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The Wendy's Co. expects its year-old breakfast daypart to grow to 10% of its sales mix by the end of 2021.

Wendy’s continues to bank on breakfast

Burger brand expects daypart to grow to 10% of sales mix by the end of 2021 from 7% in Q4

The Wendy’s Co.’s year-old breakfast daypart should benefit as vaccines roll out and workers return to commutes, executives said Wednesday, and the burger brand expects it to grow to 10% of its sales mix by the end of 2022.

Todd Penegor, CEO and president of the Dublin, Ohio-based burger brand, said on a fourth-quarter earnings call that Wendy’s expects to grow breakfast, launched on March 2 before the COVID-19 pandemic was declared, by 30% this year.

“We were thrilled with the launch of our breakfast daypart in 2020,” Penegor said, “and we know that we are just scratching the surface of its potential, as we continue to believe that we can get to 10%-plus of sales relatively quickly.”

He said marketing had grown awareness of the new daypart “and customer satisfaction has been overwhelmingly positive.”

Penegor said Wendy’s invested nearly $20 million to ready the US system for the breakfast launch and invested $15 million in incremental advertising in 2020. The company plans to make that same advertising investment this year.

“We plan to continue to support breakfast with more advertising dollars year-over-year to drive trial and frequency as we continue to ingrain Wendy's into morning routines,” he said.

Gunther Plosch, Wendy’s chief financial officer, said the daypart should continue to grow as mobility improves as coronavirus vaccines reach more of the population.

The CEO said breakfast in the fourth quarter remained at about 7% of sales and increased average unit volumes for the year.

“We believe that breakfast has been and will be transformative to our overall restaurant economic model, giving us fuel for growth into the future,” Penegor said.

While a “handful” of franchisees have talked about taking hiatus from breakfast, but not discontinuing the daypart, those are near university campuses or in trade areas with few office workers returning because of the COVID-19 restrictions.

“Everybody is all-in,” he said.

For the fourth quarter ended Jan. 3, Wendy’s net income rose 46% to $38.7 million, or 17 cents a share, from $26.5 million, or 11 cents a share, in the same period last year. Revenues were up 10% to $474.3 million from $427.2 million in the prior-year quarter.

Fourth-quarter same-store sales were up 4.7% in the quarter globally, with an increase of 5.5% in the United States and a decline or 2.3% internationally.

The company said first-quarter sales were “off to a strong start.” Through the week ended Feb. 21, year-to-date U.S. same-store sales increased about 6% and global same-restaurant sales increased about 5%.

Penegor said that, despite a weather impact, “we are expecting Q1, U.S. same-restaurant sales growth of approximately 10%.”

He said Wendy’s digital business grew to about 6.4% of U.S. sales in the fourth quarter, which is more than double the amount in same period of 2019.

“We believe that we can drive our digital business to 10% of sales by the end of 2021, which is three years ahead of our initial expectation,” Penegor said.

“Since the launch of loyalty in the third quarter, we have seen significant increases in our monthly active users by about 25%,” he said, “And at the end of the year, we had approximately 3 million active users to go along with 12 million total members.”

Penegor said Wendy’s is focused on turning its restaurants into “frictionless transaction centers.” The company launched curbside and mobile grab-and-go in 2020.

Wendy's, founded in 1969, has more than 6,800 restaurants worldwide.

As it considers development, Penegor said Wendy’s has been looking at smaller dining rooms, with 30 to 40 seats inside, and is considering drive-thru-only sites and modular designs and testing dark kitchens.

Contact Ron Ruggless at Ronald.Ruggless@Informa.com

Follow him on Twitter: @RonRuggless

 

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