Wendy’s breakfast was a success, and then coronavirus hit

The chain’s sales were up 15% in the week after its breakfast launch before the pandemic changed everything.
Photograph courtesy of The Wendy's Co.

The good news for Wendy’s is consumers loved its breakfast: Sales in the first week of March were up 15% as diners tried the chain’s Breakfast Baconator and Frosty-ccino.

But sales quickly turned south after that. At the end of last week, the company said Thursday, same-store sales were down 20%. The Dublin, Ohio-based company has now closed its dining rooms, along with 46 stores in the U.S. and 189 internationally, and is working to rescue beleaguered franchisees.

“This is an unprecedented time, and we are focused on the actions where we can make a positive difference,” CEO Todd Penegor said in a statement. “To that end, we have taken several precautionary steps to advance public health goals, maintain essential access to high-quality food, support our franchisees and safeguard our team members and customers from the spread of COVID-19.”

Wendy’s is working with franchisees that are particularly vulnerable. The company says it is extending payment terms for royalties and marketing funds by 45 days for the next three months and is deferring rent payments on properties the company owns by 50% over the next three months.

It also says it has reached out to franchise lenders and is “working through different options to support our franchisees during this time.”

Operators will also get a one-year extension on remodel and development requirements.

Wendy’s largest franchisee, NPC International, has been teetering on the edge of bankruptcy for months.

Wendy’s became the latest in a string of restaurant companies that have accessed lines of credit in a bid to hoard cash for a spring with low sales. The company drew down $120 million and says it has $340 million in cash on hand.

It also withdrew its outlook for the year and its long-term outlook, citing “the current unprecedented global market and economic conditions around the world.”

Wendy’s release Thursday also provided some clues as to how consumers are using the chain: Drive-thru sales now represent about 90% of the chain’s overall sales mix. And digital sales have surged: They now represent 4.3% of the chain’s sales, up from 2.5% in 2019.

Much of that increase came from “strong growth” in the chain’s delivery business.

The company says it has added Postmates to its group of delivery partners, which currently features DoorDash and Grubhub, and the company is increasing its marketing focus for digital and delivery orders.

It is also adjusting its marketing plan “to reflect the dynamic and changing conditions of the marketplace.”

Wendy’s introduced its breakfast daypart at the beginning of the month, its latest and arguably best effort to start serving food in the morning.

Because breakfast worked so well, Wendy’s says it will refocus its incremental breakfast marketing plans to “support our franchise system in other ways.”

But it also vowed to keep putting pressure on its competitors in the morning.

“The company and its franchisees remain fully committed to breakfast and as part of this plan we will continue to apply media pressure to this daypart as we believe it will be beneficial to both breakfast and rest-of-day sales,” the company said.

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