The Seasoned Baconator and Potato Breakfast is part of the breakfast menu at Wendy’s restaurants on March 2, 2020 in New York City.
David Dee Delgado | beautiful images
Wendy’s has become the rare restaurant company to attract customers to its restaurants for breakfast even during the coronavirus pandemic.
Over the past eight months, consumers have disrupted their old breakfast habits and started eating early breakfast at home, fueled by office shutdowns and virtual school attendance. The change in behavior has resulted in higher sales for grain producers General Mills and Kellogg, who have struggled to revive consumer appetite for varieties like Cheerios and Frosted Flakes before the crisis.
For fast-food restaurants, on the other hand, the abrupt shift dragged down breakfast sales, even as their larger business recovered rapidly. Coffee shop chain Starbucks, which relies on loyal customers for early morning commutes, reported a 9% drop in same-store sales in the most recent quarter. Executives say customers have switched to making coffee later in the morning or early afternoon.
Some of Yum Brands̵7;s Taco Bell franchisees decided to open a restaurant later, which helped with the cost of labor but temporarily cut breakfast off their menus. Early breakfast made up 4% of sales in Q3, down from the usual contribution of 6%, although more than half of operators continue to serve breakfast.
But Wendy’s, which started offering breakfast across the country just weeks before it started closing, is countering that trend. Breakfast accounts for 7% of the company’s weekly revenue – a slight drop from the previous quarter’s 8% – and adds about 6.5% to US same-store sales growth of 6.6% for the quarter. Tuesday. Executives said breakfast sales increased in the third quarter, compared with three months earlier.
Reduced competition from Taco Bell and higher spending on awareness marketing could help Wendy’s sell breakfast. In the most recent quarter, Wendy’s reported spending $ 6.2 million on advertising for its breakfast services, up from $ 2.2 million in the previous quarter.
CEO Todd Penegor told analysts on Wednesday that the chain’s repeat customer count was “very strong”, showing that Wendy’s Frosty-ccino and Breakfast Baconator are convincing consumers to build new breakfast habits.
“We are confident that we can continue to grow this business in the future as more and more people are returning to their daily jobs,” he said.
According to data from NPD Group, across the broader industry, breakfast traffic is improving. In September, hits were down just 12%, from a low of 35.8% in April. When consumers return to the driving lane for breakfast sandwiches and hot coffee, Wendy’s in a unique position of power to attract new consumers forming different habits.
Despite Wendy’s breakfast success, the company’s shares fell about 4% in late morning trading after the company failed to hit analysts’ revenue estimates. Wendy’s shares have risen more than 6% in the past 12 months. The stock has a market value of nearly $ 5 billion, hitting a 52-week high of $ 24.91 on October 16.
On Wednesday, Wendy’s also announced plans to restructure some of its operations, a move that would cost the company between $ 7 and $ 9 million in severance and office closure. The company also plans to only test drive through locations. Both decisions are rooted in pandemic-inspired habits. More and more diners are using the drive system to take their food away and Penegor says Wendy’s needed less office space because employees were productive at home during the Covid-19 crisis.