Can Wendy’s finally get breakfast going?

The brand is jumping into the morning with both feet, hoping this time it will work. But breakfast is not easy, says RB’s The Bottom Line.
Photograph courtesy of Wendy's

the bottom line

Wendy’s this week announced plans to add breakfast at all 6,000 of its U.S. locations next year. It was a somewhat surprising announcement for the Dublin, Ohio-based chain, which has tried and failed several times to get breakfast off the ground, dating back to the mid-1980s.

Wendy’s is somewhat famous for its inability to do breakfast, in fact, and the brand as recently as February was seemingly satisfied sticking to lunch and dinner.

This time, however, Wendy’s believes it has the right idea. The company has been offering breakfast in about 300 locations, giving it an important group of test restaurants.

It is expanding breakfast nationwide, rather than gradually getting restaurants to add the daypart—a big reason previous efforts failed. That will enable the brand to market breakfast, and Wendy’s said Monday that it will invest $20 million behind the effort. Wendy’s hasn’t marketed breakfast nationwide before.

The brand also has a strong social media game, which can help with marketing. As the Popeyes chicken sandwich flurry demonstrated last month, a single tweet can generate a ton of business.

Breakfast in theory could help the chain generate some excitement. And the brand is adapting some additional, popular menu items for the breakfast, such as its Frosty (Frosty-ccino) and Baconator (Breakfast Baconator).

Wendy’s could probably use some customer enthusiasm. Since 2017, the chain’s same-store sales growth has averaged 1.5%, 2 full percentage points lower than rival McDonald’s.

The company has long wanted to improve its unit volumes, which currently average $1.6 million—better than Burger King’s $1.4 million (on all three dayparts) but much less than McDonald’s $2.8 million.

Wendy’s could realistically expect to generate about 10% of sales in the morning within a couple of years, adding about $160,000 to its per-store sales figure. If it can get to 15%, similar to what Burger King does at breakfast, that would add $240,000 in sales per store, per year.

That makes breakfast about a $1.4 billion opportunity for the brand.

John Gordon, a restaurant consultant out of San Diego, said breakfast would not just help the chain generate business early in the morning but also in the midmorning hours from 10-11:30. And it could open up some locations to the possibility of overnight hours.

But it’s hardly a slam dunk.

Breakfast is increasingly competitive, and that competition has managed to take a modest bite out of McDonald’s market over the past year. “There are plenty of other entrants who are competing in the breakfast market,” CEO Steve Easterbrook said in July, according to a transcript on financial services site Sentieo. “We don’t have it all our own.”

Former Wendy's CEO Emil Brolick himself detailed the challenges of the morning. “It’s very difficult to enter that space today and commit the kind of marketing resources that we feel would be necessary to really entrench ourselves successfully,” he told Bloomberg TV in 2015.

Breakfast is a habitual occasion and can take years for brands to break into. Sometimes they fail, as Wendy’s previous efforts indicate.

Subway, the largest restaurant chain in the U.S. by unit count, added breakfast to its 25,000 locations in 2010. By 2018, it had stopped marketing it and gave operators the option to ditch the daypart, something many of them did.

Taco Bell has seemingly had more success since adding the daypart in 2014. It took about two years for breakfast to become about 10% of the brand’s business. The chain’s same-store sales growth has averaged just under 4% since then.

Breakfast requires some different thinking than other dayparts. Fast-food breakfast is a convenience occasion, and stores that are not located right won’t necessarily get the business. McDonald’s and Starbucks grew highly successful morning businesses in large part because they recognized it and developed their real estate practices accordingly.

“They were on the wrong side of the street,” Gordon said of Wendy’s. “McDonald’s were on the morning side. Wendy’s were on the evening side.”

Then there’s labor. While Wendy’s announcement featured a major hiring initiative by the brand and its operators, that initiative is coming as the industry is already fretting about a lack of available workers. Staffing those breakfast hours won’t be easy.

Gordon estimated that it would require four employees to staff the morning hours. Wendy’s would therefore have to generate 5% to 7% of its sales in the morning just to break even. The brand, and its franchisees, will hope for more.

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