Operations

Why more chains are embracing the late-night business

Rising demand, better unit economics and an improving labor picture are enticing restaurants to keep the lights on long after dark.
Wendy's location
Most Wendy's are now open until midnight or later. | Photo: Shutterstock

More restaurant chains are burning the midnight oil these days … or nights, rather.

After the pandemic made it nearly impossible for restaurants to operate 24/7, brands are gradually starting to extend their hours to midnight or beyond, thanks to rising demand, an improving labor environment and less competition, at least for now.

Earlier this week, Pizza Hut said it has extended delivery and takeout hours at thousands of locations, including some until 2 a.m. A day later, Chipotle said it would keep select locations open until midnight on Halloween, a rarity for a fast-casual brand. Wendy’s also made the leap into late night over the summer with extended drive-thru hours.

Those newbies join longtime night owls such as Taco Bell, Denny’s and Jack in the Box that have also seen the nighttime business bounce back in recent months. 

Same-store sales at Jack in the Box, for instance, rose 7.9% in the second quarter, and executives credited late-night demand as a major reason for that.

Jack in the Box is not the only brand to see traffic improve in the wee hours. At McDonald’s, 10.5% of overall visits came between 10 p.m. and 4 a.m. in Q2, up from 8.7% the previous quarter, according to data firm Placer.ai. The same thing happened at Burger King, Wendy’s, Taco Bell and Jack in the Box.

“QSR chains tend to have greater late night visits during the summer months,” Placer.ai wrote, “but a number of chains are also spending more on their late-night advertising, expanding hours of operation, and partnering with delivery services.” 

To be sure, late night still represents a very small share of restaurant sales. Since 2017, it has accounted for just 4% of all QSR sales, with the exception of 2020, when it dipped to 3%, according to data from Technomic. 

But the daypart has some appealing attributes from a unit economics perspective. For instance, customers typically spend more to get their late-night fix. So far this year, the median customer is spending $15 for a “late-night snack,” according to Technomic. That’s the highest figure of any daypart besides dinner.

Late-night orders also tend to skew toward delivery, which may allow restaurants to staff even fewer workers during those hours. In 2023, 10% of late-night QSR transactions have been for delivery compared to 7% across all other dayparts, according to Technomic. 

At Wendy’s, where 90% of its U.S. stores are now open until midnight or later, “we're seeing higher average checks and a skew towards delivery, which further supports the restaurant economic model,” CEO Todd Penegor said during an earnings call in August, according to a Sentieo/AlphaSense transcript. 

Restaurant staffing levels are also improving, allowing brands to keep the lights on longer and start investing in that daypart again. After adding 61,000 jobs in September, the industry is back to pre-pandemic employment numbers, according to data from the U.S. Bureau of Labor Statistics. 

“Our restaurants are in much better shape related to staffing and hours to the point where a national late-night activation such as this was even possible,” Jack in the Box CEO Darin Harris told investors in August, according to a Sentieo/AlphaSense transcript.

Restaurants might also be benefiting from less competition at night. Local, 24-hour diners have been struggling for years, and the challenges of the pandemic were the final blow for many. That has left room for Denny’s and other chains to win some of that business. 

“With 75% of Denny's restaurants now operating 24 hours … we have cemented our late-night leadership position in the market once again,” said Denny's CEO Kelli Valade. 

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