UPDATE: May 7, 2020: Wendy's CEO Todd Penegor said on an earnings call Wednesday that the chain's beef supply is likely to experience a "couple of weeks of challenging tightness that we'll have to work through." Penegor also said that certain items will be temporarily removed amid meat shortages, but that restaurants that aren't displaying beef items on their online menus may not be completely out of beef — operators can choose not to display beef items if supplies are low to avoid diner frustration.
"We do believe it is temporary, and we're close with our big supply partners," Penegor said. "We have several of them on the fresh beef front, and we do believe we'll work through this in short order."
Dive Brief:
- Roughly 1,000 of Wendy's 5,500 U.S. restaurants, or about 18% of the chain's system, aren't serving hamburgers or other meat items, according to analysis of online menus at every Wendy's location conducted by financial firm Stephens reported by CNN.
- Frustrated customers have also posted on Twitter about how they can't buy a burger from their local restaurant, with one Twitter user sharing an image yesterday of a handwritten sign posted at a Wendy's that reads: "We are terribly sorry for the inconvenience, we are currently experiencing issues with our meat processing supplier [and] are unable to serve beef products. We are happy to serve chicken [and] side items!"
- "It is widely known that beef suppliers across North America are currently facing production challenges. We continue to supply hamburgers to all of our restaurants, with deliveries two or three times a week, which is consistent with normal delivery schedules," Wendy's wrote to Restaurant Dive in an email. "However, some of our menu items may be temporarily limited at some restaurants in this current environment. We’re working diligently to minimize the impact to our customers and restaurants, and continue to work with our supplier partners to monitor this closely."
Dive Insight:
Wendy's reliance on fresh, never-frozen beef has helped it differentiate from QSR rivals, but it may now make it more vulnerable to supply chain shortages as North American meat processors suffer from novel coronavirus disruption and closures, according to Stephens analysis.
McDonald's made the switch to fresh beef for its Quarter Pounders in 2018 and is currently priming its supply chain for supply gaps, though CEO Chris Kempczinski said that it hasn't run into issues yet. The mega chain is now sending its restaurants meat shipments that are calculated based on demand out of an abundance of caution. McDonald's suppliers include Smithfield Foods and Tyson, which both recently warned of potential shortages.
It's likely that Wendy's has overlap with these major suppliers.
Stephens analyst James Rutherford reports that roughly 30% of Wendy's locations in states including Ohio, Michigan and New York, while other markets are unaffected, according to CNN. He also reported that Wendy's online menus have shifted to spotlight chicken sandwiches, but does not think that the current shortage will do serious damage to the chain's revenue if it is resolved quickly.
It's unclear what the the path forward for American QSRs is if shortages escalate, although President Donald Trump signed an executive order last week to keep meat plants open. McDonald's Canada has begun to source its meat from other countries to work around the issue, a luxury smaller chains and independent restaurants won't have if American meat supply continues to shrink.
