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McDonald’s fresh beef isn’t hurting or helping Wendy’s

The chain says its sales haven’t changed in markets where its larger rival has tested fresh-beef burgers.

McDonald’s this week started serving fresh-beef Quarter Pounders, made to order, a move that directly challenges a strength of rival Wendy’s, which has long served fresh-beef burgers.

But that move, at least for now, hasn’t impacted Wendy’s restaurants one way or the other, executives said on Wednesday.

Speaking on the company’s first quarter earnings call, CEO Todd Penegor said that Wendy’s sales in the eight markets where McDonald’s tested its fresh beef weren’t affected “either way.”

But, he added, “They haven’t turned on a lot of support in markets.”

McDonald’s move into fresh beef potentially takes away a Wendy’s marketing point, though the larger company is only serving made-to-order burgers for its larger, quarter-pound patties. The smaller patties it uses in its hamburgers, cheeseburgers and Big Macs are still frozen and are premade and held in a warmer.

That hasn’t been lost on Wendy’s, which has noted McDonald’s continued use of frozen patties for its Big Macs on its famously aggressive Twitter feed.  

“McDonald’s has been telegraphing fresh beef for some time,” Penegor said. “So we’ve been prepared.”

Wendy’s marketing push, often mentioning McDonald’s by name, has led to some speculation that it could actually help drive sales to its rival. At the same time, there’s a belief that McDonald’s move to fresh beef could actually help Wendy’s sales, as it has been known for fresh beef far longer.

Wendy’s said its same-store sales increased 1.6% in its North American restaurants in the quarter ended April 1.

That lagged behind its chief rivals. McDonald’s same-store sales rose 2.9% in the first quarter. Burger King’s same-store sales rose 4.2%.

But Penegor said that Wendy’s traffic increased—McDonald’s traffic did not—and he noted the chain has been performing more consistently than any of its quick-service rivals. The chain’s same-store sales have increased 21 straight quarters. And Penegor said that its share of the burger category outside of breakfast is as big as it’s been in five years.

The chain said it has gained or held its market share for 10 straight quarters.

“We feel good that we have nice momentum leading to the rest of the year,” Penegor said.

Wendy’s generated traffic growth in the quarter in part with a $1 Double Stack offer in February.

“Customers responded immediately” to the offer, Penegor said, and it lured “millions of new customers” to the chain.

Wendy’s hopes to generate more sales in the coming years with a combination of efforts. That includes continued remodels. Forty-four percent of the chain’s locations are now remodeled, the company said. Remodels generate same-store sales growth.

The company also hopes delivery, mobile orders and kiosks will help generate sales, too.

Delivery is now available at 25% of the chain’s more than 5,700 U.S. restaurants, Penegor said, thanks largely to its partnership with DoorDash.

Penegor said the company would increase its footprint as DoorDash expands coverage. But the company also said it would look to add delivery partners to increase delivery’s reach into more markets.

Delivery, Penegor said, is largely incremental, with more evening sales. The orders also come with a higher average check. “We have a franchisee base that is excited, and continues to push us to expand delivery,” he said.

The company also believes franchisees will add kiosks to its restaurants.

Wendy’s has kiosks in 300 restaurants, with the company adding the devices to 60% of the locations it operates.

Penegor said that 10% of inside orders use the kiosks, which lead to increased throughput during busy times and higher average checks. That should lead more operators to add the kiosks.

Wendy’s is also increasing the number of kiosk options. It has some countertop kiosks that cost less and accept cash, an important consideration given that a high percentage of fast-food customers pay with cash, which many kiosks do not accept.

Penegor, in fact, said that the kiosks have a “less than two-year payback,” which should be enough to drive more franchisees to add the machines.

“We don’t think it needs to be incented,” he said.

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