Offering a glimpse into the state of quick-service breakfast, Wendy’s two biggest half-hour stretches remain the 9:30–10 a.m. and 10 to 10:30 a.m. blocks. Guests are eating breakfast as a late-morning snack, which, as much as anything, relates to how COVID shook up the workplace. Per an estimate from Upwork, one in four Americans, or some 26 percent, expect to stay remote throughout 2021. Since 2009, the number of people working from home climbed 159 percent, according to Global Workplace Analytics.

It’s been well-charted how Wendy’s faced this trend on the front step. It launched breakfast—the company’s fifth run at the daypart—in March 2020. The move spiked domestic same-store sales 16 percent in the first week of the month. Then, COVID arrived, and breakfast consumption in the category plunged 35 percent in April, year-over-year, per The NPD Group. Dinner took a 22 percent hit.

Wendy’s spent $20 million pre-launch and hired roughly 20,000 people. Not to mention, it was ready to pull the lever with March Madness (Wendy’s is a sponsor of the NCAA). That, naturally, never happened.

But all things considered, Wendy’s managed to finish the year with breakfast mixing 7 percent of sales, and the category contributing roughly 6.5 percent to its U.S. comps in Q4. Breakfast drove a meaningful increase to AUVs and created a profitable channel franchisees felt confident investing in for the long-haul.

READ MORE: How Wendy’s Changed the Fast-Food Breakfast Game

The recovery topic, though, continues to center on “mobility.” CEO Todd Penegor Wednesday said Wendy’s has begun to see “a little more mix” in the 7–9 a.m. window, yet it remains uncertain how guests’ routines will ultimately settle.

That fact is only reinforcing Wendy’s approach. From the outset, the brand differentiated from past breakfast efforts on profitability, low-labor (drive-thru only), speed, and ensuring the company had marketing powder available to throttle trial. COVID hasn’t slowed those efforts.

Penegor said Wendy’s breakfast awareness today is at Burger King’s levels, “and they’ve been in breakfast business for a long time.”

“Our repeat is really strong,” he added. “So if we can get trial to happen, we can help get a lot of repeat [visits], which will help ingrain the habit going forward.”

Wendy’s ended Q3 with breakfast mixing 7.5 percent of total sales. The upward result is encouraging, Penegor said. Wendy’s always suggested it would take three years to drive awareness to breakfast. And that outline didn’t factor in a global pandemic. “But it is coming back,” Penegor said of the daypart overall. “And we want to stay ahead of the curve.”

Throughout Q3, Wendy’s pulsed deals like a $1.99 croissant and 2 for $4 offer. Now, there’s a $1 breakfast biscuit promotion. “We’re trying to be fast, we’re trying to be accurate. We’re creating the highest customer satisfaction during that daypart in our restaurant today,” Penegor said. “And as we look forward to next year, it will give us an opportunity to finally start to innovate and bring some news to the category with the support and success we’ve had to bring our franchise system along for that journey.”

Wendy’s gained morning meal traffic share in Q3 within the quick-service burger category. It’s to the point, Penegor said, where the brand has moved into the No. 3 spot overall (presumably behind McDonald’s and Burger King). That took only a year and a half, Penegor said. In April, when Burger King executives told investors the brand was putting breakfast “square in its sights” again, the daypart mixed about 13 percent of sales. RBI CEO Jose Cil said then: “We think it could be a much bigger part of our business long-term, and we’re making the similar investments in terms of quality and making sure we have a broader offering, both on product and beverage and making the commitments for investing behind that with media as well as with digital.”


Wendy’s expects year-over-year breakfast sales to grow about 20–30 percent in 2021. The chain also plans to invest $25 million in advertising this calendar as it chases long-term goals of 10 percent mix, or a $1 billion business.

Wendy’s breakfast advertising is currently about 20 percent higher than last year. Penegor said the effort halos back to the rest of the day with a strong quality message. “The folks that are trialing our breakfast are getting some very high-quality food that gets them confident in the rest of the day,” he said.

