The rise and fall of Wendy's

In February 2026, Nelson Peltz, the investor who was an activist investor who had been and run the board of Wendy's for over 17 years, filed a form with the SEC where he basically described that the stock was undervalued and they were pursuing strategic options. In other words, something big was about to happen for Wendy's. The context is, is that Wendy's, the burger chain, is a total mess. They've just lost their 7th CEO in 24 years. Same-store sales are down 11%. They're closing 300 stores and the stock is at an all-time low. And a lot of us, including me, grew up on Wendy's. And it's worth asking, how did they get here? I mean, those burgers were good. They were square and you got Frosties and all that kind of stuff. But here they are, a dumpster fire. Well, the story is pretty complex. This is the rise and fall of Wendy's. Thanks to Dex for sponsoring this video. More on them later. The story of Wendy's starts with a guy named Dave Thomas. He was a kid that nobody wanted. He was adopted as a baby. His adopted mother died when he was 5, and he shifted homes 10 times as a kid in childhood. He was a hustler, though, and he dropped out of school at the age of 15 to go work in a restaurant. And to make it all work, he lived at the YMCA. But here's the deal about Dave. The kid could sell, and he stumbled across a guy, Colonel Sanders. Yeah, that Colonel Sanders from KFC. And he convinced the Colonel to do 3 changes to his restaurants that would change everything. He convinced the Colonel to shrink the menu and make it simpler to produce the food and simpler to understand if you were a customer. Number 2, he designed the rotating chicken bucket sign for the Colonel as well for KFC. And the last one was he encouraged the Colonel to put himself in the commercials. And this would be something that would prove fateful in the story of Wendy's. Hold that thought. In 1962, the Colonel, he gave Thomas his shot. There were 4 failing franchises for KFC, and he said, hey, you can have 45% of them. Here's the deal. You got to go figure out how to turn them around. He cut the menu from 100 items down to a handful. Cleaned house on staff and turned things around. And then he built 4 more locations. And just a few years later, at the age of 36, he sold his stake for $1.5 million. In other words, he was a millionaire from basically nothing to, well, rich. On November 15th, 1969, he opened Wendy's Old Fashioned Hamburgers in Columbus, Ohio. And Wendy, well, that was his daughter. And later he regretted naming it after her. He said it put too much pressure on her. The number one differentiator was that they used fresh, never frozen beef. And it turned out there was a reason no other hamburger chain did fresh beef. It was a supply chain nightmare. But Dave, he said he didn't care. He just wanted to provide a better product. But this decision would come back later to haunt the chain. Every Wendy's hamburger is made from 100% pure fresh beef and patted daily. And unlike McDonald's, Wendy's was a hamburger restaurant that was fast food for adults. There were Tiffany-style lamps, and heck, he even got the details down to these square patties. In other words, the old phrase of, "We don't cut corners," well, Wendy's literally didn't. Dave famously had 5 things on the menu: burgers, fries, Frosties, and drinks. And one more thing, chili. And you know how he did that? He made it from the leftover meat from the patties they made in-house. That Frosty is still on the menu today. They sell 300 million cups of it a year. And, you know, they're kind of tasty. And in 1970, he rolled out a revolution before almost anybody else did— the drive-thru. Within 100 months of founding, through the magic of franchising, they had 1,000 restaurants. They'd done it faster than anybody else had. And by 1979, Wendy's crossed $1 billion in annual sales. And then as we entered into the 1980s, something happened that basically turned Wendy's into a cultural phenomenon. You see, so back in the 1980s, we were in the era of America that's still called the monoculture. And that was a thing where there were just very few sources of information, but we were able to see them all. Just a few TV channels or a few newspapers. But if you broke through on one of those, you could change the entire culture almost immediately. In January 1984, a woman named Clara Beller was hired to be in a commercial for Wendy's, and she was a retired manicurist, hard of hearing, and she was instructed to read the line, "Where is all the beef?" when speaking about competitive hamburger chains. The problem was she couldn't get the line right and she kept saying, "Where's the beef?" It's a very big fluffy bun. Where's the beef? Where's the beef? Hey, where's the beef? Suddenly it was just catching on like wildfire across the United States. It was on t-shirts, TV shows. In fact, in a presidential debate, one of the candidates asked the other one, "Where's the beef?" when they were describing their policies. Like, that