Wendy's Flexes its Late-Night Muscle

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googletag.display('div-gpt-qsr_largeleader'); }); </script> </div> </div> </div> </div> <header class="entry-header"> <div class="single-post-thumbnail-mobile"><img width="552" height="312" src="https://www.qsrmagazine.com/wp-content/uploads/2023/09/Wendys-552x312.jpg" class="attachment-qsr-medium size-qsr-medium wp-post-image" alt="Breakfast and late-night can add sales without adding labor for Wendy's." decoding="async" srcset="https://www.qsrmagazine.com/wp-content/uploads/2023/09/Wendys-552x312.jpg 552w, https://www.qsrmagazine.com/wp-content/uploads/2023/09/Wendys-400x225.jpg 400w" sizes="(max-width: 552px) 100vw, 552px" /><div class="node-image__credits">Adobe Stock</div><div class="node-image__caption">Breakfast and late-night can add sales without adding labor for Wendy's.</div></div><h1 class="entry-title">Wendy’s Flexes its Late-Night Muscle</h1> <span class="entry-date"> <time datetime="2023-08-10"> <span class="entry-date__month"> Aug </span> <span class="entry-date__day"> 10 </span> <span class="entry-date__year"> 2023 </span> </time> </span> <div class="single-post-under-title has-thumbnail"> <div class="single-post-category"> <div class="single-post-category__inner"> <svg height="24px" width="24px" xmlns="http://www.w3.org/2000/svg" viewBox="0 0 384 512"><path d="M297.2 248.9C311.6 228.3 320 203.2 320 176c0-70.7-57.3-128-128-128S64 105.3 64 176c0 27.2 8.4 52.3 22.8 72.9c3.7 5.3 8.1 11.3 12.8 17.7l0 0c12.9 17.7 28.3 38.9 39.8 59.8c10.4 19 15.7 38.8 18.3 57.5H109c-2.2-12-5.9-23.7-11.8-34.5c-9.9-18-22.2-34.9-34.5-51.8l0 0 0 0c-5.2-7.1-10.4-14.2-15.4-21.4C27.6 247.9 16 213.3 16 176C16 78.8 94.8 0 192 0s176 78.8 176 176c0 37.3-11.6 71.9-31.4 100.3c-5 7.2-10.2 14.3-15.4 21.4l0 0 0 0c-12.3 16.8-24.6 33.7-34.5 51.8c-5.9 10.8-9.6 22.5-11.8 34.5H226.4c2.6-18.7 7.9-38.6 18.3-57.5c11.5-20.9 26.9-42.1 39.8-59.8l0 0 0 0 0 0c4.7-6.4 9-12.4 12.7-17.7zM192 128c-26.5 0-48 21.5-48 48H112c0-44.2 35.8-80 80-80v32zM112 416H272v96H112V416z"/></svg> Menu Innovations </div> </div> <div class="single-post-thumbnail"> <img width="765" height="446" src="https://www.qsrmagazine.com/wp-content/uploads/2023/09/Wendys.jpg" class="attachment-qsr-main size-qsr-main wp-post-image" alt="Breakfast and late-night can add sales without adding labor for Wendy's." decoding="async" srcset="https://www.qsrmagazine.com/wp-content/uploads/2023/09/Wendys.jpg 765w, https://www.qsrmagazine.com/wp-content/uploads/2023/09/Wendys-300x175.jpg 300w" sizes="(max-width: 765px) 100vw, 765px" /> <div class="node-image__credits"> Adobe Stock </div> <div class="node-image__caption"> Breakfast and late-night can add sales without adding labor for Wendy's. </div> </div> <div class="wd-shared-counts"><div class="wd-shared-counts__inner"><span class="wd-shared-counts__label">Share:</span><div class="shared-counts-wrap style-icon"><a 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You could credit the pandemic’s clamp on mobility or the burger chain’s need to focus spend elsewhere, like its relaunch of breakfast, </span><a href="https://www.qsrmagazine.com/reports/how-wendys-changed-fast-food-breakfast-game"><span>which arrived in March 2020 behind a $20 million pre-launch push</span></a><span>. Some of that deployed toward a national rollout supported by advertising—a big change from past attempts that didn’t always appreciate the full backing of Wendy’s entire fleet. Also, naturally, Wendy’s had to race staffing, food safety, ops, digital, and other COVID accelerants up the priority ladder.</span></p> <p><span>But that’s changed. Wendy’s in Q2 saw the late-night daypart generate double-digit sales growth as higher staffing allowed 90 percent of locations to remain open until midnight or later for the first time since the crisis. CEO Todd Penegor said Wednesday, as you’d expect, late-night produced higher average checks and more delivery, “which further supports the restaurant economic model.”</span></p> <p><span>“We continue to see room to grow our share of this daypart versus our [quick-service restaurant] competitors and are excited to continue advertising late night during the third quarter,” Penegor told investors. “We believe the daypart will expand even further as customers come to know that Wendy’s is reliably open for the high-quality late-night experience they deserve.”