast menus in our company restaurants, though we haven't directly quantified these impacts. In terms of COVID, we faced two significant events that affected us in the first half. The first was a notable 10% increase in restaurant recognition pace, which resulted in approximately a 40 basis point impact on our fiscal year margin. Additionally, we were overstaffed in March due to the onset of restrictions, which created about 150 basis points of headwind in the first quarter. Despite these challenges, we are confident that our restaurant margin will improve in 2021, although there are several factors at play. On the positive side, we anticipate growth, particularly in breakfast, along with improved labor productivity as we compare to the first half of last year. The sale of our New York restaurants will also provide a boost for us. However, we do face challenges, such as expected labor inflation of about 2% to 3%. We also anticipate a normalization of our customer mix as traffic increases and check sizes decrease, which could present some margin headwinds. Our entry into the U.K. market is creating about a 30 basis point headwind as we invest there. Lastly, we have chosen to provide paid sick leave to all our restaurant employees, which will create a year-over-year headwind, but we believe it's the right decision given the environment we are operating in.

Thank you.

Your next question comes from Brett Levy of MKM Partners. Your line is open.

Great. Thanks for taking my call. In the past on this call, you talked a little bit more about franchisee annual EBITDA. Can you go into a little bit more on what that is, what you're seeing? And just when you talk about all of the growth that's available to you, whether it's domestic international conversions, these newer boxes? Where do you think it's going to come from in terms of existing and new franchisees? Where do you think it's going to come geographically, urban, suburban, traditional? Thanks.

If you think about where the franchise community stands, and this is more anecdotal talking to the franchise community because we haven't collected all of our 2020 results yet. But if you talk to the franchise community, we feel very good about the overall profitability of our business, especially with the strong margins that we had in the back half, the nice sales growth that we see, and the layer that we have with breakfast. And that business and that confidence is starting to manifest itself in really leaning in to invest back into our people, invest back into new development, invest back into technology to continue to keep this nice cycle of growth moving forward. And the really good news is as we work throughout the course of the year with some of the support on programs like PPP, our franchisees exited the year with really strong balance sheets that really set themselves up for growth into the future. As you think about development, the great news is we've been on a journey for a while. We've got all kinds of different asset sizes. And we've been looking at smaller dining rooms for a while with 30 seaters and 40 seaters. We've got those already in the pipeline. We're pushing hard to see if we can do some more drive-thru-only sites along the way. We got some modular designs. We're testing dark kitchens, which allows us to learn and provide even more access to the brand. So, there are a lot of tools across the board on that front. As GP said, we got a nice pipeline of conversions with the conversion task force to help us go a little bit faster. But you'll see that we do think we can get good growth in the U.S. still with the contraction in the restaurant industry. You'll see record growth in Canada, our strongest growth we've had in a long, long time on new development. And we're going to get back to our long-term algorithm of 10%-plus growth on the international side. So, we feel like those are all covered. There are some regional pockets that we have across the U.S. It would be a mixture of existing franchisees with commitments and bringing some new franchisees in, and we'll strengthen our franchise recruiting team to continue to bring more folks in, to help us build out areas where our existing franchisees can't. So, we feel like all of those pieces are coming together to really drive that accelerated development net unit growth that we talked about earlier.

Your next question comes from Lauren Silberman of Credit Suisse. Your line is open.

Thanks for the question. Regarding digital, Todd, I think you talked about three million active users and 12 million total members. Can you just define what you consider active and clarify whether these numbers are related to your mobile app or loyalty program, and how you're thinking about the strategy for new member acquisition versus reengaging inactive members who've already joined? And then, are you seeing any higher incidence of loyalty program adoption at specific dayparts like breakfast or among certain customer cohorts?

Thank you for the question, Lauren. We have 12 million users who have signed up for our app, and everyone in the app is part of the loyalty program, which makes up our entire user base. Currently, we have about 3 million active users who are engaged in mobile ordering, earning loyalty points, and redeeming them. This represents a 25% increase, attributed to the introduction of the loyalty program. However, our digital awareness remains relatively low, which presents an opportunity for us to attract more users. As we enhance our data analytics team, we believe we can connect better with not only our active users to encourage more frequent use but also reengage those who haven't been very active within the app. The data we're gathering will be valuable for this purpose. When we analyze usage patterns across different meal times, we see an even distribution among breakfast, lunch, and dinner. By creating a more frictionless experience—such as transforming our parking lots into seamless transaction areas through mobile ordering—we can improve the user experience and encourage users to earn loyalty points. These efforts will significantly enhance consumer engagement, especially as customers increasingly demand a more seamless experience at our restaurants.