is how big of a deal it got. When I hear your new ideas, I'm reminded of that ad. Where's the beef? Yeah. Because of that one moment, Wendy's sales jumped 31% in one year. Crazy. And then humorously, Clara, our spokesmodel who came up with Where's the Beef? She famously did a commercial for Prego, the spaghetti sauce that had meat in it. And she said, I found it. In reference to the beef inside. I found it. Real beef. It's in there in new Prego Plus Spaghetti Sauce with beef and onions. I really found it. Once the Where's the Beef phenomenon ended, and Claire was fired, by the way, they went ahead and saw 2 years of sales slumping at Wendy's. Something had to be done. And that's where Dave Thomas, the guy who could sell anything, well, he stepped in. Gee, this is pretty good. Dave did the same thing that Colonel Sanders did 2 decades earlier. He put himself front and center. In the commercials. He was one of the first guys to do this founder-led marketing well before Elon Musk and other guys like that even considered the idea. And heck, some of them weren't even born then. In 1989, Dave became the spokesperson for Wendy's. He appeared in over 800 commercials over 13 years. At one point, he had a higher brand recognition as a person than the president of the United States. Over 90% of people knew who Dave Thomas was. Later entrepreneurs like Steve Jobs at Apple, Elon at Tesla, Howard Schultz at Starbucks. They would all be founder-led brands that basically figured out how to survive the founder leaving. The problem was Dave Thomas didn't really think he was ever going to die, but we'll come back to that soon. In the meantime, Dave was the perfect spokesperson for Wendy's. At age 61, in order to be a great example to his employees and partners, he went back and got his GED. Remember, he was a high school dropout. The funny thing, when he went through his GED program, his classmates voted him most likely to succeed. And it turned out people trusted Dave Thomas for reason. He lived the talk. He also put together a whole set of charities around adoption to help kids who had grown up, well, now who were facing the same challenges he did as a kid. So while Dave was out front, in the background, CEO James Near at the time in the '90s was making Wendy's a lean, mean operating machine. He cut 700 admin positions from headquarters, and even so, they operated more efficiently than before. Employee turnover dropped from 55% to 20%, and same-store earnings went through the roof. They delivered 4 straight years of over 20% earnings growth. Sales hit $3 billion in 1990, up 29%, while competitors, their sales were staying flat. In 1995, with all the success going on, Wendy's acquired Canadian chain Tim Hortons for $450 million. This number would prove to be pretty important later on in the story. And then in August 2002, at age 69, Dave Thomas succumbed to liver cancer and he passed away. Dave had been the heart, soul, and brand of everything Wendy's stood for, and suddenly he had exited stage left. And when most people talk about Wendy's now, they say this is when the story kind of went on the downturn and this is what caused the problem. But it turns out Wendy's downturn and where they are today is more than just Dave Thomas leaving the stage. If you've optimized your notes, tasks, and calendar, but your relationships are still scattered across LinkedIn, Gmail, and your phone, that gap can add up. This is Dex. It pulls your contacts and interactions into one clean timeline so you can actually see where you left off with people. What stood stood out to me is the pre-meeting briefs. Before a call, it automatically sends context on who you're meeting with and your past interactions, so you're not scrambling through old emails or notes trying to catch up. It keeps itself updated, suggests thoughtful follow-ups, and doesn't feel like you're running a pipeline on your friends. If you want a system for your relationships the same way you have a system for everything else, try Dex for free using the link in the description below. You see, Tim Hortons, that purchase they had made by 2005 was the majority of Wendy's, basically profits, over 57% of it, despite only contributing 27% of total revenue. In other words, the side hustle that had been buying of Tim Hortons and bolting it on to the Wendy's hamburger chain, well, it had become the main business. Analysts valued Wendy's hamburger business at about $2 billion. They valued Tim Hortons at over $4 billion. A business with this kind of latent value that the stock market can't value well, that's catnip for a type of investor called an activist investor. And at that moment, two of them showed showed up, a guy named Nelson Peltz and a guy named Bill Ackman. They came in, bought up shares, and got themselves influence inside the company. And they won their battle. In 2006, they forced shareholders and the board to spin out Tim Hortons into its own stock. Existing shareholders of Wendy's got stock in the new company, but suddenly