Wendy’s will launch a new breakfast menu across its U.S. system in 2020.
Wendy’s
On Monday, Wendy’s announced plans to launch a breakfast menu across its nearly 6,000-unit U.S. system in 2020. The company is taking a big ($20 million) bet on the launch with plans to hire 20,000 employees and offer other franchisee support.
Because of this investment, the company now expects its adjusted earnings per share to decline by 3.5% to 6.5% in 2019.
The initiative is certainly ambitious, especially considering this isn’t the brand’s first go-round in the competitive morning space.
Wendy’s first launched breakfast all the way back in 1985. According to Mashed, the chain pulled the morning menu after just nine months, blaming lack of portability and unfamiliarity with the daypart. Some argued that operational complexity tripped up the chain’s initial success, as Wendy’s ambitiously offered things like made-to-order omelets.
Likely motivated by McDonald’s and Burger King’s morning success, Wendy’s tried again in 2007, but couldn’t find the consistency it wanted. It entered breakfast yet again in 2012, however the chain began “decelerating” its morning daypart in 2013 because it couldn’t find the profitability it wanted.
At the time, some analysts blamed Wendy’s lack of a branded coffee presence as one of its major issues, as coffee helps drive the trial necessary to create habituation. But the company launched its proprietary coffee blend, Redheaded Roasters, two years earlier, in 2011.
That Wendy’s couldn’t quite get the wind under its sails came (comes) as a bit of a surprise in the quick-service segment that has consistently yielded heavy traffic in the morning.
But you know what they say–if at first you don’t succeed, try, try again.
This time around, Wendy’s is able to leverage the only growing daypart in the U.S. restaurant industry, according to NPD/Crest data. Breakfast business accounted for 21% of all traffic in 2018, up from 19% in 2013, when Wendy’s breakfast last fizzled out.
Since that time, quite a bit of activity has happened in the morning daypart. Chick-fil-A started gaining a significant amount of market share. Taco Bell has jumped into the space. Traditional morning favorites Dunkin’ and Starbucks have evolved their menus and coffee offerings to continue dominance. Burger King has elevated its focus on breakfast innovation and marketing efforts. And Panera has started to dip its toes in breakfast delivery.
The competition has picked up so much that McDonald’s, the longtime market share leader, has lost some ground.
But McDonald’s is also a case study as to why breakfast can–and should–work in quick-service. The morning menu accounts for about 24% of the chain’s sales and is its most profitable daypart.
Plenty of fingers have pointed at Taco Bell as the biggest reason behind McDonald’s eroding market share in the daypart. According to Euromonitor, McDonald’s market share was 17.4% five years ago and 14.7% last year. Taco Bell added breakfast in 2014.
Arguably, where Wendy’s failed years ago, Taco Bell has thrived. As Robert Byrne, senior manager of consumer insights at Technomic, explains, “Taco Bell looked at the unit economics and made it worth franchisees’ investments.”
Of course, it also helps that Taco Bell “came at breakfast with a completely different angle” with its Mexican-inspired offerings.
This time, Wendy’s will offer plenty of support to its franchisees. It will also come at breakfast with a very Wendy’s-esque angle, featuring signatures such as a Breakfast Baconator, Frosty-ccino and honey butter chicken biscuit. In a press release, CEO Todd Penegor said the company’s breakfast menu will “set us apart from the competition.”
That’s a bold prediction. In an interview with Bloomberg in 2014, then-CEO Emil Brolick called the breakfast daypart “a war.” Not much has changed since then; in fact, the space has become significantly more intense. Trying to win share here will be a challenge, but as Taco Bell has proved, it can certainly be done.