Fast-food chain Wendy’s has big plans that go well beyond square burgers and the Baconator.
McDonald’s (MCD) – Get McDonald’s Corporation Report pioneered the fast-food breakfast. The chain derives about 25% of its sales during the morning hours, but it has faced increasing competition.
Starbucks (SBUX) – Get Starbucks Corporation Report has been on the national scene only since 1992, but the high-end Seattle coffee chain changed the equation in the morning, It used coffee as its core draw, capturing a higher ticket price than McDonald’s could and sort of opening up the idea that breakfast could be a competitive part of the day.
That’s a door that McDonald’s opened by letting its breakfast menu stagnate. The Chicago chain has not added a major new breakfast item, at least a hot one, since the McGriddle in 2003. In many ways, the chain has remained tied to its Egg McMuffin, a sandwich that’s 50 years old.
It has been a case of if it’s not broke, don’t fix it — which opened the door for Wendy’s (WEN) – Get Wendy’s Company Report to try to become a player in the morning.
Image source: Wendy’s.
Wendy’s Wants to Deliver a Better Breakfast
Wendy’s brought back breakfast on a national level in 2020. That timing proved a bit unfortunate due to the pandemic, but the chain had a clear vision — it wanted to follow the model it has used with hamburgers, to be fresher and better than McDonald’s.
The Dublin, Ohio, company made its intentions very clear in a news release launching breakfast.
“People deserve a delicious, affordable, and higher quality breakfast than what they’re currently getting, so that’s exactly what we’re going to serve when Wendy’s launches breakfast nationally on March 2,” said Wendy’s U.S. President Kurt Kane.
“Our crew will be hand-cracking fresh eggs on all our breakfast sandwiches and leaning into the quality ingredients that have long set Wendy’s apart from the competition. We’ve crafted unique sandwiches that will leave you craving another, like the Breakfast Baconator, which features a fresh-cracked egg, signature sausage patty and six strips of Applewood smoked bacon.”
Kane repeated the words “fresh-cracked eggs” multiple times because McDonald’s doesn’t offer those. He didn’t call out his chain’s rival directly, but his comments were intentional and very clearly targeted.
Is Wendy’s Becoming a Breakfast Player?
Breakfast has pretty quickly grown into a meaningful part of Wendy’s business. The chain has posted 11 straight quarters of global same-store sales growth and Chief Executive Todd Penegor noted that during the company’s fourth-quarter earnings call.
“This was driven in part by growth in our breakfast business, which reached 8.5% of U.S. sales at the peak of our very successful Buck Biscuit promotion and global digital acceleration, which grew to approximately 10% of sales by year-end,” he said.
That growth happened despite the changed customer habits caused by the pandemic. With many more people working from home, breakfast demand has dropped, but that has not affected Wendy’s.
The chain clearly believes that breakfast will be one of its big drivers going forward.
“As we turn to 2022, we remain focused on our three long-term growth pillars: to build our breakfast daypart, accelerate digital and expand our global footprint. We believe that now more than ever, [quick-service restaurant] is the place to be. And our mix of convenience, affordability, and speed position us to deliver against customers’ evolving expectations,” the CEO said.
To keep that momentum building, Wendy’s has spent aggressively to promote its breakfast menu. That came during the pandemic when McDonald’s actually dropped its all-day breakfast menu.
“This growth was primarily driven by successful promotions, which not only drove significant trial of our breakfast daypart, as evidenced by a meaningful increase in buyer penetration in the quarter but also increased overall breakfast awareness to record levels,” Penegor said. “This culminated in another quarter of morning meal traffic share growth in the QSR burger category.”
The CEO also made clear that he saw continued opportunity in the morning hours. And, while he did not mention McDonald’s by name, that’s clearly the chain Wendy’s has targeted.
“In 2022, we will add to our playbook to build the breakfast business as we support growth through menu innovation, such as our new craveable Hot Honey Chicken Biscuit alongside compelling trial driving offers to further ingrain the habit,” he said.
“We believe our breakfast business in the U.S. will accelerate in 2022 by approximately 10% to 20%, taking average weekly U.S. breakfast sales to approximately $3,000 to $3,500 per restaurant by year-end.”
