Yeah, look, it's always a multivariant equation because what we say about our brand with our marketing and how we bring that to life in a compelling way is really important. But I do want to be clear, the quality comments that I made are related directly to the quality of our food. And, you know, we don't have anything to share today to kind of talk about what we've already done or what we're working on. But in the diagnosis phase, you saw me talk about ingredients and you heard me talk about that. There are issues that we've created for ourselves. There are decisions that we've made in the interest of cost and efficiency that maybe have degradated a little bit of our quality. There are certainly some execution elements to that. And there's also the innovation component that David asked about. Are we bringing to life the food in the very best way possible? Those are things within our control, though, and I think that's the beauty of what we're facing today is we can take advantage of the core elements of the Wendy's brand that have always been there. Fresh, never frozen beef, prepping vegetables inside our restaurants, and handmade sandwiches that are made to order every single time a customer orders them. Those are things that we still own. I do think, to your point, we can leverage them far more than we have. And we can focus on the operations systems, processes, and oversight and leadership that helps execute it more consistently. But the customer notices when you make a few changes, and we need to make sure that we're putting that experience ahead of everything else we do when it comes to quality.

Your next question comes from the line of Danilo Garguillo with Bernstein. Danilo, your line is open. Please go ahead.

Thank you. I wanted to ask about the U.S. system and the number of stores that are currently available at Wendy's. I think you mentioned that in the near term there is an assessment still in place. I'm just trying to understand whether you think that the system is in a healthy place right now in terms of the number of franchisees that you have, the number of units per franchisee that you have, and should we be expecting some additional rationalizations as part of a turnaround or is the portfolio already optimized and we're going to be growing from this moment onwards? Thank you.

That's a great question because as we talk about all the things we plan to do strategically with the brand, we have to do that in the context of how healthy the system is and our capabilities to execute against those things. Let me start with telling you that I mentioned I've spent a lot of time in the field. I've been with a lot of franchisees in these few short weeks, as well as the board and employees and analysts, And, you know, we met some of you guys in New York. And this is really personal to me. This is not a system filled with private equity ownership. It's filled with family ownership of our businesses. And these are people that I know. I know their families and I know their personal situations. So the health of this system is a personal matter for us. And, you know, understand that the health of the franchisees certainly is pressured right now because of the sales declines that we've had. You guys know this business. When you see some of the sales declines, it's going to show up in restaurant profitability and it's going to pressure the franchisees and create a little bit of fragility there. But, you know, when it came to closures, I think what you heard in some previous quarters was closures addressed more as a program for the system. And you'll see us take a much more targeted approach. We're going to come alongside our franchisees if they need our help. And if we need to use closures of a few restaurants here and there to make a portfolio a little bit healthier and help that franchisee get to the right place, maybe a trade area has moved on and it's no longer a business that's viable going forward, then we'll certainly help them make that decision, close a restaurant, and get their portfolio healthier. But overall, the health of the system is tied to the health of the brand. And I'm just thrilled to say that franchisees are invested in the work that we're doing. They're excited about the work that we're doing, and they're certainly looking forward to the progress on the top line. Because at the end of the day, nothing cures financial health in the restaurant system like top-line growth. Everything we're doing is going to be pushing that to the top of the list, and that will help everybody. Thank you.

Your next question comes from the line of Margaret May Binstock with Wolf Research. Margaret, your line is open. Please go ahead.

Hi, thank you for taking my question. I just wanted to ask if you could walk us a little bit through how you saw comps progress through the quarter on a monthly and then relatedly kind of what you're seeing across the different income cohorts. Are you seeing, you know, the gap between the higher and the lower income consumer widen or, you know, what you're seeing there? Thank you so much.