</span></p> <p><span>Overall, Wendy’s reported U.S. same-store sales growth of 4.9 percent in Q2, comprised of about 6 percent price and negative guest counts. The chain’s two-year comp is running 7.2 percent.</span></p> <p><span>Beyond advertising, though, what’s driving late-night at Wendy’s can be seen on the other side of the daypart spectrum. The chain said breakfast posted mid-single-digit growth to the highest quarterly sales lift since its March 2020 debut. BTIG analyst Peter Saleh noted increased consumer mobility—back to school, work, and simply getting on the road again after lockdowns—could translate into higher morning sales for the long-run. </span></p> <p><span>“What we really want to do is make sure that there is awareness that we are open and we’re consistently open, so we can build into customers’ routines that we are there for them onto late-night dayparts,” Penegor said.</span></p> <p><span>Penegor credited Wendy’s $3 croissant promotion as well as an ongoing strategy to raise breakfast awareness. The company launched a Frosty Cream Cold Brew lineup in late July that merges coffee with Frosty creamer and the choice of vanilla, chocolate, or caramel syrup. These hit the menu at 99 cents through Wendy’s app for a limited time. Uber Eats customers also could tack on a medium Frosty Cream Cold brew to any order over $15 free of charge from July 27 to August 2. Penegor hinted “additional menu innovation” was coming soon, and to expect a steady cadence of promotional activity designed to drive trial and repeat.</span></p> <p><span>Key to both breakfast and late-night for Wendy’s is the aim to support margin. U.S. company stores posted a 200-basis point year-over-year increase last quarter to 17.3 percent.</span></p> <p><span>The two dayparts pose the potential add sales without incremental labor, Penegor said. </span></p> <p><span>He added the majority of Wendy’s guests who come for lunch or dinner still have not given breakfast a shot. “So that’s an opportunity at the restaurant level as we continue to focus on breakfast to let them know, why don’t you try us for breakfast tomorrow,” he said. “And we’ll continue to focus on that.”</span></p> <p><span>In other terms, alongside menu innovation and trial-inducing offers, expect to see messaging across every daypart to encourage customers to return for breakfast.</span></p> <p><span>A similar sentiment applies to late-night. “It is incremental,” Penegor said. “We continue to see opportunities midnight or later. We do see a big opportunity to drive delivery business as well as folks coming to our restaurant. … And the more that we drive awareness and the more that we get consumers to come to us and see that we’re reliably open in the late-night daypart, the more we become part of that routine.”</span></p> <p><span>Wendy’s outlined a broader consumer view Wednesday that mirrored much of what competitors have shared this earning season. Income groups above $75,000 have held, while the under $75,000 cohort softened, leading to traffic declines. </span></p> <p><span>CFO Gunther Plosch said he’s in the camp of there being a “mild recession,” or perhaps none at all. “And if I’m right on that one,” he added, “it should be good for the category.”</span></p> <p><span>He said net disposable income started to improve. Consumers continue to face pressures from macroeconomic forces. Yet like Plosch, Penegor feels quick service will weather the rocky environment better than most. Wendy’s saw some trade down from mid-scale casual last year, Penegor said. Those guests have stuck around.</span></p> <p><span>“You’re seeing higher-income cohorts start to shift into [quick service], which is good for our brand,” he said. “And we do know the lower-income cohort, as inflation starts to moderate in the back half with all the gross income improvements they had, real income will start to improve, which could be a nice tailwind for our business.”</span></p> <p><span>But all said, student loan repayments (a topic mentioned recently by multiple peers as well), and other challenges could force customers to tighten spend. “When you think about where we play on the Biggie Bag offering, we have a lot of relative value to add,” Penegor said. “So I think we’re really well positioned no matter where the consumer health place for the outlook of the year.”