As a business, before COVID, Wendy’s guests visited about 5.5 times a year. That’s upped to 6.5. Breakfast played a role, Penegor said, as well as digital and Wendy’s omnichannel efforts across all dayparts.

Very early on, the pandemic shot drive-thru mix north of 90 percent of Wendy’s business. While an anchor the brand was happy to lean on, it had to consider outlets to alleviate pressure as lines kept getting longer. And so mobile grab-and-go and curbside picked up. “I think all of those things will help drive our business moving forward just on a core operational metric perspective,” Penegor said. “And I think that’s where the consumer wants to go. They expect speed, convenience, and affordability from Wendy’s, and we want to continue to deliver that on that and differentiate with quality.”

If you consider those drivers, he continued, there’s clear whitespace for breakfast, which is why Wendy’s is driving so hard on trial.

And the quality differentiator sits atop the priority list. It’s led to innovation in the company’s Made to Crave lineup and, perhaps more noticeably, a “game-changing” fry innovation that focused on a hotter and crispier product that holds better for off-premises. Announced in October, Penegor said consumers prefer the option 2:1 to McDonald’s fries. “We believe we have a winner with this product,” he said.

Sales, labor, growth in the outlook

Wendy’s U.S. same-store sales increased 2.1 percent in Q3 after lifting 7 percent in the year-ago period (the best result of 2020 for the brand). The somewhat muted quarter was tempered by “several macroeconomic factors that others across the industry experienced related to staffing and shipping mobility due to the Delta variant,” Penegor said.

Without these realities, CFO Gunther Plosch added, Wendy’s believes its same-store sales would have been line with expectations.

Year-over-year company restaurant margin decreased 250 basis points thanks to higher than expected labor rate inflation of nearly 9.5 percent, commodity inflation of about 3 percent, lower local advertising spend in the prior year, and customer count declines. These were partially offset by higher average check, bolstered by digital orders and premium products like the Bacon Cheddar Cheeseburger. Wendy’s domestic digital sales mix exited Q3 at 8 percent. Loyalty program members hiked 10 percent, quarter-over-quarter, to roughly 19 million. Wendy’s has increased its loyalty base by 7 million since the start of the year.

Plosch doesn’t expect pressures to lessen near-term. The company predicted an increase in commodity and labor rates, “which we are now expecting to be inflationary approximately 4 percent and 7 percent to 8 percent, respectively,” he said.

The trickle-down nature of the staffing shortage is hard to miss these days. Penegor said Wendy’s faced “inconsistency” in Q3 stemming from the fact it operated with fewer dining rooms than Q2, on average—85 versus 95 percent. So consumer demand was moving one way up the recovery curve while labor worked downstream.

“That does put pressure or our digital business,” he said. “When you think about mobile grab-and-go, when you think about delivery folks coming into the restaurant. [When] you think about throughput that happens in the in the drive-thru. You do see throughput challenges with staffing tighter.”

Getting new employees constantly trained affects that equation, too. While applicant flow is picking up, Penegor said, and staffing is improving a bit, it’s still not enough to get ahead of where the brand wants to be. “One of the big keys for us is to get our dining rooms open to really support taking pressure off of the drive-thru and support our digital business moving forward,” Penegor said.

Staffing slowed late-night business as well. “And that’s a big growing area where we think there’s a lot of opportunity when we get ourselves staffed in those hours open,” he added.

As a company, Wendy’s is still pacing toward 7,000 restaurants by the end of the year. Its pipeline of nearly 200 potential franchisees lays the groundwork for 8,500–9,000 by year-end 2025.

In 2021, Wendy’s expects 2 percent plus growth and 1 percent in the U.S. (10 percent international). An agreement with REEF adds 700 delivery-only units over the next five years.

The chain opened 50 stores net in Q3 but 90 percent of the units needed to get to that 7,000 figure are under construction, Penegor said. The remaining 10 percent are nontraditional stores and REEF builds, which typically move much quicker.

Fast Food, Story, Wendy's