Your next question comes from Andrew Strelzik of BMO. Your line is open.

Thank you and good morning. I have another question about digital. Clearly, you are very satisfied with the progress made in this area. Since you mentioned being three years ahead of schedule and the new leadership having more experience, I'm curious about the insights you've gained regarding what is effective and what isn't. Have there been any changes to the specific strategies you intend to use moving forward to meet the targets you've set, whether for 2021 or beyond?

I think the biggest thing that we're seeing is the consumer expectation of how they leverage digital and how it connects to a more seamless experience that the restaurant has changed a lot. And what you really need to do is figure out how to actually get a benefit for the consumer, as we've been so busy at lunch and dinner and get folks out of those long lines. So what we're really seeing is, how do you actually supplement that with things like curbside, if you want to order and get to the other side of the building, have your order brought to you, things like mobile grab-and-go, if you're comfortable running in the restaurant. So I think those are the things that have evolved and changed that really have us ahead of the curve, and it's sticking. The consumer is seeing that this is a different experience, and it fits their needs for coming to the restaurant. And I think that will continue to grow as we drive awareness in digital into the future.

Your next question comes from Brian Mullan of Deutsche Bank. Your line is open.

Hey, thank you. Just a question on the international unit growth opportunity in Europe, specifically, you're going to open company-owned units in the U.K. this year. You've characterized that market in the past as a bit of a gateway to other important markets in Europe. So, with that in mind, just curious when we might expect to hear more plans for other markets in Europe, whether that be discussions with franchisees, or perhaps might you be willing to continue to build units on balance sheet if you deem the market to be important enough. Just any details, how you expect that to progress on the path to 2025 would be great.

Yeah. In the near-term, Europe is really the focus. We'll get about five company restaurants open in the U.K. in 2021. We're actively recruiting franchisees to build out that market along with us. We'll continue to build company units into 2022, and supplement that with the franchisees that we're recruiting to grow that market out. And that's a couple of year journey to really start to solidify a good beachhead in the U.K. to really prove out the model for the broader European business. The team is actively recruiting franchisees in other European markets. And we'll pace and sequence that out over the next couple of years as appropriate.

Your next question comes from John Ivankoe of JPMorgan. Your line is open.

Hi. Thank you. Obviously, 2020 or I guess, the last 12 months was really a once-in-a-lifetime occurrence within quick service of huge average ticket gains in the mid-teens in some cases offset by transaction count. And I don't know exactly what your numbers are, but maybe they're kind of something like that as the number of transactions fell, but the order per transaction rose so significantly. My question is in terms of what you expect that dynamic to look like going forward? And if you had any evidence maybe in the higher mobility southern markets, as people come back and do more single-order transactions, are they doing more single-order transactions than they did before to offset a decline in average ticket, or in some way, is that average ticket being maintained even as transaction counts have grown? And the third, slightly related point is, what's the experience in overall sales to the restaurant as dining rooms are reopened? Is that being shown as an incremental occasion, or are people choosing other types of dining room formats such as casual dining to eat-in when that market allows?

Good morning, John. In terms of transactions, we have about 10% more items on our check. This increase is a key reason why our check size has risen, as we are also selling larger sandwiches. Looking ahead to 2020, our check size remains quite high. There was a slight decline in the fourth quarter compared to the third quarter. In the short term, we anticipate that check sizes will remain elevated during the first half of the year. However, we expect that by the latter part of the year, check sizes will decrease while transaction numbers will increase, bringing us back to the more typical model we experienced before COVID. That’s what I wanted to share about transactions.

Regarding the dining room question, John, we initially saw a drop to about a 5% dining room mix, but we're back to approximately 10% now. Half of that is dine-in, and the other half is takeaway. We expect this trend to continue. Currently, about 25% of our dining rooms are still closed, but we hope to reopen most of them with warmer weather in the spring, either for dine-in or takeaway. We do see some contribution to profit from this, even if it's not fully margin accretive at this point, and we believe that usage of dining rooms will grow over time. The key question remains whether we will return to the 30% to 33% mix we had previously, which will take some time as customer behaviors evolve.

