Wendy's announced plans in 2021 to open 700 delivery-only locations with the ghost kitchen startup Reef Technology. A year later, the fast-food chain revised that number to about 100 to 150 sites by the end of 2025.
This week, the chain said it's pulling back further on its delivery-only operations with Reef.
"We have tested and learned across several non-traditional formats and locations. And while we continue to be very successful with many of these formats, we do not envision that delivery kitchens will be a large element of our growth trajectory moving forward," Wendy's CEO Todd Penegor said Wednesday during the company's fourth-quarter earnings call.
Wendy's Chief Financial Officer Gunther Plosch confirmed the chain's restaurant-growth projection is down as a result of slashing its ghost kitchen strategy.
"So it's clearly less than what we have said previously," he said. "And it's really less Reef units than even previously contemplated as we reduced our outlook with Reef."
The company said it sees more value in growing modern brick-and-mortar restaurants in the US and abroad. Wendy's said it currently has 16 Reef locations in the UK.
"We believe our efforts are better spent driving more access to the Wendy's brand through our global next-gen design," Penegor said.
Reef operates food trailers, or "kitchen vessels," stationed in parking lots across the US. The company, formerly ParkJockey, also manages parking lots and garages.
At its peak in mid-2021, the SoftBank-backed startup operated more than 330 food trailers in the US and abroad. It has licensing agreements with restaurant chains and virtual brands like MrBeast Burger. Wendy's was one of its biggest chain partners.
The Wendy's pullback comes as Reef has reportedly hired restructuring advisers, according to sources cited by The Information this week.
Citing a person familiar with the matter, the publication said the Miami-based ghost kitchen hired restructuring advisers to explore a split of the firm's parking and restaurant businesses.
Reef did not return a request for comment about Wendy's or the restructuring reports.
The food-tech startup had raised $1.72 billion in capital as of November 2022, according to Pitchbook.
Though well-funded, Reef has struggled to prove its concept with national chains.
In 2021, David Chang's Fuku fried chicken brand cut ties with Reef following reports of food safety issues inside trailers run by Reef.
In 2022, Burger King, Popeyes, Jack in the Box, and Del Taco ended their partnerships with Reef. Reef also closed dozens of underperforming food trailers, laid off 5% of its workforce, stopped paying vendors, and closed operations in Houston last year.
When it shut down dozens of trailers in Houston, a Reef spokesperson told Insider the move was part of "a company-wide realignment of locations and brands" that started in early 2022 to optimize operations.
"As part of that process, some mobile vessels were paused and re-deployed elsewhere, one of the benefits of Reef's flexible model," the spokesperson said.
Are you a Reef or Wendy's insider with insight to share? Got a tip? Contact this reporter via email at nluna@insider.com.
