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The real reason Wendy's is giving breakfast another try

It takes a lot of guts for a QSR like Wendy's to try breakfast again -- for the fourth time in the chain's history. But a recent location data study shows why the chain is willing to take that leap and what other QSRs might see in breakfast, too.

Photo: iStock

October 3, 2019 by S.A. Whitehead — Food Editor, Net World Media Group

Last month when Wendy's announced it would take another crack at breakfast — the fourth time the burger brand has done so after previous attempts in 1985, 2007 and 2011 — the response from investors in the brand and restaurant industry experts was anything but an outpouring of confidence.

The brand's stock dropped. Players industry-wide buzzed online and elsewhere about whether this time might be the right time for the brand to finally win big in the morning. 

But, there's little argument that what the QSR is doing is risky business. And that's exactly what one Silicon Valley-based foot traffic analytics company really liked about the move. At Los Altos, California-headquartered, Placer.ai, this was a gutsy move that showed real strategical clarity from Wendy's leadership. 

"When you think about these brands from a 30,000-foot perspective, if you were Wendy's ... the basic question you're always asking yourself is how do I maximize this retail footprint?"

-Ethan Chernofsky

Likewise, leaders at the analytics company said its the kind of move that almost begs for a location data analysis of the entire QSR breakfast space to get a hard, factual feel for the potential breakfast holds for both Wendy's and other QSRs. So in the run-up to Wendy's breakfast menu launch next year, Placer.ai launched its own analysis of the market as it stands today, with a focus on Wendy's, of course, but also QSR breakfast power-player, and, just for contrast, Panera, which recently said it was making an opposite move of sorts, by adding a dinner menu to its offerings. 

Placer.ai looks at location traffic patterns in the foodservice space to get an idea of larger trends and changes. It does this by information collected from cell phone pings as QSR customers visit the brands. 

"We're looking at tens of millions of devices, but we're not looking at what people think they would do (as in traditional preference-based surveys) but what they actually do," said Placer.ai Vice President of Marketing Ethan Chernofsky in an interview with this website.

"The key thing is though this data on its own is very simple data, we're really looking at the movement patterns," he said. "The second you have those movement patterns at scale and over time you can do really interesting things to measure changes and understand potential shifts in customer behavior."

And that is exactly what they found, as it relates to the QSR breakfast market. 

For instance, this past year Wendy's and Panera have had similar traffic throughout the day, though peak times for each were very different. In the a.m., Panera experiences  27.6% of its daily visits between 6 a.m. and noon, while Wendy's sees just 10.7% of its visits in its morning hours. 

But the real potential for that morning meal for a QSR like Wendy's, is seen in fast-food phenom, McDonald's (indicated in red in the graph). Though the burger brand is better known for lunch and dinner, it's taken breakfast full-on and now scores 25.9% of its daily traffic at breakfast.

Wendy's, as seen in the blue bars on the graph, currently has no breakfast presence, but its traffic keeps pace McDonald's in other dayparts. And that, of course, is what you call, pure, unadulterated early morning potential, a.k.a. the reason Wendy's is giving it another go, Chernofsky surmised.

"When you think about these brands from a 30,000 foot perspective, if you were Wendy's and you and your franchisees own hundreds or thousands of restaurants across country ... the basic question you're always asking yourself is how do I maximize this retail footprint?" Chernofsky pointed out.

"So if I have lunch and dinner, then I already have this space paid, but (my sales are) not paying for it in the morning. How do I make it so people want to stop by this brand in the morning and thereby giving us this whole other revenue stream that I have access to?" 

But that was just the start of the kinds of information that Placer.ai's study of the brand's holds for not just Wendy's, McDonald's or even Panera, but really any other limited-service player that has ever considered expanding sales, by expanding daypart menus. 

In our interview, I first keyed in on that, asking Chernofsky what other QSR leaders pondering the "breakfast question" might want to know from Placer.ai's findings. 

"This particular piece (of research) is asking where are (QSRs') positions of strength and does an opp exist to extend that strength? ... Do I have a customer base that could view me as a provider of other meals beyond where my position of strength is? 

"So you really want to look at what all this means for me. All brands have a good sense of what's happening in their own stores, but they don't know what's happening around them. So they want to know, 'What does it mean for me that Wendy's is going to start doing breakfast?'" 

In seeking answers to that question, Chernofsky said brands might see synergies where nearby Wendy's units could bring traffic into their stores, either occasionally for breakfast as well, or more steadily for a menu item, like a special blend of coffee that might augment that Wendy's menu offering. He said this is particularly valuable to think about for smaller brands. 

"All brands have a good sense of what's happening in their own stores, but they don't know what's happening around them. So they want to know, 'What does it mean for me that Wendy's is going to start doing breakfast?" 

Ethan Chernofsky

"It goes to that second and third layer, where all the sudden I have someone who I know is going to embark on this journey and there's so many lessons I can learn about how much value this could potentially bring to me," he said. 

"If smaller brand were to make a play like this, it really faces a lot more risk based on their number of locations. But if that brand understands, for example, that it has a lot of similarities with Wendy's and says, 'Let's see, I've got 12 stores and maybe I'll try a breakfast menu and I'll see if I can replicate things (if results are successful). Then I can start taking other concepts from a brand like that that show me similarities with my own product.'"

Similarly, he pointed out that a brand with similarities in audience to those of Panera, might also giving dinner a go, based on Panera's results with its dinner menu. The bottom line is that smaller brands can use the actions taken by similar larger chains as a kind of "focus group" on these kinds of initiatives designed to grow the brand by growing its daypart participation. 

This brings up a key question for QSR expansion strategy: 'What can I do in my existing space?'

Chernofsky pointed out that this type of expansion through existing spaces is now becoming even more of a "thing" for all QSR brands since the data insights they can get about these large strategic steps is so accurate and able to tell brand leaders how the tide is turning as they move forward.  

"We're seeing a lot — particularly with fast food brands — of movement in that they're getting really sophisticated in terms of how they drive expansion," Chernofsky said. "And there are many dozens of brands with a little over 100 locations that are looking for ways to expand beyond their regional strengths and trying to figure out what the right locations are for that.

"So what they'll do is they'll look at high-performing location on a platform like ours and then try to understand what are the traits that differentiate high performance from low performance. Then they seek out those high- performing traits in other markets, so that they can all of the sudden, in a much smarter, more strategic manner, grow and that multiplies their chances of success."

But what about the impetus for all this discussion in the first place, Wendy's move to breakfast? And what does this particular research company think are the best areas to look at closely as Wendy's breakfast breaks from the gate next year?

That, too, said Chernofsky, is an area where data — about both failures and successes — can be a game-changer.

"With any brand ... there's going to be areas that perform extremely well and ... less well," he explained. "That (information) offers a golden opportunity, because that kind of information allows you to understand what traits are common between my successes and my failures...

"The second I can start breaking down by my high-performing and low-performing sites, I can start creating models for what works and what doesn't work so that as I roll out more of my idea, I can start catering things accordingly. ... And that allows you to grow your brand in a very smart way."

Chart: Placer.ai

About S.A. Whitehead

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Pizza Marketplace and QSRweb editor Shelly Whitehead is a former newspaper and TV reporter with an affinity for telling stories about the people and innovative thinking behind great brands.