Wendy’s still seeking recipe for success at breakfast
By Mary Vanac
Ohio-based Wendy’s has made a place for itself at lunch and dinnertime, but the breakfast market has been tougher to crack.
Facing “very entrenched participants,” the Dublin-based fast-food company pulled the plug early this year on another breakfast experiment at restaurants where it was unprofitable, Steve Hare, chief financial officer, told investors in mid-March.
“Over the last couple years, we have tried to put a differentiated menu together,” Hare said. But the Mornin’ Melt Panini, Honey Butter Chicken Biscuit and Fresh Baked Breakfast Bar couldn’t lure customers from their morning routines.
“We were seeing franchisees and some of the company stores lose money in the morning ... without any real signs [profitability] was around the corner,” he said.
One reason that Wendy’s has had trouble with breakfast is inconsistency, said Darren Tristano, executive vice president of Technomic Inc., the Chicago restaurant and food research firm.
“Consumers don’t know if they’re in breakfast or not,” Tristano said. Although Wendy’s has tested breakfast occasionally, it has not rolled it out systemwide, he said.
“We will still have 375 to 400 restaurants in breakfast,” Emil Brolick, Wendy’s CEO and president, said at a January investor presentation. “But breakfast is not really going to be a top priority for us in this next three-year period.”
Wendy’s also lacks a strong coffee brand, which is important at breakfast, Tristano said.
In 2011, the Dublin company introduced Redhead Roasters coffee; the name was a play on the redheaded Wendy character. But most consumers didn’t recognize the brand, he said.
Wendy’s wants to be in the breakfast market because about 25 percent of the customers of fast-food restaurants visit during breakfast hours, Hare said.
Even though the Dublin, Ohio, company shouldered the advertising bill for all its participating restaurants, many of the stores just couldn’t make money on breakfast.
“The franchisees saw the breakfast as too expensive, too upscale,” said John Gordon, principal at Pacific Management Consulting Group in San Diego, who visited with several Wendy’s franchisees in Miami in January.
Wendy’s markets its food as being “a cut above” its competitors. That perception might apply more to quality than to price.
Wendy’s Artisan Egg Sandwich, which includes bacon, egg and cheese, sells for $2.59 at a restaurant on the East Side of Columbus. That’s less than the $2.89 for a McDonald’s Egg McMuffin in the same area.
While upscale, Wendy’s breakfast “wasn’t competing well with McDonald’s items, Dunkin’ Donuts items and others,” Gordon said.
Exiting breakfast in unprofitable markets will mean a short-term hit to sales at stores open at least a year, Hare said. But cutting breakfast advertising and operating expenses at some restaurants will raise profit margins, he said.
To locate a Wendy’s that serves breakfast, visit www.wendysbreakfast.com.