Wendy’s Breakfast Bet Is a Winner

The QSR’s recently introduced morning offerings plus strong digital sales have boosted the bottom line. 

August 11, 2020

DUBLIN, Ohio—Wendy’s new breakfast offering, which rolled out in March before the pandemic began, helped the chain’s same-store sales increase 5.1% in June and 8.2% in July, according to RestaurantBusinessOnline.com. Company executives believe they can generate even more sales during the morning daypart and plan to spend $15 million in the second half of this year to market morning offerings.

“We plan to market breakfast in a big way in the back half of the year as more people fall into their daily routines,” said Todd Penegor, CEO, during the company’s second-quarter earnings call. “We believe we have a huge opportunity” to increase breakfast sales even further.

Company executives said that breakfast was largely incremental and didn’t take away from Wendy’s lunch or dinner business.

As NACS magazine reported early this year, the morning daypart is becoming increasingly competitive as more QSR and c-store operators market breakfast deals. Although the pandemic and commuters’ disrupted work schedules have impacted breakfast sales, “we’re very pleased with breakfast,” Penegor said, calling the daypart “another layer of growth.”

Wendy’s also reported that digital sales doubled during the quarter and are now 5% of sales, up from 2.5% of sales last year. Most of that increase has come through delivery channels. The chain now has deals with every major third-party delivery company.

As noted in NACS Daily at the time of Wendy’s newest rollout, breakfast has been the only meal that has customers coming back for more, making it ground zero in the war for dining-out dollars. For fast-food chains, breakfast grabbed 16% of its yearly traffic ending in November 2019, according to The NPD Group. 

At Wendy’s, sales improvements, combined with a focus on drive-thru orders, have helped improve profitability. The profit margin at Wendy’s 357 company-owned restaurants was 14.4% of sales for the quarter ended June 30. While that was down from 16.5% in the same period a year ago, margins accelerated throughout the period thanks largely to improved efficiency, executives said.

“As we’ve gone to drive-thru-only, we’ve had lower waste, utilities, lower maintenance and security costs,” said Penegor, adding that the company has been able to better prepare for busier times of the day.

As for the remainder of 2020, Wendy’s plans to push more value, an important consideration given the current state of the economy. This includes a value-priced Spicy Chicken sandwich that is available starting this week.

For now, Wendy’s executives said that transaction sizes have increased during the pandemic as customers made larger orders. The company has seen improved customer counts, while the average check has remained elevated. That is “continuing to hold through July,” Penegor said. “We have to see what happens. It’s too early, and there are so many variables, with COVID and whether school goes virtual.”

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