Thanks, Margaret May. It's great to meet you in this environment. I, stepping into this, into this role and seeing the progression of sales in the quarter, it's kind of an interesting dynamic, right? Like the early part of the April period that we saw system, same restaurant sales, I should say, in the U.S. drop 6.4 percent, which was kind of in keeping with the trend coming out of P3 or March. I think the challenge, though, was as we moved into May, we saw that actually slip back to negative seven and a half percent, same restaurant sales in the U.S. system. Some of that due to, you know, some promotions from the prior year, which which, you know, like we had a three dollar son of Baconator promotion, which was pretty powerful. And it was a little bit of a tougher challenge to lap that. And then as we moved into P6, you know, we expected and we thought we would see, you know, some improvement in the progress of the business. This was, you know, we had launched our new chicken sandwich platform. The P6 period saw us launch our Minions and Monsters promotion. And honestly, those did not perform. They did not drive the traffic that we expected. They pushed a little bit on average check. But the real challenge for us has been that underlying traffic trend. So while comps bounced around a little bit, negative 6.4, negative 7.5, back to negative 7, the traffic trend is the one that we pay the most attention to. And, you know, we had negative double-digit traffic each period of the quarter, and it did not improve over the quarter. And we ended it with a negative 12.5%, as we discussed.

Your next question comes from the line of Dennis Geiger with UBS. Dennis, your line is open. Please go ahead. Thanks, and good morning, guys.

Bob, recognizing you probably don't want to give any kind of rigid timeline at this early juncture, but can you help us think a little bit about how you think about timing or cadence of some of the turnaround plan implementation across the five key points of focus that you outlined and, you know, generally, again, from your experience, how you think about where traction comes first versus what takes a little bit longer, generally speaking? Thank you.

Yeah, happy to. You know, I hope, hopefully what you see in the fact that we're having this conversation after only a few weeks is we are moving with urgency and we're pulling out all the stops to make sure we have the right support to be able to get this work going and get the strategy moving. The way that we like to operate, when I say we, I'll start with just Steve and I, but that applies to the team too, is that establishing that strategy is the first step. And frankly, you all should recognize those areas of focus as critical to any restaurant company, but especially to us in the current situation that we're in. What we're working on now already is the strategic initiatives that underpin those areas and those specific things that we will take action on with an expectation of what it will cost to invest in those things and what our expected returns on those things will be. Now, you often want to do the biggest thing first, but it may have a little bit more time to develop that bigger thing. But we'll go ahead and take advantage of the quicker wins in those strategic initiatives as well. Our franchisees expect it. We know that the investors expect us to do that. Our employees are counting on the same thing. There's a lot of energy around action in the organization, and I think a lot of enthusiasm for what those things might be. We committed to you that when we come back to have our next update, we'll have the full strategy. I think you'll have even more clarity than we've given you today. We hope to give you quite a bit today, but we'll give you some more. And then the other thing you can count on is for us to develop a pattern of talking about what we are doing, not what we will do. Um, I, uh, candidly, it's just the way I like to manage the businesses. Once we start working on something, we're going to prove that it's worth it, that the investment makes sense. The returns are there. And when we're ready to scale, that's when we'll start investing that time in communicating those things to you. And it's just a cadence that comes for a long time to come. That's, that's our process for operating a strategic plan. Yes. In a turnaround situation, like I've most recently done, but frankly, on an ongoing basis like successful companies do year on year on year on year. That is what we're entering today.

Great. Thank you. Your next question comes from the line of Brian Bittner with Oppenheimer & Co. Brian, your line is open. Please go ahead.

Thanks. Good morning. And Bob, for those of us that perhaps weren't as close to monitoring your success at Potbelly's over the last five years. Can you just maybe touch on or help us understand if there's anything specific from a skill set perspective or an experience there that benefited you at Potbelly's that you can utilize here at Wendy's that's worth talking to? And secondly, just as it relates specifically to improving the quality degradation, which you pointed out, is that something you have experience doing? Can you help us understand the steps and how you actually take that idea into action and actually improve the quality of the product?

