News

Analyst: Wendy's experiencing weak demand for breakfast tests

September 11, 2012

As the breakfast daypart continues to experience staggering growth in the QSR segment, Wendy's may be having a hard time trying to garner its piece of the market.

According to CBS News, KeyBanc Capital Markets analyst Christopher O'Cull said that the brand's breakfast offerings may not be expanded nationally because of weak demand.

Specifically, O'Cull said that franchises in the Providence, R.I., market have been offering breakfast since May, but demand has been weak.

Wendy's is currently testing breakfast items such as Panini, an artisan egg sandwich, a roasted burrito, steel-cut oatmeal and biscuit sandwiches. The chain has also developed a proprietary coffee blend called Redhead Roasters. In March, CEO Emil Brolick said the breakfast line had rated high on key consumer metrics.

During its most recent earnings call in August, Brolick added that the morning daypart, or A.M. Access as its known internally, offers an opportunity to increase consumer access to the Wendy's brand and "represents an important long-term opportunity." Breakfast testing at the company began in 2006 and has gone through several iterations.

"We've made significant progress operationally, yet our breakfast economic model is not producing the results we need across a full spectrum of restaurants," Brolick said. "On system-wide initiatives, our commitment to franchisees is that we will achieve a green light from consumer, operations and economic perspectives before full-scale commercialization. We have more work to do, and in particular, around economics. We want our share of this business, but we want it to be a profitable share for our system."

Wendy's, he added, will be making refinements to its breakfast tests with the goal of providing consumers with a "unique morning meal." Beverages, including the Redhead Roaster initiative, will be a big part of the morning menu.

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