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Wendy’s investing $25M behind digital efforts

The company’s strategies will include scanners to improve its speed of service.
Photograph courtesy of The Wendy's Co.

The Wendy’s Co. plans to invest $25 million in its digital initiatives, including new scanning equipment designed to improve speed of service as the burger chain works to increase its competitiveness after sales slowed late last year.

The investments will include $15 million to support its digital experience organization and modernize its digital platforms.

The rest will go to the scanners, which executives said Thursday would help improve speed by enabling employees to scan mobile offers and coupons rather than having to key them in to the point-of-sale system.

And executives believe the scanners will increase use of the company’s mobile app, which provides the company with more information on the consumer.

Todd Penegor, Wendy’s CEO, said the investment will “build a stronger foundation across our digital platforms with a heightened sense of urgency moving forward.”

“We really want to accelerate our consumer-facing digital initiatives, and we think that’s where the customer is going,” Penegor said. He noted the company had made “meaningful progress” over the past couple of years, adding mobile ordering, for instance, while delivery is now in 60% of the chain’s domestic locations—with plans to expand that to 80% by the end of the year.

“We believe that being successful in digital will be a competitive advantage for us, as consumers are craving customization, speed and convenience.”

Wendy’s is making the digital investments following a quarter in which its same-store sales rose 0.2%—reflecting a broad slowdown among fast-food burger chains. Outside of the 2.3% growth that McDonald’s reported in the fourth quarter last year, which came despite declining traffic, publicly traded fast-food burger chains all reported same-store sales of less than 0.8%.

Penegor called improving speed of service at the restaurants an “opportunity.”

“We did slow down during the course of last year,” he said on the earnings call. He said the company plans to simplify its restaurants and is providing training in the system to improve throughput.

Technology will also help, Penegor said. “We really have to make it easy and comfortable for folks to order and get more orders back into the kitchen. It is a focal point for us. We’re going to continue to improve speed of service as we go into this calendar year.”

Revenues at the Dublin, Ohio-based company rose 3.6% in the quarter to $397.8 million. Net income fell nearly 87% to $18.8 million, or 8 cents per share. Wendy’s stock was flat Thursday.

The company has been working to accelerate its unit growth, both in the U.S. and internationally.  The system added 77 net new units in 2018, the third straight year of unit growth for a chain that had largely stopped through the recession. The company operates about 5,800 locations in the U.S. and 6,700 restaurants worldwide.

Wendy’s wants to increase its rate of global expansion. The company put Abigail Pringle in charge of efforts to build its international business—an area where the chain has lagged behind its primary burger competitors McDonald’s and Burger King, both of which have robust international development.

The company has also been working to accelerate its U.S. unit growth. And Penegor detailed efforts to accelerate same-store sales this year following the late-2018 slowdown.

The company earlier this month introduced a line of Made to Crave burgers, such as a Peppercorn Mushroom Melt, that Penegor called “the most significant change to our premium menu in more than a decade.”

The company’s digital efforts do include adding kiosks to its restaurants, but executives said that effort is going slower than initially planned. The chain has kiosks in 60% of company locations, and the company is trying to prove the benefits of the devices.

“We’re trying to put our money where our mouth is,” CFO Gunther Plosch said on the call. “We’re trying to prove the business case.”

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