Your next question comes from Jared Garber of Goldman Sachs. Your line is open.

Hi, thanks for taking the question. I think last quarter, you talked about the awareness levels for breakfast being at about 50% and a high percentage of your existing Wendy's customers hadn't either – hadn't tried the breakfast offering yet. I wonder if you could just give us some update to those metrics. I think you talked about accelerating awareness. So just curious if you can give us an update there as it relates to the breakfast business in some of your core customers?

Yes, still a big opportunity for us. We're at about that 50% awareness level, and we've got a little bit of seasonality when you think of breakfast in the darker months of winter. So we're very optimistic with the support that we had, the two for four, the official breakfast to the NCAA that we'll start to see awareness pick-up as the year progresses. And we still have a huge opportunity to take existing Wendy's customers and get them to try our breakfast items. In fact, our existing Wendy's customers that have tried our breakfast are the highest frequency users today. So how do we get more and more of those folks to get the food in their mouth to try it, that's the objective during the course of this year.

Your next question comes from Chris O'Cull of Stifel. Your line is open.

Thanks for the question. Regarding digital, could you provide some thoughts on how the introduction of the loyalty program has impacted your sales strategy and customer engagement? How do you think about expanding on that success going forward?

I think as we think about what is really happening with the loyalty program in the digital space, it’s been pivotal. We’re starting to see different stages of customer engagement and how they earn points with their purchases—it's really making a difference. The exciting part is our investment in this area is allowing us to drive repeat visits and elevating the frequency for our best customers. We are heading into a phase where we'll see even more benefits as loyalty integration improves, and I have plans in place to incrementally drive awareness and broaden the engagement among our customer base—so, we feel very confident in our trajectory.

Your next question comes from Andrew Strelzik of BMO. Your line is open.

Great. Thanks and good morning. I had another question regarding digital. Clearly, you're very pleased with the progress there. You mentioned that you’re three years ahead of schedule and that the new leadership has been in position for a bit longer. I’m curious about the insights you have regarding what’s effective and what isn’t. Has there been any change in the specific strategies you intend to implement moving forward to reach the goals you've set, whether for 2021 or later?

You keep reinforcing our emphasis on a frictionless experience, which is about bartering our technology improvements with a steady investment path—it really has simplified the consumer operation side. Our tracking and analytics are currently providing insights that refine customer experiences, customize promotions, and bolster loyalty initiatives. All of this signals a positive change in customer behavior, and we can position ourselves for substantial program expansion across 2021.

Your next question comes from John Ivankoe of JPMorgan. Your line is open.

Hi, thank you. Obviously, 2020 or I guess, the last 12 months was really a once-in-a-lifetime occurrence within quick-service of huge average ticket gains in the mid-teens in some cases offset by transaction count. And I don't know exactly what your numbers are, but maybe they're kind of something like that as the number of transactions fell, but the order per transaction rose so significantly. My question is in terms of what you expect that dynamic to look like going forward? And if you had any evidence maybe in the higher mobility southern markets, as people come back and do more single-order transactions, are they doing more single-order transactions than they did before to offset a decline in average ticket, or in some way, is that average ticket being maintained even as transaction counts have grown? And the third, slightly related point is, what's the experience in overall sales to the restaurant as dining rooms are reopened? Is that being shown as an incremental occasion, or are people choosing other types of dining room formats such as casual dining to eat-in when that market allows?

Good morning, John. Regarding transactions, we have about 10% more items on our checks, which contributes to the significant increase in check size. In 2020, check sizes remain quite high, although they saw a slight dip in the fourth quarter compared to the third. We anticipate that in the first half of the year, check sizes will stay elevated. However, our forecast suggests that in the latter half of the year, check sizes will decrease while transaction counts will increase, returning to the more typical model we had before COVID.

On the dining room question that you had, John, so we've seen we fell to about a 5% dining room mix early on. We're back to about a 10% dining room mix, but half of that is dine-in, best we can tell, half of that is takeaway at this stage. We think that will continue to build back. We've got about 25% of our dining rooms are still closed. Our expectation is to get most of those dining rooms back open, either for dine-in or for takeaway. In a lot of cases, we do see penny profit added from this, even if it is not fully margin accretive at this stage, but we think that will continue to grow. People will be looking to use the dining rooms over time. The question is, will it ever come back to the old days of a 30% to 33% mix?