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Wendy’s makes big push into delivery

Fast-food chain to expand delivery to 2,500 locations by end of 2017

Add The Wendy’s Co. to the growing list of restaurant chains making a huge push on delivery.

The Dublin, Ohio-based quick-service chain on Wednesday said it is planning to expand its delivery partnership with Door Dash to 2,500 locations in 48 markets by the end of the year.

“We are excited,” CEO Todd Penegor said on the company’s third-quarter earnings call. “The continued results in Columbus and Dallas encouraged us to go bigger with our partner Door Dash on delivery.”

Delivery is the biggest restaurant industry trend, with chains as different as McDonald’s Corp. and The Cheesecake Factory Inc. all in some stage of expanding the service.

In this case, Wendy’s is playing keep-up with McDonald’s, which is rapidly expanding delivery through a partnership with Uber Eats.

On the earnings call, Penegor said that delivery is “highly incremental” and results in increased spending per customer.

“We’re seeing some significantly higher average checks,” Penegor said. He noted that, while most orders at Wendy’s are generally for one or two people, delivery gives the chain access to larger orders for three or four people.

Penegor also said that orders frequently come in the evening and at dinner, and he said Door Dash has been able to get delivery orders to homes within 30 minutes.

As for whether the chain could add it nationally, however, Penegor was less certain. “We’re making sure we’ve got delivery partners,” he said, noting that the chain plans to go where Door Dash is operating today. “We’re working hard to expand access to our brand and our food wherever we can find the right partners.”

Earnings disappointment

Wendy’s announced its delivery expansion the same day it reported third-quarter earnings that fell short of investors’ expectations — sending the company’s stock down about 3 percent midday Wednesday.

The company said that earnings adjusted for one-time items was 9 cents per share, below investors’ expectations for the quarter ended Oct. 1. Revenues were $308 million, down 15 percent from $364 million due largely from lower sales from refranchising.

Net income was $14.3 million, down 71 percent from $48.9 million because of higher taxes.

Same-store sales at the 6,500-unit chain increased 2 percent in North America in the quarter.

Hurricanes Harvey and Irma lowered same-store sales by 30 to 40 basis points. Executives also said Wednesday that its remodeled restaurants are expected to improve same-store sales by 70 basis points this year. The company expects its full-year same-store sales to rise 2 percent to 2.5 percent.

The company said that 39 percent of its system has been remodeled and 42 percent of its system should be remodeled by the end of the year.

Wendy’s company-operated restaurant margins declined 170 basis points to 16.7 percent of sales in the quarter, from 18.4 percent. The company blamed high commodity costs for the decrease.

Those high commodity costs came from a “spike” in beef and bacon costs, executives said. They also said that food costs were higher for its new chicken tenders. The company suggested that the spike was temporary, and that the higher beef and bacon costs should moderate this year.

QSR outperformance

Wendy’s same-store sales have increased for 19 straight quarters, which Penegor called “unmatched in the QSR hamburger category.”

He also said that the chain has kept or increased its share of quick-service traffic for eight straight quarters.

Yet Wendy’s performance also came as its primary competitors, McDonald’s and Burger King, both reported same-store sales in excess of 4 percent in the same period.

“A lot of the QSR folks are playing a good game,” Penegor said. “It’s a testament to traditional QSR being in the right segment at the right time, with speed, convenience and affordability.”

Penegor said that deals are driving a lot of growth in the sector, but he also said he’s seeing signs that the consumer economic model is starting to improve.

“We start to see some of that pick up a little bit in the QSR segment,” he said. “But we don’t see it broadly across total restaurants.”

Mobile ordering and kiosks

Wendy’s is on track to have 75 percent of its system enabled for mobile ordering and most of the system in place by the end of the first quarter of 2018.

The company is also working on in-store kiosks. It has kiosks in 100 restaurants and expects them to be in place in 300 by the end of the year. Mobile ordering and kiosks tend to generate a higher average check, Penegor said.

“In 2018, technology needs to play a bigger role in the connection to the customer,” he said.

Contact Jonathan Maze at [email protected]

Follow him on Twitter at @jonathanmaze

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