it created a new problem. No longer was Tim Hortons around to mask the core problems of the burger business. The crazy thing is, in 2014, Burger King turned around and paid $11.4 billion for Tim Hortons. Remember, Wendy's had bought it just a few years earlier for $450 million. Crazy. Then remember Nelson Peltz? Well, the guy who'd been on the board and spun out Tim Hortons, he encouraged Wendy's to sell and they sold to Triarc, his company, for $2.34 billion. He merged it with Arby's and that lasted for 3 years until he sold the whole thing in a mess at a loss to a private equity firm called Roark Capital, who merged it with a bunch of other random brands to create a business called Inspire Brands, of which Wendy's, Arby's, and some of the other things were all part of it. This was classic financial engineering. Wall Street loves this kind of stuff. It makes for beautiful pitch decks that investment managers turn around and put money into. The problem was when you have this many brands this spread out, nobody was paying attention to the thing that mattered most. Were customers walking into the restaurants and leaving happy? And remember how I talked about the monoculture in which things could spread like wildfire if they happened the right way? Well, suddenly in March 2005, Wendy's started to feel its first fatal blow, which was a woman claimed to have discovered a severed finger in a bowl of Wendy's chili, and it spread across the news like wildfire. Uh, $21 million in sales went down over the next few days for Wendy's. Wendy's had to give away free Frostys to get people coming back in the door, and it turned out the whole thing was a hoax. Uh, the woman's husband had bought the finger from a friend for $100. First of all, I had no idea you could get a finger for $100. Like, I don't even know where do you go to get a finger? I have no idea, like, but I guess there's people out there selling figures. So if you know that, let me know in the comments below. But anyway, she eventually got 9 years in prison and the whole thing just turned out to be a big nothing. And at that moment, if Dave Thomas had still been around, somebody they trusted, he could have gone on TV and said it was all fake. But in reality, like, he'd been gone a few years earlier. What happened next over the next 24 years was a revolving door of CEOs. A few of them did good jobs. The 4 for $4 meal, all that kind of stuff. Breaking into breakfast, challenging Burger King, and actually starting to do okay with a few of them here and there. The problem is when you have that kind of turnover, well, the CEOs come in and it's like a lawyer. Whenever a new lawyer looks at one of your documents, they're going to hate what your old lawyer did. Same thing with CEOs. New CEO walks in the door, they're going to have a new plan. And with that kind of inconsistency, it's hard to build long-term value. And when you have a high fixed cost business like a restaurant, the more meals you can sell per day, the better you're going to do. And one of the ways fast food chains have started to do that, McDonald's and others, is by getting into breakfast. The problem was Wendy's had tried to crack breakfast for decades, but gaffe after gaffe and mistake after mistake had prevented that from happening. Like heck, they tried to bring omelets to Wendy's. Only Wendy's. Only Wendy's makes freshly prepared omelets. And production guffaws and stuff like that prevented it from ever working. They did hit 8% of total sales for breakfast by 2021, And that was good during COVID because people were driving through looking for food. But by 2025, they were realizing their whole effort at breakfast wasn't working everywhere. Then in March 2024, the new CEO had the latest wild hare with Wendy's, which was to do what they called dynamic pricing, which in reality was surge pricing. The busier the restaurant got, the more they would raise the prices. Elizabeth Warren, the senator from Massachusetts, came out and went ballistic about it. Uh, and the media, they had a field day. Suddenly, in an era in which big evil corporations are easily painted as the villains, Wendy's was backing themselves into a corner. Tanner, the CEO who had been the guy to announce the surge pricing, he only lasted 17 months. In his tenure, the stock went down 45%. He left shortly thereafter to go to Hershey. And the next CEO to enter the picture, well, he was the former CFO. But while these little mistakes were happening that combined to make the Wendy's brand incredibly vulnerable, what was going on outside the four walls of the restaurant were the things that truly doomed the restaurant. In the end. Remember the great service and care that Dave Thomas was famous for? The structure of Wendy's meant that other competitors could come in and create systems and hire people and build restaurants that would beat Wendy's in the customer service department. Perhaps the greatest example there is Chick-fil-A. The difference between building a Wendy's, which can cost you