More breakfast, menu innovation, digital moves
Wendy’s spent close to $20 million to launch breakfast and then another $15 million in incremental advertising throughout 2020. As noted, it plans to do the same this year.
Greg Lemenchick, senior director of investor relations and corporate FP&A, said “everybody is all-in” on breakfast, which was one of the main setbacks in past launches concerning franchisees. Back in 2010, Wendy’s breakfast push stalled somewhere in the 600–700 restaurant range.
Lemenchick said “less than a handful” of franchisees considered placing breakfast on hiatus, but there hasn’t been talk about discontinuation. More just a short-term break in trade areas hurt by COVID restrictions, like campus locations, etc.
“There is a lot of excitement across the system,” he said. “We think the opportunity as mobility comes back and morning routines get more ingrained, that we can continue to drive this daypart. And the system is fully aligned behind that.”
“As we looked at the incremental $15 million of breakfast advertising that we're supporting from the company side, we really looked at our total market pressure,” Lemenchick added. “We looked at our marketing pressure for the breakfast daypart. We looked at our marketing pressure for the rest of the day. And as we think about, now collecting ad fees against our breakfast daypart, we've got even more fuel in that mix. And we looked at really what pressure did we need across all of those dayparts. And we felt that it was appropriate to add another $15 million to that, primarily focused on breakfast.”
The goal for Wendy’s is to drop its breakfast contribution come Year 4, or 2023 and beyond. By then, it thinks awareness will be humming. It’s seen success with a 2 for $4 deal and being the official breakfast of the NCAA, which should pick up over the year as well.
But there’s still significant opportunity, Penegor said. Namely, with taking existing Wendy’s customers and getting them to try breakfast.
Those core users who have done so are the highest frequency breakfast guests today, he added. Once they order it, they come back, in other terms. “So how do we get more and more of those folks to get the food in their mouth to try it? That's the objective during the course of this year,” Penegor said.
One potential avenue is loyalty and digital. Wendy’s launched its rewards program nationwide in July.
The program has seen monthly active years increase by about 25 percent since, Penegor said. By year’s close, there were about 3 million active users to go along with 12 million total members.
Wendy’s sees that business accelerating meaningfully to reach 10 percent of sales by the end of 2021.
Digital as a whole expanded to more than 6 percent of domestic sales in the period, which was more than double the prior-year mark. And Wendy’s digital traffic share growth reached double-digits, Penegor said.
It’s all part of turning restaurants into what Wendy’s calls “frictionless transaction centers.” It launched curbside and mobile grab-and-go in 2020 and expects to grow both this year as it drives awareness around new ordering platforms. “At the core of our digital business is the opportunity that exists to build one-to-one relationships with our customers,” Penegor said.
To date, Penegor said, it’s been pretty evenly split across breakfast, lunch, and dinner in terms of how guests use Wendy’s app. And the vision is to turn parking lots into these “frictionless transaction centers” with mobile ordering as the anchor. A better customer and user experience that also results in loyalty points.
“Those are all things that will continue to drive engagement from consumers. And consumer behaviors are changing. It's something that they expect for a more seamless experience at the restaurant,” he said.
Penegor was asked about the bevy of chicken sandwich launches flooding the sector in recent months. Wendy’s premium chicken and hamburger business has grown to more than 10 percent of its mix. It reintroduced the Classic Chicken Sandwich and then brought a Jalapeño Popper Chicken Sandwich to market in mid-February.
“We continue to bring news. So it's not just going to be chicken with the pickle. It's going to be great-tasting, craveable chicken,” he said.