Absolutely, Brian. Thanks for the question. Yeah, and, you know, I understand for a smaller company, you may not have a lot of that story. But, look, there are some similarities to the starting place there. First of all, it was a great brand, had been off track for some time, years of traffic losses. and yet a culture and a connection to the customer that was, if I can say this word, kind of rooting for it to be its best again. There were significant issues with quality and value when we walked in the door there as well. And this strategic approach that you're hearing us discuss today is the same approach that was used there. I think you'll note Steve's title is chief financial officer and chief strategy officer. And he was there already when I walked in the door. So this approach is similar. You've got some similar foundations. Let's be clear, though. Every brand and every system is different. There is no one size fits all. But I like your question about lessons. You asked specifically about some of those learnings. It was clear to us that the decisions of the past around food quality, food portions, ingredients, sizes, sandwiches, the lineup of the sandwiches, how they're presented on the menu, the other add-ons, the price architecture of the menu and the promotional aspects of the way that was delivered needed so much work that, frankly, there we had to rebuild the menu from the bottom up and did so successfully. The results were fantastic. You know, put over 40 percent more sales on the top line inside of five years. And I'm not promising that here, but I'm telling you The customers respond to a great brand that recognizes the problems they've created for that relationship, and they begin to reward you for it. And I think that's some of the stuff that we can do here. It is a significant opportunity for us, for our franchisees. One of the great things about being here at Wendy's, which is different than Potbelly, we expanded through franchising there. Here we have a mature and strong and a storied generational franchise system who understands what we're talking about and can be a massive advantage for us as we start to move forward and make many of these improvements.

Thank you.

Your next question comes from the line of Jim Salera with Stevens, Inc. Jim, your line is open. Please go ahead.

Thanks for taking our question. Bob, I appreciate all the detail and your thoughts around where the business sits today. I wonder if you can give us some thoughts about managing some of these changes with a pretty challenging macro backdrop and if that maybe shuffled around the rank order of your priorities about what to address first to get the trends to start to bend towards the right direction.

Yeah, absolutely. Thanks, Jim. Look, we have to take a near-term, long-term approach to our strategy. The strategic initiatives are going to be year-long, multi-year-long things that we need to do to build the business. And I think if we're too reactive to the current situation with the macros, then we can find ourselves off strategy. I think the danger of being eager to respond to the matters of the day is some of what maybe we've been dealing with here recently. So, of course, we have to be aware of those things. I think one of the big ones that, you know, you see in the news and other brands talk about it, we certainly talked about where we thought we were losing some of our customers. Customers today are extremely value conscious. But I think it's important that you all understand we think about value differently. I think traditionally in the QSR space, you would think of value as that bottom right hand side of the menu board where it may even have the title value menu. And that's where value was compartmentalized. And today's consumers, especially as the as the broad based pressure on consumer spending is what it is, are looking for value everywhere. And, you know, not to go back to the potbelly question, but that's one of the things we understood very clearly there is that having value across all of the offerings, the what you get for what you pay equation must make sense to the customer. In fact, we established sort of a tiered approach to, and we'll be using that same thinking here at Wendy's, this notion that the menu itself, the core menu, not the bottom right-hand side of the menu, but the core menu has to be infused with what I call intrinsic value. You should buy a double with cheese, a medium-sized combo, and walk away from that meal when you take that last bite of that double with cheese and feel like that was a good deal. That's something that I got what I paid for, maybe a little more. as well as when you buy something off the Biggie platform. And so there's this intrinsic value in the core menu. There's the everyday value in the bottom right-hand corner of the menu, if you'll allow me that lingo to compartmentalize that a little bit. Today for us, it's the Biggie platform. And then there's the promotional value that you deliver with promotional activity in the digital world, as well as sometimes promoting things on television nationally. All three of those have to work. I know I've strayed in deeper into value, but your question about the customer is at the root of that. That's what customers are looking for. Whether they're super pressured because gas is $5 a gallon or they're feeling a little flush because it's $3 a gallon or whether it's the day after they got paid or it's two days before they got paid, they have to know that they can count on their relationship with your brand to be there for them in the way that they need. And I think you can see where those various consumer need states fit with that overall approach to being there for them. So it is our strategy, but I think it will apply to the pressures of the day for the consumer as well.

Your next question comes from the line of Lauren Silberman with Deutsche Bank. Lauren, your line is open. Please go ahead.

Thank you very much. I think you mentioned the potential for targeted investments. Can you expand on this and whether this is more like franchisee support through royalty relief, investments in the assets, or more about marketing? And then the second part is I could follow up on Danila's question. Wendy's already previously announced plans to close, I think, 5% to 6% of the store base. Do you see potential for additional closures above what's already been identified?

