Web Exclusive | October 2010 | By Barney Wolf

Wendy’s Breakfast 3.0

A leading burger chain hopes its effort to build the morning daypart is “real” this time.

In an effort to grab a share of the fast-growing morning daypart, Wendy’s launched a new breakfast menu in three test markets and part of a fourth.

The nation’s No. 3 burger chain, which has operational headquarters in suburban Columbus, Ohio, is gauging customer sentiment for a quartet of distinctive breakfast sandwiches, a new coffee blend, a value menu, and a handful of side items.

“We’re very excited by the test results so far,” Wendy’s/Arby’s Group chief financial officer Stephen Hare told investors during a recent conference‚ adding that more test markets will be added this quarter with the hope of a national roll out by the end of 2011.

The trial run began more than a month ago in Kansas City, Phoenix, and Pittsburgh, all of which continued to serve breakfast after Wendy’s backed away last year from its last bid to build a national a.m. daypart. Ten hometown Columbus restaurants are also in the test.

It is no surprise that Wendy’s wants to return to morning business. During the last five years, quick-serve breakfast traffic grew 10 percent, and the daypart accounted for 60 percent of total industry growth, according to the NDP Group.

“It’s been one of the bright spots of the industry” during the recent economic downturn, says Bonnie Riggs, restaurant analyst at NPD, a global market research firm.

Twenty-two percent of all fast-feeder traffic is during the morning meal, so “for anyone not serving breakfast, it’s a missed opportunity,” Riggs says.

Not surprisingly, operators are increasingly pointing development and marketing dollars into that daypart, and new entrants, including Subway, have engaged in the breakfast battle.

“It’s a very competitive segment,” Hare says. Industry leader McDonald’s “has a very strong position,” and the space is crowded with seasoned quick-service players and fast-casual brands such as Panera Bread.

But “the size of the prize is amazing,” says Dennis Lombardi, executive vice president of foodservice strategies for global design firm WD Partners, also based in Columbus.

Wendy’s averages $1.4 million in sales per store annually, so if it can obtain breakfast receipts of “even 15 percent of total sales, that amounts to more than $150,000 per store,” he says. 

Breakfast has proved elusive for Wendy’s. The new a.m. menu is version 3.0, following a casual-style breakfast in the mid-1980s and a “me-too” effort from 2006 to 2009.

The morning meal continued afterwards at a handful of the chain’s units, including those in markets hosting the newest test and in dozens of contract locations such as airports, malls, and highways. Only 2 percent of Wendy’s sales are from breakfast.

This time, the company plans to break through in breakfast by delivering products consistent with its “real,” high-quality brand positioning. That means “fresh-cracked eggs, fresh-cooked bacon in the store,” and a new coffee program, Hare says.

Pricing has been consumer-friendly.

The Artisan Egg Sandwich features a cracked egg, asiago cheese, hollandaise sauce, and Applewood bacon on a square honey-wheat artisan muffin. The Fire Roasted Burrito is grilled and has eggs, roasted peppers, poblano chiles, and Applewood bacon stuffed into a multigrain tortilla with a signature hot sauce. Both are $1.99.

The Morning Melt Panini, which is $2.99, includes an egg omelet, cheddar and asiago cheeses, and bacon or sausage between slices of sourdough bread. The Fresh Baked Biscuit is a Southern-style biscuit with an egg omelet and melted American cheese for $2.29.

If Wendy’s can obtain breakfast receipts of “even 15 percent of total sales, that amounts to more than $150,000 per store.”

Side items can be purchased separately or for $1 as an add-on to the sandwiches. These include a Good To Go Bar that is similar to an oatmeal-and-fruit cookie, home-style potatoes, sliced fruit, and small coffee, soft drink, iced tea, or orange juice.

The menu is akin to “Panera light,” says Tom Forte, director and senior research analyst for Telsey Advisory Group, a New York–based independent equity research firm. “Most of its competitors are focused on value, but Wendy’s is going to more high-quality,” he says.

The menu also offers items for value consumers, ranging from 99 cents for a Sausage and Egg Biscuit to $1.99 for the Sausage and Gravy Biscuit. The Classic Breakfast Platter offers eggs, a biscuit, and bacon or sausage for $3.99.

Data developed from the breakfast test will help create an operational plan to be presented to the Wendy’s system for approval in advance of “a national launch, hopefully by the end of next year,” Hare says.