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Wendy's breakfast pull back due to inconsistency

Having antiquated restaurants was affecting Wendy's ability to compete with traditional QSRs and fast casual brands.

April 5, 2013 by Alicia Kelso — Editor, QSRWeb.com

The Wendy's Company's chief financial officer Stephen Hare spoke Thursday at the Morgan Stanley Retail & Restaurant Conference. Hare covered topics such as the chain's current restaurant remodeling process, value platform and breakfast deceleration.

Highlights of his presentation include:

• Wendy's embarked upon a comprehensive restaurant remodeling program to better be able to compete with both the "traditional" QSRs and also the "new QSRs" (fast casual brands) that Hare says were pulling away some of Wendy's premium customers.

"As we looked at it, one of the clear obstacles we had was the age of our facilities. We're a 40-year-old brand. The average age of our facilities is somewhere in that 20-year category," he said.

• Restaurants aren't the only facet of the brand undergoing a makeover. Wendy's is also focused on presenting higher quality food, new advertising messaging, a new logo and more.

"Frankly, Wendy's is a company that has suffered from an advertising message standpoint since the glory days when Dave Thomas was such an effective spokesperson," Hare admitted.

Wendy's current "two-pronged" approach features Dave's daughter Wendy, to reinforce the brand's traditional values, as well as a character named Red, meant to contemporize the brand.

"Beyond that, if you go into our restaurants today, you'll see new packaging that incorporates the new design and a brand new logo. We had not touched our logo for a long time and it's all designed to bring a more contemporary feel to the building and all the way down to new uniforms for our restaurant crews. People feel good about working both in a better environment and in a successful restaurant," Hare said.

• Wendy's breakfast deceleration has been an interesting move in a QSR sector that has benefited greatly from the daypart. Hare said Wendy's has recognized that it's the only major hamburger chain that wasn't a participant in the breakfast category — one that yields 25 percent of QSR traffic. Ultimately, however, market performances were too inconsistent.

"In some of our markets, that differentiated menu made a difference and we were seeing very profitable operations. But in other markets, we were not seeing traction and we were seeing sales stay below a breakeven level. So we had both company stores and franchisees losing money at breakfast," Hare said.

Still, Wendy's will remain in the breakfast space at about 400 restaurants that have proven profitable during the daypart.

One of the reasons traction may have been missing in breakfast is because the company didn't have a strong branded coffee offering, Hare said. It has since developed a proprietary brand — Redhead Roasters — and will anchor any longterm plans around the offering.

"We think we'll establish (Redhead Roasters) as an all-day-long part of Wendy's and maybe leverage that over time to be able to expand hours and begin to work back into morning daypart participation," he said.

See some of Wendy's new branding efforts.

Read more about marketing and branding.

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