As challenges rack the quick-service restaurant (QSR) industry, there may be some major moves in the space in the near future — privatizations, mergers, acquisitions and more could be down the line.
Take, for instance, Wendy’s. The company’s largest shareholder Trian Partners, Nelson Peltz’s activist hedge fund, revealed Tuesday (May 24) after market close that it is considering taking control of the quick-service restaurant (QSR) brand.
In a filing with the U.S. Securities and Exchange Commission (SEC) published Tuesday, Trian stated that it will “explore and evaluate” the possibility of a transaction “alone or with third parties” that would “enhance shareholder value.” Trian and its affiliates own 19.4% of the company.
The filing went on to say that possible transactions include “an acquisition, business combination (such as a merger, consolidation, tender offer or similar transaction) or other transaction that would result in the acquisition of control of the Company by the Filing Persons and/or their affiliates.”
So far, 2022 has not been an easy year for the burger chain. The company’s stock may have soared 10% following this news, but the brand lowered its guidance in April, and its stock remains down 25% year-to-date even with the recent jump.
“The Wendy’s Company’s Board of Directors and management team regularly review the Company’s strategic priorities and opportunities with the goal of maximizing value for all stockholders,” the restaurant commented in a public statement in response to the news. “Our Board is committed to continuing to act in the best interests of the Company and its stockholders. Consistent with its fiduciary duties, the Board will carefully review any proposal submitted by Trian Partners.”
Across the restaurant industry, major brands are seeing major declines in stock prices this year as skyrocketing inflation and ongoing labor challenges negatively impact profit margins. Other food brands, too, are trying gimmicks to woo customers, like a new pairing of Oreo and Ritz dubbed “Oreo x Ritz.” One part cracker, one part cookie, stuck together with peanut butter and cookie cream. The combo snack will be launched this week.
April’s Consumer Price Index for All Urban Consumers (CPI-U), reported by the U.S. Bureau of Labor Statistics (BLS) earlier this month, showed food away from home (i.e., restaurant) prices rose 0.6% month over month in April and 7.2% year over year, and those numbers only reflect the costs passed on to customers. Restaurants are also absorbing some of the rapid rises in commodity costs. Major moves may be on the horizon with the combined impacts of inflation and labor difficulties. While it is unlikely that category giants such as McDonald’s or Restaurant Brands International will be going private any time soon, there could be some consolidation soon when it comes to smaller brands, especially as headwinds grow stronger.
The upside is that, despite these inflationary challenges, restaurants are still seeing widespread demand. If they can find ways to mitigate their labor difficulties and meet that demand, there is a tremendous sales opportunity.
“Revenue’s up, dining is up, and it really could be a boom market for [restaurants] if they could get the labor,” Andrew Robbins, CEO of Software-as-a-Service (SaaS) customer experience management (CXM) solutions provider Paytronix, said in a March interview with PYMNTS’ Karen Webster. “There are still people who are shutting down, not doing the full day that they would normally do and closing some nights, so they don’t overwork the team. … It’s still a real problem.”
Many major restaurant brands are testing automated solutions to tackle these challenges, ranging from Chipotle’s use of a robotic kitchen assistant to Chili’s parent Brinker’s drone delivery trials to McDonald’s partnership with IBM to develop an Automated Order Taking (AOT) system at its drive-thru stores. In time, restaurants may be able to alleviate some of the burdens of the challenging labor market and meet the widespread demand.