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Wendy’s acknowledges its fresh beef shortage

But executives downplayed any impact on sales and suggested that reports of the outage are exaggerated.
Photograph: Shutterstock

Wendy’s on Wednesday acknowledged that its restaurants have struggled with tight supplies of the fresh beef it uses for burgers, but also downplayed the impact on the chain’s sales and suggested some of the reports are exaggerated.

Speaking on the company’s first quarter earnings call, CEO Todd Penegor said suppliers are facing “production challenges.”

“Because of this, some of our menu items may be in short supply from time to time at some restaurants in this current environment,” he said, noting that supplies continue to come in for each of its restaurants, with normal schedules of two to three deliveries per week.

The company has also shifted marketing to focus on chicken products. “We’re working diligently to minimize the temporary impact to our customers and restaurants and continue to work with our supplier partners to monitor this closely,” Penegor said.

Production declines across the country have in particular hurt the supply of fresh beef primarily used in burgers, as Restaurant Business reported last week. The challenge has been most acute at burger chains that supply 50% beef trim, which they use along with 90% trim to make the fresh ground beef for their burgers.

The tight supply has been driving up costs throughout the industry, and Wendy’s noted Wednesday that its commodity prices in the first quarter rose 3.9%, driven by beef.

Some Wall Street analysts earlier this week studied menus for mobile apps at Wendy’s around the country and found that more than 1,000 of them weren’t selling burgers at the time, suggesting that nearly 1 in 5 of the chain’s restaurants were out of their primary product.

Penegor, however, said that might have been exaggerated, noting that some restaurants take burgers off their mobile menus out of “an abundance of caution.”

“I know there were a lot of reports out there yesterday that we were completely out of beef in many restaurants,” he said. “One of the things people can do in the digital app and on Wendys.com is, when you’re tight on beef, you can turn it off the mobile order. It doesn’t mean you’re out of beef at the restaurant level, but you wouldn’t want to disappoint a consumer that looked in mobile order and it said you had beef, and then they drove to the restaurants and you are out.”

Penegor also downplayed the impact on sales. “Folks are still in the restaurants, and they’re buying other food items when they’re there,” he said.

He also assured analysts on the call that the situation was temporary. “We do believe it is temporary, and we’re close with our big supply partners, and we have several of them on the fresh beef front, and we believe we’ll work through this in short order,” Penegor said.

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