Wendy's replacing older locations with new buildings

[Brian Lutz]

Lately, I've noticed that a number of Wendy's restaurants that used to be in converted Rax locations in the area (one in Renton and one in the Totem Lake area of Kirkland) have been getting replaced. In the case of the Renton one they closed down the location and moved to what appears to be a newly built location a couple of blocks away. The Totem Lake location has recently been torn down and will be rebuilt on the same site (MCDonald's has done this with several locations in the area as well.) So far I have not seen any purpose-built Wendy's locations being affected by this.

I'd be curious to know if this is happening elsewhere.

[storewanderer]

They did such heavy remodels on a couple of mid 1990's locations in Reno (Northtowne Lane and North Hills Blvd.) that you would think they did a demolish and rebuild. I REALLY like how these remodels came out. The insides of the locations are just great. Great vibe, comfortable, the spacing all makes sense (lots of space at the counter, good size drink area, good space in the walkways). Another one that got a light remodel about a year and a half ago (Reno Kietzke) got a lot done inside but still feels old, and outside isn't really changed at all.

They have also been kicking out franchisees who fail to make the remodels. I know of one up in Oregon, I think in the Springfield/Eugene area.

I think some of the older locations may not make enough money to justify paying for the magnitude of remodel work Wendys Corporate wants done.

In my market there are 3 Wendys franchisees and we have one franchisee with two stores who has one heavy remodel store and also a store that got a light remodel maybe 3 years ago. There is another franchisee with 5 stores who has one heavy remodel store and that light remodel store referred to above. Then there is a third franchisee with 5 stores who hasn't remodeled anything (and that franchisee's locations need the work the most...).

[kr.abs.swy]

Storewanderer, the local papers briefly covered the closing of the Wendy's restaurants in Eugene, Springfield, Corvallis, Albany and The Dalles. No one wanted to say explicitly what happened. According to the Eugene Register Guard, the owner "failed to meet certain basic obligations of his Wendy’s franchise agreement." It sounded like he got behind on his franchise fees.

I don't think it was necessarily strictly an issue of remodeling stores, although I could be wrong. The Corvallis store remodeled the dining room last year (new carpet, new tables, new tile, a TV screen, etc.) but didn't do anything to the exterior. The dining room felt more like a Panera than a Wendy's. It also got a new Coke Freestyle machine. It was a nice improvement.

Then, all of a sudden, it was closed.

What was (and still is) very odd about this closing is that the signs are still up. All of them (although they took down the help wanted sign a few weeks after the store closed). There is no indication that the Wendy's has closed except that the lights aren't on, the doors are locked and there are no cars in the parking lot. The drive through menu board is still there. The promotional signs in the windows are still there. If you got some food delivered, the store could reopen the next day. There isn't a tarp over the Wendy's sign along the road. There isn't a note in the doors. It is a very odd situation. Franchisors are usually so diligent about having their signs removed from closed locations to avoid damaging the brand.

Eugene is a large town to not have any Wendy's locations.

I can imagine a scenario where Wendy's knew that the franchisee was struggling, "suggested" that he sell his stores, pulled the plug when he got behind on his fees and refused to sell, and now they are in some form of litigation. But this is 100% speculation.

[BillyGr]

Storewanderer, the local papers briefly covered the closing of the Wendy's restaurants in Eugene, Springfield, Corvallis, Albany and The Dalles. No one wanted to say explicitly what happened. According to the Eugene Register Guard, the owner "failed to meet certain basic obligations of his Wendy’s franchise agreement." It sounded like he got behind on his franchise fees.

I don't think it was necessarily strictly an issue of remodeling stores, although I could be wrong. The Corvallis store remodeled the dining room last year (new carpet, new tables, new tile, a TV screen, etc.) but didn't do anything to the exterior. The dining room felt more like a Panera than a Wendy's. It also got a new Coke Freestyle machine. It was a nice improvement.

Then, all of a sudden, it was closed.

What was (and still is) very odd about this closing is that the signs are still up. All of them (although they took down the help wanted sign a few weeks after the store closed). There is no indication that the Wendy's has closed except that the lights aren't on, the doors are locked and there are no cars in the parking lot. The drive through menu board is still there. The promotional signs in the windows are still there. If you got some food delivered, the store could reopen the next day. There isn't a tarp over the Wendy's sign along the road. There isn't a note in the doors. It is a very odd situation. Franchisors are usually so diligent about having their signs removed from closed locations to avoid damaging the brand.

Eugene is a large town to not have any Wendy's locations.

I can imagine a scenario where Wendy's knew that the franchisee was struggling, "suggested" that he sell his stores, pulled the plug when he got behind on his fees and refused to sell, and now they are in some form of litigation. But this is 100% speculation.

Something like that happened in this area (over in far Western MA) where several Wendy's closed due to an issue with the franchisee. I know at least one reopened (not sure exactly where the rest were) after a time, probably after getting someone else to take over, or maybe the company ran it for a time?
That same area also had the same issue with several Burger Kings - at least 2 of the 3 reopened, but the 3rd one, as far as I know is still closed/empty.

So perhaps if they are in the process of looking for new franchisees or figuring out how to reopen them that would explain why the signs are still there - not much point removing them only to have to re-install them in a short time. They can just add grand re-opening banners when they do open, so people who saw that they were closed will know they are again open.

