Wendy's executives admit its last breakfast attempt was a massive failure. Here's their new plan to make breakfast a $940 million business.
- Wendy's is rolling out breakfast across the US in 2020.
- Executives said that breakfast is set to become 10% of Wendy's business, bringing in $940 million.
- In the past, Wendy's breakfast aspirations have flopped. On Friday, the company's US president Kurt Kane gave investors a number of reasons why this time will be different.
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Wendy's is rolling out breakfast. And this time, executives are determined to do it right.
Breakfast was one of the hottest topics at Wendy's investor day on Friday. The company's shares were up 2.9% at 10 a.m., after executives shared details on the chain's plan to roll out breakfast in 2020."We believe we fully have the right as a brand and a business to move into those that are serving breakfast," Wendy's US President Kurt Kane said.
Kane acknowledged a "big elephant in the room" - the fact that Wendy's has failed on breakfast in the past.
Nine years ago, Wendy's attempted to add breakfast to the menu. Rivals such as McDonald's snuffed out the rollout before it went national, aggressively advertising and slashing prices in areas where Wendy's was testing the breakfast menu. In 2013, Wendy's admitted defeat and shelved its plans to roll out breakfast.
"We didn't build it the right way," Kane told investors on Friday.
- Wendy's will roll out breakfast nationally in 2020, instead of a regional rollout that allowed rivals to strangle the breakfast menu in its cradle in the past.
- It only requires three employees, saving on labor costs. The previous breakfast required four workers.
- Franchisees worked to create the new model, making sure that the economics make sense for locations instead of weighing on profit margins.
- The menu only uses 18 new stock-keeping units - or new products and ingredients - compared to 45 unique stock-keeping units in the last rollout.
- No new equipment costs. Franchisees had to pay $10,000 for the last breakfast rollout.
- It's focused on pick-up windows, instead of focusing on both dining room and drive-thru window orders.
- It's operationally simple, as opposed to making franchisees deal with the complications they faced in 2010.
Wendy's told investors that breakfast will be 10% of its business, with a relatively speedy ramp-up. Restaurant Business Magazine's Jonathan Maze crunched the numbers and found that that would make breakfast a $940 million business for Wendy's.
Prior to Friday's investor day, analysts had been split on Wendy's breakfast aspirations. While Cowen sent investors a skeptical note on the move into breakfast, Gordon Haskett analyst Jeff Farmer offered a more optimistic outlook.
"Wendy's, in making another run at the breakfast daypart, is walking into arguably the most challenging market share battleground in the restaurant sector - but with critical lessons learned from past attempts and what we believe is a more resolute franchise group," Farmer wrote last week.