a couple million dollars in a loan that you have to take out as a franchisee, and what it takes to become a Chick-fil-A franchisee is, well, $2 million versus $10,000. And nobody walks around saying Wendy's has great customer service. There's too much debt for that. In the case of Chick-fil-A, those managers and owners, they know how to be at your service for each individual customer. So while Chick-fil-A, Raising Cane's, and others were winning on the customer service front, something else was happening for Wendy's. And that rise during the 2010s was the rise of fast casual. Guys like Shake Shack, Five Guys, they realized that the position that Wendy's had been in as a slightly more adult version of McDonald's that was targeting adults with slightly higher quality. Well, they could come in and for a few bucks more offer something even higher quality than Wendy's. Today, fast casual is a $139 billion a year market growing 8 to 12% per year. And Wendy's was suddenly cut out of that end of the market as well. And remember that the big thing that had differentiated Wendy's was this fresh beef aspect. And that's when McDonald's came in. And in 2018, they revamped their supply chain to make Quarter Pounders be built on fresh beef. They made a $60 million investment. And in one fell swoop wiped away the key differentiator for Wendy's. In other words, the moat that had protected Wendy's and differentiated them, if anybody asked, was suddenly wiped away in a single moment when McDonald's wrote a check. We talk about this in business. Moats are what protects your business from competition, and there's lots of different ways that businesses can do that. Unfortunately, not all moats are created equal. And if your moat is so shallow that in the case of Wendy's, that McDonald's can write a single check and wipe it away, well, it wasn't that much of a moat in the first place. And in the end, you're seeing this happen across the economy. The same thing that's killing JCPenney and Sears, the K-shaped economy where certain— most people are going down compared to the average and a few people are going way up. Well, it turns out the same thing's happening for dining. You're seeing folks like Shake Shack, Raising Cane's, those kind of guys succeed really well and they're charging a little bit more and the bottom is still doing okay. But that left Wendy's stuck in the middle with no place to call home. And that leaves us where Wendy's, because of all the financial engineering done by the private equity firms, means there's $3.2 billion in debt sitting on the chain with only $100 million in equity, plus or minus. The public markets are valuing Wendy's at $1.5 billion, which, by the way, is less than the $2.3 billion that Triarc paid to buy Wendy's back in 2008. Behind it all, there's been a ton of financial engineering. They've been selling off the dirt that the company owned in order to pay down debt. They've been refranchising stores, meaning they take stores and sell them off to the franchisees. And then behind it all, they've been having to close underperforming stores. 300 to 350 of them expected to close this year alone. And heck, where I am in San Antonio, I actually spent time in a map to figure out if I wanted to record this video in front of a closed Wendy's. The deal was I had a ton of choices. Like there's one over that way, like a mile away. I could have just gone over there, but instead I chose the drainage ditch. And that leads us to where we are today, which is Nelson Peltz on the board, who owns 16%, by the way, through his funds of the entire company, publicly stating that they're considering strategic options, which means something's going to have to change because what they're doing at Wendy's ain't sustainable. So the thing I come back to on this whole story is the role of Dave Thomas. And one of the parallels that I see is you imagine things like a great TV show or a radio show. Imagine Friends, the TV show. If you're my age, from the late 1990s. What people have discovered is when you swap out those characters, you swap out the people in the room, sometimes it causes the entire magic to disappear. And it's the power and also the vulnerability of what Dave Thomas did with Wendy's. You know, he was such a force of will and such a character that the entire business was able to be built in terms of billions of dollars of value on who he was. And the day Dave walked out the door, well, things changed pretty much forever. The same thing happens with any business. The moment you leave or the moment you buy something and the founder walks out the door, You have to understand that creates a huge amount of risk. And in this case, the risk that was associated with Wendy's, well, spelled the beginning of the end. And that's where we are today. All right. Let me know what you think about Wendy's. And could all this have been avoided? It makes me sad because I remember getting Frosties as a kid. Let me know what you think in the comments below. I try to read them all.