Wendy’s is doubling down on breakfast and unit growth following a strong second quarter that has it once again raising its expectations for this year.
The chain is spending an additional $10 million to continue promoting breakfast, opening 700 ghost kitchens over the next five years and launching a development fund for new restaurants designed to help it reach a new goal of up to 9,000 locations worldwide by 2025.
In the quarter ended July 4, Wendy’s U.S. same-store sales increased 16.1% year over year and 11.7% compared to the same period in 2019. Customers continued to spend more per visit, buying more salads, which saw "significant growth," and a record number of the chain's premium Made to Crave sandwiches.
Digital sales also grew more than 10% in the quarter vs. Q1, and Wendy's pool of rewards members increased by 25% to approximately 17 million.
The results led the Dublin, Ohio-based chain to once again raise its financial expectations for the rest of 2021. It is now expecting 11% to 13% systemwide sales growth for the year, up from the 8% to 10% previously forecast.
Breakfast, a key area of development for the chain, continued to perform well. It grew 10% compared to Q1 and has contributed to a 20% increase in guest frequency over the past year, from 5.5 visits per year to 6.5., CEO Todd Penegor said during an earnings call with investors Wednesday.
"Breakfast is driving some of that, digital is certainly helping that," he said. "And we always get the question, is breakfast incremental? That helps prove it out."
The $10 million advertising investment is intended to accelerate a.m. business as the chain continues to work on growing the daypart to 10% of its sales.
It is an early step in what Penegor called the “seven-year journey” of ingraining customers’ breakfast habits. With this investment in particular, Wendy’s wants to make itself part of people’s new morning routines coming out of the pandemic.
“We really want to be there as morning routines start to get re-established as we head into the fall,” he said.
Mirroring a trend across the fast-food segment, Wendy’s elevated average check was accompanied by lower traffic, which improved in Q2 but remained below 2019 levels.
"We want to continue to make sure we got a balanced high-low calendar" to bring back more value-driven guests, Penegor said, noting that its 4 for $4 deal and $5 Biggie Bag will play a role in that.
Wendy’s on Wednesday also unveiled an ambitious update to its global development plans. It now expects to have between 8,500 and 9,000 locations worldwide by 2025, up from a previously forecast 8,000. That growth will be aided by three new initiatives:
- A deal to open 700 ghost kitchens in the U.S., Canada and U.K. over the next five years through a partnership with Reef Kitchens, starting with 50 this year.
- A new $100 million build-to-suit development fund that is expected to result in 80 to 90 new franchised units.
- Lowered liquidity and net worth requirements for prospective franchisees.
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