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Wendy’s finds some surprising sales and profitability in the morning

The chain’s morning sales have held up during the pandemic, helping its sales more fully recover in recent weeks.
Photograph courtesy of The Wendy's Co.

Wendy’s same-store sales have improved steadily over the past six weeks, thanks in part to surprisingly resilient breakfast sales.

Same-store sales in March were down 7.7%—even though they were up 16% in the first week of the month after the Dublin, Ohio-based burger chain introduced its morning daypart. In the first two weeks of April, same-store sales were still down about 25%.

By the week ending on May 3, however, that figure had improved to down just 2.1%. Breakfast, meanwhile, represents about 8% of company sales, Wendy’s executives said Wednesday.

That performance runs counter to expectations. Chains such as McDonald’s and Dunkin’ have noted that breakfast is the most challenged daypart as work-from-home orders have reduced the number of morning commuters.

Companies such as Taco Bell have gone so far as to give operators the option to not offer breakfast at all during the crisis.

“With mobility down so much and people not having a morning routine, the breakfast daypart across the industry has been hit very hard,” CEO Todd Penegor said on Wendy’s first quarter earnings call Wednesday. “Even with that headwind, we’ve been able to get folks to come out and try our great breakfast offerings.”

Wendy’s introduced breakfast on March 2 to considerable fanfare—and intense competition from rivals such as McDonald’s.

The company took steps to ensure that franchisees could generate a profit off of the daypart, starting it later (6:30 a.m.) and not opening dining rooms until after 9 a.m.

Wendy’s said it is abating marketing fund contributions for sales in the morning and has been able to “work creatively with our labor model” to reduce staffing.

Specifically, with traffic down even in the mornings, Wendy’s says it can staff the morning daypart with just two employees, rather than three.

The moves have helped the daypart become profitable more quickly for operators, an important consideration given sales challenges. “While the environment we encountered as we started breakfast was not what anyone would have expected, the strength of our program makes this daypart a key bright spot for us,” Penegor said. “It has helped it perform well despite significant headwinds.”

Wendy’s said sales in the morning are incremental, and Penegor suggested it has had a “halo effect” on the other dayparts.

Wendy’s has also seen strong digital business: Sales through digital channels more than doubled, and the number of mobile app downloads and users has increased 25% during these weeks.

The company has also taken steps to boost speed in the drive-thru during the pandemic, shifting labor to focus on that window.

Penegor said drive-thru speed has improved during the pandemic. The chain has streamlined its menu, removing items such as wraps and side salads, to simplify operations.

“Right now, the consumer is really looking for core offerings,” Penegor said. “Our marketing calendar is focused on that, and we want to make sure we’re delivering those products very high-quality and very fast, especially as we’re focused on drive-thru and delivery.”

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