[kr.abs.swy]

Interesting, BillyGr. I don't conceptually disagree, but, at least in the case of the Corvallis Wendy's, there is more to the story. The restaurant has been closed for almost 2.5 months, and there isn't even a sign in the door stating that the restaurant is closed. I believe that a couple of weeks ago, the store in Albany still had a promotion on the reader board (it closed at the same time).

What I suspect is happening is that the landlord isn't giving corporate Wendy's access to the building, which is interesting. The franchisee was likely behind on his royalty payments to Wendy's, so it seems like a reasonable guess that he hasn't been making his lease payments, since his restaurants aren't generating any cash flow, so I would think that the landlord would be willing to work with Wendy's in hopes of re-leasing the building (unless he/she is stuck in the middle of litigation, which is a real possibility).

Back to your point, I will be surprised if at least some of these stores don't reopen as Wendy's in the future. The one in Corvallis is in a good location (although sandwiched between a McDonald's, Subway, Burger King and Taco Bell) on the main drag. The McDonald's across the street has a cramped parking lot (drive-thru traffic backs up onto the street at lunchtime and the way the parking lot is configured, it is difficult to get into the parking lot except through the drive-thru lane), and I sometimes wonder if the McDonald's should try to take over the Wendy's location, as the Wendy's has a much larger parking lot. Neither the Wendy's or the McDonald's are new, so bulldozing the Wendy's to build a new McDonald's isn't totally out of the question. (This is 100% speculation on my part).

I suspect that at least some franchisee-franchisor contracts allow for the franchisor to take over operations if the franchisee is in default. Does anyone know if this is the case? Does the franchisor require landlords to consent to allow the franchisor access to the facilities in some cases? Either that wasn't the case with the Eugene franchisee, or he is involved in litigation with Wendy's.

[Brian Lutz]

We had a similar situation up here where a number of Burger Kings closed down for a period of time (I think it may have been as long as a year) before eventually reopening.

[BillyGr]

McDonalds does (or at least did at one time) have somewhat more power in the situation, as they were both landlord and franchisor.

One of the lesser known people in the founding of the company was more into the financial and real estate ends, and he developed a plan that allowed the corporation to buy the land, build the buildings then lease them to the franchisees. The leases were basically a certain $ amount, or a certain % of sales, whichever was more.
Overall, that was how the corporate company made money - the franchising fees and small % of sales each month weren't enough to cover the costs of running the company.

However, it also gave them the power, as part of the lease agreement was that franchisees follow corporate's rules, so if they didn't keep the place up to standards, not only could they take the franchise back, but also cancel the lease.

Note that the book this comes from was written quite some time ago (1980's I think) so I don't know if it is still true, but would assume it is, where many other chains (at least at that time) didn't control the real estate, and likely with older stores still wouldn't.

[Super S]

I get mixed signals about how well Wendy's franchise system works. I know of one in Vancouver, WA that recently received a VERY extensive and thorough remodel with new signage and everything. Go across town and there is a rather old one which has maybe received a couple interior remodels. Go to others and you will see various states of remodels. But the food quality has at least been consistent.

It is not hard, however, to spot former Wendy's locations. I know of several in Portland (which have become various different businesses) and recently took a trip to the Oregon Coast where I spotted two former Wendy's. One was a Starbucks, and the other (which appeared to be a newer building) was a Subway. Also, Burger King, KFC, Taco Bell, and Pizza Hut all have former locations scattered around the Northwest which are still easily identifiable as to what they used to be. But you rarely see a former McDonald's that can still be easily identified as such. They tend to not close as often, at least in my area. The few that do close are usually replaced with new buildings nearby or rebuilt on the same site. McDonald's seems to do a better job at keeping locations open.

[Brian Lutz]

I only know of a couple of former McDonald's locations around here where the building got reused by someone else (one just closed outright, the other one moved to a nearby location. There is one here in Downtown Bellevue that sat empty for a couple of years, then got subdivided into two restaurant spaces that were originally occupied by a Fatburger andf a Baja Fresh, but were later replaced by a teriyaki place and a ramen/curry place. Given the location I'm assuming this one will eventually get knocked down for a highrise development of some sort (the building is sitting on what would have to be some pretty valuable land.) In Everett on Evergreen Way there's a former McDonald's got turned partially into a Starbucks (it's interesting to note that Starbucks took over a number of former Burger Kings in the area as well) and partially into a used car dealer.

[BillyGr]

I only know of a couple of former McDonald's locations around here where the building got reused by someone else (one just closed outright, the other one moved to a nearby location).

We have one here (East Greenbush) that has been empty for a couple years. It was an old store (drive thru with roof over the window, old drive thru lane around the back right near the building that had been replaced by an extended lane, front vestibule with doors on both ends leading in then 2 sets of doors leading into the restaurant, at least a couple additions including a "cube" stuck on the right side for a playground, small area in front with outdoor tables) and there was an issue with the landlord (which also indicates age to some degree, as they owned most of the newer properties) not wanting to renovate/repair as needed.

Just recently it has been under construction, not sure for what but there must be a planned tenant, as they are now adding on to the rear (to "square off" the building where the playground cube was) and were digging up quite a bit before winter.

This one was not replaced, though there is one not too far away on a different road, but both co-existed for several years. However the newer one is tending to be the area of town where development occurs - the old one sits net to a Ponderosa turned Chinese buffet and across from an old Howard Johnson's (turned Weathervane Seafood and now vacant for quite some time) that is still recognizable as a HoJo, even with Weathervane's gazebo add on at one end.