Yeah, absolutely, Lauren. Thank you. Look, we're not going to make a lot of news on those targeted investments today. I think the main thing that we wanted you to hear is that we see in these strategic focus areas opportunities to push this business farther than it's ever been. And that's going to take investment. Some of those targeted investments will be in the form of initiatives, things that we will do with and on behalf of and alongside our franchisees to make our restaurants more profitable, to grow the business at the restaurant level, to maybe enhance or expand or add something to what we have as a restaurant brand and facing the consumer. Those things will be those strategic investments. Those are the things we'll work on to prove the model and come to you when we're talking about scaling those things. There certainly will be some unique and specific situations with franchisees. I mentioned earlier, we may have to come alongside franchisees and do some things to help them with their business. You know, the closures question that you followed up on is an example of that. We will look to fill that toolbox that we'll use to help franchisees when they need us. And that may include some investments. You heard me talk about the restructuring and the reorganization. Traditionally here at Wendy's, restructuring has meant job cuts and pulling resources. And that isn't always the case. When I think about the first thing that follows a solid strategic plan is the structure of the organization to be able to deliver on that strategic plan. And we are going to need additional capabilities. We're going to need beefed up capabilities in certain parts of the industry, or business, I'm sorry. And we're going to need additional talent in places that we may not have talent today. So those will be investments in the business, all of which, though, will have to stand the test of the returns that they provide for us and for our franchisees. On the closures, again, I think what I said was, and that is really the state of affairs here, is that it really was presented to you all as a programmed. We've decided we're going to close or need to close a certain number of locations that was a fairly large percentage. Will there be additional closures? I'm sure there will be additional closures. I just put it on the table in that targeted approach that we would use when we're working with franchisees to help get their portfolios healthy, but not as a matter of programmatic closing just to shrink the brand. It's all about creating brand health, and it's brand health at a level that makes the most sense for the owners, whether we're the owner or the franchisees, the owner, and where we connect with the customer. If the trade area has moved on and it is a financial drag on that portfolio, then we're going to support the closing of that location for the health of the system.

Very helpful. Thank you.

Your next question comes from the line of Chris Carroll with KeyBank Capital Markets. Chris, Your line is open. Please go ahead.

Thanks, and good morning. And thank you for all the detail and looking forward to the evolution of the strategy here in the coming quarters. I did want to ask about breakfast and your assessment so far and the viability of the day part for the broader system. I know you mentioned pressure on the comp in the 2Q from reducing or eliminating breakfast operating hours at certain locations. So curious how you're thinking about breakfast as part of the business going forward here, and then any detail on where breakfast sales mix is today would be helpful. Thank you.

You're welcome. Thanks for the question. This is a big one. Breakfast is important to us, and it's a complex topic that, frankly, we're still analyzing very deeply. It can't be disconnected from the broader strategy and the work that we're doing there. But let's sort of baseline everything. The large majority of the system continues to serve breakfast. We did have some opt-out activity, and frankly, it was very helpful for some of the franchisees that took advantage of that opt-out because it was a drag on their business, just like I said that about the tool of closing. For some franchisees, the opt-out was really helpful and provided a little bit of a relief valve, but it's still a key area that's under evaluation for us. And as I said, we need to get our footing on the remainder of the strategy before we start deciding exactly where breakfast fits into that. Steve can provide some color on the specifics of what it meant for the system sales.

Sure, sure. Look, overall, the pressure to same restaurant sales from the day part itself was about 120 basis points. And you asked the contextual question, what's the sales mix for breakfast? For us, it's about five, between five and five and a half percent of overall of overall sales. Now, the specific actions around opt outs impacted the impacted the same restaurant sales for the quarter by about 70 basis points. So, as Bob said, you know, this is this is a component of our overall approach to thinking about the strategy. We want to make sure that we're we're looking at this as as a brand, as a complete menu in the context of the consumer, the franchisees and where we think where we think growth is going to come from in the years ahead.

Thank you. Your next question comes from the line of Peter Sally with BTIG. Peter, your line is open. Please go ahead.

Pete, you there?

I've lost it.

As a reminder, please unmute your handset locally. Your next question comes from the line of Sarah Senatore with Bank of America. Sarah, your line is open. Please go ahead.

