Dive Brief:
- Wendy’s will spend $55 million dollars over two years to advertise its breakfast offerings, the company announced Thursday in its Q4 2023 earnings release.
- CEO Kirk Tanner, who joined the company less than two weeks ago, said the advertising could drive up breakfast sales in the U.S. and Canada by 50%.
- The announcement marks a continued focus on the breakfast daypart as a potential sales driver with low marginal labor costs, a plan that began under previous CEO Todd Penegor.
Dive Insight:
Tanner said the company expects the focus on breakfast marketing to eventually push its North American breakfast sales to about $6,000 per store, per week. Such a sales rate at Wendy’s 6,010 U.S. locations would account for $312,000 in sales per store on a yearly basis, or nearly $1.9 billion in sales across the company’s U.S. store system.
Late night dining remained a significant sales driver in 2023 as well with high teens sales growth, CFO Gunther Plosch said. But it’s unlikely, according to Plosch, that such a level of growth will recur for late night in 2024.
The burger brand’s sales growth has been slow in recent years compared to its major competitors; its U.S. comparable sales were up 3.7% in 2023 and 3.9% in 2022, compared to increases of 8.7% for McDonald’s in 2023 and 5.9% in 2022. Wendy’s U.S. development targets were derailed in 2022 and 2023 with the closure of its Reef Kitchens units. At the same time, Wendy’s has seen its store traffic pressured by changes in consumer spending habits. In November, one of the brand’s major U.S. franchisees filed for bankruptcy citing the expense of remodeling its restaurants and difficulty driving sales in an inflationary environment.
The confluence of slow comp sales growth, reduced growth expectations and traffic difficulties, pushed the company to emphasize late night and breakfast as potential drivers for sales growth in 2023. With the new marketing spend, breakfast will remain a strategic emphasis for Wendy’s in 2024 and 2025.
“We can grow our breakfast business significantly without adding incremental labor, which drives meaningful improvement of our restaurant economic model,” Tanner said on the brand’s earnings call. The company has added menu items to its breakfast line up over the past year, including English muffins, in an effort to drive trial by customers.
Wendy’s is trying several other efforts to strengthen its system in 2024, including the investment of $30 million in digital menu boards, which Tanner said would yield “immediate benefits in order accuracy, improved crew experience and sales growth from upselling and consistent merchandising execution.” Tanner also said the brand might test dynamic pricing with these new menu boards as early as 2025. The brand is still testing its Wendy’s FreshAI, a drive-thru chatbot developed in partnership with Google, which franchisees can pilot this year.
