The Wendy’s Company [linkme to=”WEN”] is the world’s third-largest quick-service hamburger company. Its unique system includes approximately 6,500 franchise and Company-operated restaurants in the United States of America and 28 countries and United States territories worldwide.
On the morning of Friday, the 3st of June, Wendy’s announced that its franchisee in Japan had entered into a definitive agreement to acquire 100% of the equity of First Kitchen, a Japanese fast food restaurant chain, from Suntory Holdings. The deal, which involves 136 restaurants in 136 locations, is expected to close at the end of June.
This came as Wendy’s is looking to expand its horizons in Japan; it plans to convert the existing First Kitchen restaurant into Wendy’s First Kitchen restaurants and build new locations over time. These new locations are said to offer a combination of Wendy’s traditional chicken and hamburgers sandwiches along with pasta and other staples that Fist Kitchen was popularly known for. Wendy’s First Kitchen is a hybrid concept- offering a revamped menu and refreshed deco- all of which has been tested in Roppongi and Ueno sections of Tokyo where two locations opened since 2015.
In the bid to enable the First Kitchen acquisition, The Longreach Group, a leading North Asia based private equity firm, has acquired a majority of stake in Wendy’s Japan, a wholly owned subsidiary of Higa Industries Co., Ltd.
[adv_smv1 link=”4″] Bob Wright, Wendy’s (WEN) Executive Vice President, Chief Operations Officer and International said “The First Kitchen restaurant brand is well-established with a presence in many desirable, busy locations throughout Japan.” “We anticipate the acquisition will leverage the strengths of both Wendy’s (WEN) and First Kitchen, while providing a springboard for growth in the coming years. This deal would not have been possible without the vision and dedication of Ernie Higa and the Wendy’s Japan team, who understand the importance of great customer service, continuous innovation and playing a different game when competing against well-entrenched restaurant competitors. We also appreciate the full commitment of The Longreach Group to enable this deal and we welcome them to the Wendy’s franchise system.” Bob Wright further added “This is an example of how we are bringing our ‘narrow and deep’ international strategy to life by initially focusing on four key markets – Japan, India, Brazil and the Middle East – where we see considerable upside potential over the next few years. We believe our best approach is to support our franchisees in building Wendy’s brand strength in local markets and enhancing the economic model of their restaurants.”
Shares of Wendy’s are slipping 3% to $10 in Friday’s morning trading session.
[must_read] The company’s strengths can be seen in multiple areas, such as its reasonable valuation levels, good cash flow from operations, expanding profit margins, notable return on equity and impressive record of earnings per share growth. We feel its strengths outweigh the fact that the company has had sub par growth in net income.