(CNN Business) - On March 2, Wendy's finally rolled out its long-awaited breakfast menu across the United States. Then, two weeks later, the daily commute basically collapsed due to lockdown measures encouraging people to work from home.
Wendy's breakfast should have failed because of this. But it was not like that.
The mouthwatering array of new menu items, such as the “Breakfast Baconator” and the “Frosty-ccino,” has been a success and has bolstered Wendy's results during a bleak second quarter for its competitors. Breakfast now accounts for 8% of Wendy's total sales, a figure the fast food chain celebrates because it expected it to reach 10% of total sales by the end of the year.
"We couldn't be more satisfied with the breakfast slot since its launch in early March," Chief Executive Todd Penegor said at this week's earnings call. Interest in breakfast has not waned, he said, noting that sales in stores open for at least a year finally turned positive in July due to the "continued strength" of new breakfast offerings.
Wendy's immediate success can be attributed in part to lockdowns, difficulties from rivals (especially McDonald's), and even boredom.
"Since there's not much else to do, some consumers welcome the opportunity to try a fun new menu during this crisis," Jill Failla, Mintel's senior foodservice analyst, told CNN Business. "This test gives them something to talk about with family, friends and on social media."
Unlike McDonald's and Starbucks, which mostly have more conservative breakfast menu items like Egg McMuffins and croissants, Wendy's menu has less traditional items, including a breakfast-themed fried chicken sandwich and cold coffee. mixed with ice cream. Those represent "relevant menu trends" that appeal to a younger demographic, Failla noted.
It also didn't affect Wendy's attacking when McDonald's was in trouble. The chain has boasted of its success during the mornings, but has struggled in recent years with new competition from a variety of venues.
Breakfast was born
Wendy's breakfast menu in the USA
Wendy's announced that it was entering the competitive breakfast war in September 2019. It saw an opportunity to grow at an idle time of day: more people make breakfast at home than any other meal, and morning is still the only growing market for the fast food sector, according to the NPD research group.
About 300 of Wendy's 6,000 US restaurants served breakfast, including a bacon sandwich and a honey butter chicken cookie. A cohesive menu backed by a national marketing campaign "provides incredible growth opportunities," Penegor said at the time.
Wendy's had to convince its franchisees that an entirely new menu would be relatively easy.
To start, the company worked closely with the restaurants and created a menu that does not require new equipment. Franchises had to spend more than $ 10,000 on equipment the last time they offered breakfast several years ago. It only takes three employees to work the shift, which is one less employee than last time.
Wendy's hired about 20,000 employees and said it initially wanted to spend $ 20 million on marketing. However, some of the marketing spending was stopped due to the pandemic. This week, Penegor reported that Wendy's will spend $ 15 million to promote breakfast later this year "as more and more people return to their daily routines."
Five months into the effort, a Wendy's spokesperson told CNN Business that its best-selling breakfast items are the “Breakfast Baconator,” the Honey Butter Chicken Cookie, the Maple Bacon Chicken Croissant, and the "Frosty-ccino."
Tough competition
Breakfast is packed with a number of restaurants vying for supremacy in this segment, including Panera, Starbucks, Dunkin ', Taco Bell and, the behemoth itself, McDonald's.
For companies reporting earnings, the second quarter was not as rosy compared to Wendy's, particularly McDonald's. The world's largest fast food restaurant struggled with breakfast before the pandemic and is still struggling.
McDonald's Chief Executive Chris Kempczinski said in his most recent earnings report that breakfast "was an area of pressure" due to new competitors. The chain also temporarily eliminated its all-day breakfast, among other items, to help restaurants keep costs down. The company did not say when it would return.
Dunkin 'and Starbucks coffee chains also said they struggle in the morning. Both recently reported a deep decline in revenue and visits because people don't stop as long.
Starbucks CEO Kevin Johnson said "disruption to weekday morning routines, particularly commuting to work and school, is an obstacle." Dunkin 'noticed a decrease in visitors from 6 a.m. to 9 a.m., but some visit from 11 a.m. to 2 p.m. for snacks or beverages other than coffee.
Even so, they are not ruled out yet. McDonald's Kempczinski said "there will be a new dedication from a marketing and investment point of view after breakfast." He also hinted at "innovation," also known as new menu items to be introduced later this year. (In January, McDonald's sampled “Chicken McGriddles” and “McChicken Biscuit” across the country, perhaps hinting at what Wendy's success still takes into account with its chicken sandwiches.)
Starbucks and Dunkin 'also continually add new items to their menu. The first launched a new breakfast sandwich using Impossible, an alternative to meat. In August, Dunkin 'will launch its ever-popular pumpkin-themed menu and flavored coffees and donuts.
Whether Wendy's maintains its success in the morning depends on whether "consumers enjoy the trial breakfast enough to repeat their purchases," Failla explained.
"The feedback so far has been mostly positive, but it will be an uphill battle for Wendy's during this economic and public health crisis," he concluded.
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