The Breakfast Baconator and Seasoned Potatoes will be on the breakfast menu at Wendy’s restaurants on March 2, 2020 in New York City.
David Dee Delgado | Getty Images
Two years ago, Wendy’s launched its breakfast menu across the country, eventually reaching the finish line for a goal it failed and failed to achieve for nearly four decades. Then came Covid lockdowns.
Before the pandemic, breakfast was the only meal that attracted a growing number of customers to fast food chains. Lunch and dinner traffic declined as consumers chose healthier options or made their meals at home. For Wendy’s, introducing breakfast would allow the hamburger chain to attract new sales without cannibalizing its lunch, snack or dinner traffic.
Wendy’s stuck to its plan even as Covid took hold, serving egg sandwiches and breakfast burgers while rival chain restaurants opened later or trimmed their morning offerings. It now holds the third largest market share of any hamburger chain in the competitive breakfast category, behind Restaurant Brands International’s Burger King and a dominant McDonald’s.
By the fourth quarter of 2021, breakfast sales accounted for approximately 8% of Wendy’s US sales, still below the chain’s target of 10% of total US sales. Last year, the company’s breakfast sales grew about 25%, and Wendy’s thinks the half-day has more room to grow. In 2022, the hamburger chain expects breakfast sales to increase by another 10% to 20%.
“For us, we’re very solid right now and very quickly number three, but we’re only about a point behind Burger King,” Wendy’s U.S. President Kurt Kane said in an interview. “Our first task is to leave them behind, and we are confident that we will be able to do that here in the not-too-distant future.”
Burger King’s US operations have struggled in recent years, and its weak breakfast performance hasn’t helped. In the fourth quarter, Burger King US same-store sales grew just 1.8%, lagging behind both McDonald’s and Wendy’s for their home markets.
And while McDonald’s is still the dominant player in the morning portion, Kane said he thinks Wendy’s could eventually become number one.
“We think the Frozen Arches have had enough time at the top of the breakfast category, but I think we’ll obviously continue to feast on that and gobble up some of the rest of the category,” he said.
In late February, Wendy’s announced it would be bringing its breakfast menu to all of its Canadian restaurants this spring.
The company’s shares are up 7.6% in the past 12 months, bringing its market value to $4.76 billion. The stock underperformed the S&P 500, but outperformed the shares of McDonald’s and Restaurant Brands International.
Becoming a pandemic winner
Wendy’s breakfast was available nationwide for only about two weeks before states and localities ordered restaurants to close their dining rooms and switch to serving their food through delivery, takeout and drive-thru avenues.
According to Kane, the company discussed the option to adjust its breakfast plans with franchisees once the lockdowns came into effect, but their operators promised to keep the momentum going.
“We had a fantastic start, well ahead of any forecasts we could have hoped for in those first two weeks,” Kane said. “We knew that if we could keep it going, we could develop new habits and create a lot of fans through the process.”
Wendy’s had an edge over the competition anyway, as it had already designed the first two and a half hours of its breakfast service to be drive-in only.
In addition, Wall Street analysts had expected its fast-food rivals to ramp up their own breakfast deals and ads to maintain customer loyalty. Instead, many restaurants found themselves hoarding money, advertising and canceling promotions when their sales took a nosedive.
Wendy’s took the opportunity to spend more on marketing and spread awareness.
The pandemic didn’t just affect the marketing plans of the competition. Some fast food restaurants have even stopped selling early morning meals due to staffing problems and to maintain their profitability. Many Taco Bell locations opened after breakfast and didn’t resume their previous schedule until September.
Still, Wendy’s has not been immune to some of the pressures of the pandemic. Like the rest of the wider restaurant industry, the franchisees sometimes struggled with staff shortages, although Kane said efforts to recruit more employees ahead of the breakfast launch helped.
Changing Routines
The timing of Wendy’s breakfast launch gave consumers the chance to start a new morning habit just as the rest of their daily routines were turned upside down.
“Even if it wasn’t the way we would have set up the script, it may have really helped us because it gave us a chance to really build it in a stable way,” Kane said.
Many consumers stopped commuting to offices or schools, so they changed their breakfast routine. The sale of cereals and orange juice picked up after years, but restaurants saw the demand for their breakfast decline sharply. For example, Starbucks saw that many of its customers were delaying their visit and opted for a cup of coffee after lunch instead of a cup of coffee.
Before the pandemic, Wendy’s expected its busiest times to be 7 a.m. to 9 a.m. when consumers went to work. Instead, the company saw its longest breakfast lines in the last half hour of shift.
Of course, that pattern is shifting again as more consumers return to offices and schools.
“While the pattern is different, breakfast mobility is pretty much back to where it was prepandemic,” he said.
From September to November, online and in-person traffic to restaurants during breakfast hours increased by 11%, compared to a 10% decline in the same period a year ago, according to The NPD Group.
With early risers returning, Wendy’s has used aggressive promotions to attract visitors to his restaurants and create fame for his breakfast offerings. From November through mid-December, it sold its egg and cheese biscuit sandwiches — with a choice of sausage or bacon — for just $1. Kane said he expects similar deals in the coming months.
The chain also recently launched its first addition to its breakfast menu since its debut: the Hot Honey Chicken Biscuit. It’s a game with the Honey Chicken Biscuit, which is paired with the Breakfast Baconator as Wendy’s best-selling breakfast item.
Between the two crowd favorites, however, Kane has a clear favorite: He claims to have eaten 720 breakfast baconators since its official launch — about one a day.
“Some days you get two, sometimes you get none, but you have to balance it out,” Kane said.
This post Wendy’s breakfast menu could overtake Burger King, 2 years after launch
was original published at “https://www.cnbc.com/2022/03/20/wendys-breakfast-menu-could-overtake-burger-king-2-years-after-launch.html”
