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Wendy’s will consider a franchisee opt-out on breakfast

CFO Gunther Plosch says burger brand will be open to discussing concerns

The Wendy’s Co., which plans to roll out a breakfast platform nationwide in the first quarter of 2020, will be consider offering franchise operators the option of opting out later on, executives said Wednesday.

The Dublin, Ohio-based burger brand in October said the new breakfast platform, which has been tested in 300 stores from 6:30 a.m. to 10:30 a.m., is expected to contribute 6% to 8% of sales in the partial 2020 fiscal year and has been tailored, with help from franchisees, to simplify operations.

In a third-quarter earnings call Wednesday, Gunter Plosch, the company’s chief financial officer said franchisees will “have an opportunity to potentially raise concerns if the breakfast business is not creating enough financial returns for them.”

Plosch said Wendy’s would be willing to discuss with those operators the potential of opting out.

“They need to demonstrate on their side that they have really put their best foot forward,” Plosch said. “Because, again, you need to understand we passionately believe that we have designed a very, very compelling breakfast program that is profitable and, therefore, we really expect the opt-out range to be very, very low.”

Todd Penegor, Wendy’s CEO and president, added that, “We don't want breakfast to be a Hail Mary. We want breakfast to be an additional layer to growth in our business.”

Penegor said the franchise system was aligned to the breakfast launch and the company expects breakfast revenue to grow to 10% of sales after the first rollout year in the domestic system.

“We believe that we can grow this daypart to at least 10% of our U.S. sales based on strong customer demand and on the strong program that we plan to execute,” he said.

Plosch said Wendy’s is proud of the labor model it has created for breakfast. “It needs only three people,” he said, and the workers can also be available for the lunch daypart.

The company is investing $20 million in the breakfast launch, he said.

“We are investing actually in the awareness generating advertising to make sure we can hire those 20,000 new employees for the system to make sure the daypart can be staffed,” Plosch said. “We actually think it's a popular daypart for people to work in and it creates actually more flexibility doing the morning and lunch daypart as you have already a crew in place. So, if you have call-offs later on in the midmorning, you can actually recover much better from that.”

For the third quarter ended Sept. 29, Wendy’s net income was $46.1 million, or 20 cents a share, compared to $391.2 million, or $1.60 a share, in the same period last year. The 2018 quarter included Wendy’s sale of its interest in Inspire Brands for $450 million.

Revenues in the third quarter were up 9.3% to $437.9 million from $400.6 million in the prior-year period.

Same-store sales growth at Wendy’s North American restaurants was 4.4% in the quarter. Systemwide same-store sales growth was 5.7%.

Wendy’s, founded in 1969, has more than 6,700 restaurants worldwide.

Contact Ron Ruggless at [email protected]

Follow him on Twitter: @RonRuggless

TAGS: Franchising
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