Wendy’s reported earnings on Thursday and, lost amid news that it’s closing 140 locations, is that its Krabby Patty Kollab, introduced in early October, has appeared to be a big success.
The effort is “driving significant sales growth” so far, CEO Kirk Tanner said, with “significantly” accelerating same-store sales in October.
The chain’s same-store sales had been up 0.2% in the third quarter, but the implication was that such sales were far higher once that promotion hit.
The campaign “definitely struck a chord with a large population,” Tanner said.
Meanwhile, rival McDonald’s has had a popular marketing effort of its own. Like Wendy’s, it was generating flattish same-store sales, up just 0.3% in the third quarter.
But it introduced a marketing campaign of its own in the form of the Chicken Big Mac. Customers apparently flocked to the chain’s restaurants, with same-store sales up in the mid-single digits, and traffic not far behind.
Had it not been for an E. coli outbreak, we might be talking today about a McDonald’s comeback from a tough summer.
It is certainly not accurate to declare the fast-food business on the road to repair, particularly given some of the other numbers we’ve seen thus far. Traffic fell 7.6% at El Pollo Loco last quarter. Traffic fell 10% at Starbucks. Both McDonald’s and Wendy’s, each of which had negative traffic and flat same-store sales, said they either kept pace with or outpaced overall fast-food sector results.
But it is also worth highlighting that both chains generated considerable interest with limited-time offers backed by substantial marketing efforts. Neither of those efforts focused on price. And both have easily outdone price-based promotions that both chains were running over the summer.
For operators, however, the lesson is simple: Even during an otherwise bleak period for customer traffic, the right marketing efforts can bring in customers willing to pay full price.
We’ve generally known this, of course. Chili’s has easily bested its rivals for the past half a year plus largely on the backs of a strong marketing campaign focused on what customers are concerned about right now—specifically, value for the money.
The consumer economy is remarkably strong. Gross domestic product increased 2.8% last quarter, according to newly released federal data. Disposable personal income increased 0.3% in the quarter.
Consumers have money and jobs, and they’re spending, which is lifting the economy despite a host of issues.
While lower-income consumers have clearly been frustrated by high prices and have cut back accordingly, the economy also does not have many of the hallmarks that would suggest a level of difficulty being seen in the fast-food space.
All of which is to say that consumers want to dine out. Most of them have money to do so. Brands just have to figure out how to get it done.
That said, it’s one thing for big chains like McDonald’s and Wendy’s to win with some marketing campaigns. Larger brands have big marketing budgets that can break through the noise during a competitive period.
Smaller brands have a tougher time doing this.
Nevertheless, the success of McDonald’s and Wendy’s should be viewed as a sign that brands can win right now with a good marketing campaign. Wendy’s executives sure think so.
“Krabby Patty has been nice shot in the arm that’s built off of a terrific core menu that is delivering the growth, and we’ll continue to do that,” Tanner said. “You can’t iterate enough the excitement and innovation that drives. You’ll see us continue to drive innovation.”
Indeed, he mentioned a couple of other products, such as a Mushroom Bacon Cheeseburger and a Salted Caramel Frosty. “Those are the kind of things you can expect from us,” Tanner said. “Continuous innovation, focus on the core, and delivering the best value in the marketplace.”