Wendy's revealed last year an ambitious development plan that would add 1,200 outlets by 2025.
700 of these new locations were intended as delivery-only ghost kitchens to be run and manned by Reef Kitchens.
The burger chain may have taken on too much with its ghost kitchen plan, and is now stepping back. Wendy's to open 100 to 150 Reef sites, down from 700, with a notable drop in the U.S.
First sales from the agreement with U.S. Reef kitchens were disappointing. Average yearly sales per store are less than $500,000, compared to $500,000 to $1,000,000 in comparable areas.
Wendy's hasn't escaped inflation's punch to the fast-food business this year.
The burger establishment raised prices to keep up with rising ingredient and labour expenses, and consumers had less discretionary spending, narrowing profit margins.
Wendy's has slowed its aggressive expansion plans.
Wendy's ghost kitchens will remain in the U.S., albeit on a reduced scale and in "high potential areas." Reef's mobile eateries will launch in Canada and the U.K., where sales are better.
Reef Kitchens has had other growth difficulties than Wendy's. The company's mobile food units have been accused of serving uncooked or undercooked meals.
Reef terminated its agreement with Fuku in 2021 and shuttered a third of its kitchens in January.
Reef has approximately 8,500 sites, including 300 kitchens throughout North America and Europe. Reef's other kitchens operate numerous brands at once, a more successful approach than Wendy's.