A follow-up on the point you made about intrinsic value. If you were to sort of diagnose the reason customers aren't walking away thinking something was a good deal, is it because the quality, the service? Is it about production, I guess? How much of this is an operational issue that needs to be addressed as you think about that? You know, is there an opportunity, whether it's for kind of process engineering or technology? I guess I was surprised that the chicken sandwich relaunch, that platform didn't move the need on traffic because it does seem to address kind of the quality issues that you mentioned at the beginning very directly. So any thoughts on how much of this can be, you know, fixed through just, you know, I don't know if it's listening to franchisees or operators, you know, and improving the process?

Yeah, you sound like an operator, Sarah. It is all of those things, honestly, but obviously we can't throw everything into this and solve it. So we try to work on these things in their component parts, recognizing that they all come together for the value equation for the customer. And you are 100% right. That's what intrinsic value is, how it is derived. Look, there have been some decisions that have been made on the menu that I think we can address on the core menu that we have today And then on the innovation of the core menu that we have that can bring additional excitement and enthusiasm towards those products. Price is a significant component of that. People have this mental model based on all of the consumption they have in the restaurant space about where that price neutrality seems to be from a competitive perspective. We have to evaluate that and we have to have a pricing architecture for the menu. So not only do we fit well with our competitive set, but even reference pricing on our own menu always has to make sense. And that's an area of opportunity for us. So we will we will be addressing that as well. I did mention the operations inconsistency as a challenge. As soon as we lose consistency as a brand, you start to lose confidence and and trust really in the minds of the customer that they can get the overall experience that they're looking for. The execution comments I made when David asked his question, I think these really come to life in this area because every one of these elements, some of it is brand, it's design, it's sort of the menu price architecture, the menu itself, the ingredients. We control quite a bit of that as a brand. But at the end of the day, even for digital orders, and I say this all the time, even a digital order that's placed on your phone and picked up or delivered or whatever, at the end of the day, it's a human being making food for another human being that's made fresh when they order it that's going to be consumed. Every single experience ends analog, not digital. And the digital business is promising that also. And so there are tools and systems and processes. You heard me talk about training. Candidly, I think we have a lot of great work we can do in the area of training. It could be one of our elements of creating additional consistency and really tightening that consistency gap on execution. You may not be satisfied with my answer is kind of yes, all of the above. It is all of the above, but the real secret is to unpack those individually and attack each one of them individually to their very best. And then they come back together for the customer and they start to come to life. So that's, that's kind of how we think about it.

Thank you. your next question comes from the line of brian harbour with morgan stanley brian your line is open please go ahead hi this is hillary lee on for brian harbour uh thanks for taking the question so i just want to kind of ask you know how would you compare you know your plans to like the prior project fresh and do you kind of see it as a continuation or expansion or just kind of a complete overall of it?

Yeah, good question. We're not talking about Project Fresh. It's really not a continuation of it. I think you'll recognize some elements of what was discussed in Project Fresh in these areas that we're focused on. That makes sense. I mean, there's certain sort of indisputable truths that you have to battle for in the restaurant space and here at Wendy's too. But there was some work that was done on the brand. I think previous leaders talked about a partnership with an outside resource that was helping us kind of diagnose what was going on at the branding level. And I've tried to pick up everything that we had during this early diagnosis phase and understanding the situation that we're in, including Project Fresh, including some of that early work that was done. But this is our strategy. This is a sort of a declarative position on the things that are going to be the most important to strengthen this company and strengthen the brand and re-strengthen our franchisees going forward. So I think you can draw a hard line between the two.

Thanks. And I guess just as a quick follow-up, you know, could you share any of the key talking points that you've had with franchisees?

That's the beauty of this conversation. We've been doing a lot of work with franchisees in market. We've had them in. In fact, we've got all of our franchise leadership together next week to actually tear apart this strategy and start working on those initiatives that I told you about. They are fully engaged. I mentioned my personal relationships with many of the franchisees, so you can only imagine the number of individual phone calls I've had and text messages and communications. This goes up as well in, you know, our first board meeting together was just a couple weeks ago. And I think one of the things that is unique about our situation is we're finding very close strategic alignment with the board, with the management team, with our employees, with our franchisees. These are the things we need to work on. This isn't just something that was developed and delivered. It was something that we developed in partnership with those, including the franchisees. And sure, they have a lot of feedback, but they're thrilled to know that we saw the business the way we saw it. We spoke openly about it and that we've developed these five areas to focus on.

Great. Thank you. Your next question comes from the line of Peter Selle with the U.S. Bancorp BTIG. Peter, your line is open. Please go ahead.

Hey, guys. Can you hear me okay?

Yes. Yeah. Yeah. Thanks for jumping back in, Pete.

Yeah. No, thanks. Some technical difficulties. But anyhow, so thanks for taking the question. Bob, I wanted to get your pulse on the image of the system as we sit today. How do you feel about the look and feel of the restaurants? Do you feel like there's more CapEx needed to get up to speed and up to, you know, up to par with the rest of the industry? Just curious if you have any thoughts on, you know, remodels and how you're thinking about that going forward.

Question. Look, I mentioned that as the fifth area of focus is our restaurants, our number one asset, have to be a source of high return investments that we can make in the system. I don't want you to read into that, that we've got a remodel program we're going to unveil. I think in my visits in the field, I've been across the country already. We still have a strong base of assets in the hands of our franchisees and in the company hands. I'll be honest with you. Some of them are not being maintained and supported and cleaned and and, you know, sort of giving our best face. But the core asset base is still very strong. And I think we've got something we can work with there. We can lean on the execution elements of how we support, maintain and invest maintenance capital in our existing restaurants for the near term. Long term, you know, what we call image activation here at Wendy's is more than a decade old. And so, sure, I think we're going to want to look at what we can do to put an even better face on our restaurants going forward. But again, always tested for, and we're going to be talking about this, dollars that would go into our restaurants should be dollars that provide returns on that invested capital for our franchisees and for our company business, too. So those will always be. And that may be, you know, in the areas of image. It could be you can imagine all kinds of investments, digital capabilities could be in transaction driving capabilities with with how we operate. It could be, you know, equipment potentially that is connected to the menu. I'm not giving you insights. These are all categories you would expect restaurants to think about investing in. But again, with those returns, we're in a good place to start.

Thank you very much. I appreciate it.

Your next question and last question comes from the line of John Tower with Citi. John, your line is open. Please go ahead.

Thanks for taking the question. Maybe just two quick ones for me. Obviously, you mentioned that you're not happy with the state of the marketing these days. I'm just curious if we should expect, aside from the store closures that have taken place already, an actual retrenchment in the dollar spend from a marketing perspective. in the near term as you're kind of adjusting the system and working your way back to right messaging for the brand in the marketplace? And then, two, do you feel like you have the right level of field leadership in the system to get this turnaround going today?

Great questions. Thanks, John. Great last questions, in fact. I appreciate it. No, I think we all have to, you know, be honest about the performance of our marketing efforts are not delivering what we want, But that that would not suggest that we would pull back from the marketing spend. It really is more about messaging. It's about creative. And and, you know, we're exploring media as well. So where the marketing is being delivered and in pulling ourselves out of a a cycle of promotion and collaboration type of events and getting back to a much more cohesive and long term approach to the calendar. that's reflective of the things that we want to continue to communicate to the customer. Pulling back on the spend does not make any sense. We need to adjust while we're going forward, not the other way around. And I love your question about the field staff, too. I know that the company has made some recent investments and additional support in the field. I've been with many of those field leaders here recently, and I'm impressed with some of what we've done. I will say this is an area I have a lot of experience in. I think you guys know that. This is kind of home base for me when it comes to ops. And I'm eager to learn more and eager to make sure that we have the right structure, that we have the right balance of support for franchisees. and even down to the level of what our field teams are being asked to do. We want to set them up for success and make sure that certainly there are activities that need to be performed, but we need outcomes out there, too, and empowering them to be the most helpful and supportive and impactful leaders that they can be. I continue to say that I think training is an area of significant opportunity for us in the field. don't read that as we need to invest a bunch more in training individuals. I think the training systems actually are areas we can invest in first, and that gives our field staff unique and special and new things to work on as well. So we have something to build from here, but we really have to skill up in the field too.

That was our last question of the call. Thank you everyone for joining us this morning. I hope everybody has a great day. You may now disconnect.