</span></p> <p><span>There’s also been a noticeable guest shift to mobile grab-and-go—customers who order and then pick up in-store at the racks Wendy’s implemented late last year. “That was one of the tools that has helped us to take some of those big delivery orders, [take] lunch and dinner out of the line and get folks to grab their food and get out of the restaurant quickly,” Penegor said.</span></p> <p><span>Wendy’s development plans endured external pressures of their own. The chain forecasted 2 percent net global unit growth for 2023 and 2024, offering the caveat that permitting delays could lead to a lower result near-term. Chipotle, Texas Roadhouse, and Papa Johns mentioned similar themes on their quarterly calls.</span></p> <p><span>Penegor said all U.S. stores facing permitting delays this year have secured sites. So if they don’t open this year, they’ll shift into 2024.</span></p> <p><span>The main development focus for Wendy’s now, however, is into higher AUV formats. Penegor said new traditional units are opening with AUVs nearly double that of its restaurant closures. That 2–3 percent growth figure is expected to bump to 3–4 percent in 2025.</span></p> <p><span>About 60 percent of Wendy’s pipeline through 2025, he added, is under development agreements.</span></p> <p><span>The chain opened 41 stores in Q2 (net of 24), including its first Global Next Gen restaurant, bringing the total first-half number to 80 (net of 20).</span></p> <p><span>Additionally, </span><a href="https://www.qsrmagazine.com/news/wendys-and-flynn-restaurant-group-ink-deal-grow-australia"><span>Wendy’s announced Wednesday it’s entered into a master franchise agreement with Flynn Restaurant Group</span></a><span>—the world’s largest franchise operator—to develop 200 Wendy’s in the Australian market through 2034 with a combination of equity stores and sub-franchise partners.</span></p> <div style="position: relative;"> <img decoding="async" border="0" src="https://www.qsrmagazine.com/wp-content/uploads/2023/09/wendysvoiceAI.jpg" alt="" class="image-style-story-page"></p> <div class="node-image__credits">Wendy’s</div> <div class="node-image__caption">Wendy’s voice AI will soon head to a second location.</div> </p></div> <p> <br clear="all"></p> <p><span><strong>Digital journeys and AI at the drive-thru</strong></span></p> <p><span>Wendy’s global digital sales mix held at 12 percent in Q2 (11 percent in the U.S.) following a strong Q1 boost. Starting this quarter, Wendy’s digital sales definition will include in-restaurant mobile scans to closer resemble the rest of the industry. In turn, Penegor expects global digital sales to eclipse $1.5 billion this year.</span></p> <p><span>Domestic digital sales are up 25 percent, year-over-year—a result that benefitted from late-night advertising and expanded operational hours.</span></p> <p><span>The U.S. loyalty monthly active user base is more than 3.5 million and helped Wendy’s improve one-to-one marketing, Penegor said. “We have now activated more personalized user experiences and expect our progress in this area will accelerate over time, ultimately driving frequency, check, and operational efficiencies,” he said.</span></p> <p><span>It’s a path for Wendy’s that began with general consumer journeys and has quickly become more personalized ones, Penegor continues.</span></p> <p><span>“We feel like we’re in a position now, after a lot of work, to really double-down going forward to lean in to better connect to make sure that we’ve got offers customized to those consumers that are our morning, afternoon, and late-night customers,” he said.</span></p> <p><a href="https://www.qsrmagazine.com/technology/wendys-test-groundbreaking-ai-drive-thru"><span>Penegor also briefly touched on Wendy’s AI drive-thru pilot</span></a><span>. Called “FreshAI,” it uses Google Cloud’s generative AI and large language models innovation. The test launched in June at a company-operated restaurant in the Columbus, Ohio.</span></p> <p><span>Penegor said it’s headed to “restaurant No. 2 here shortly.”</span></p> <p><span>“We’re making a lot of progress. We’re seeing a lot of accuracy. Our crew loves it. They do see it as a supplement to helping them do their jobs even better,” he said. “And the customers that have utilized it feel very comfortable and feel like it’s a great experience for them. This isn’t about labor savings for us. This is about how do we reposition the labor within the restaurant to drive more throughput, drive speed and accuracy, and a better customer experience to drive frequency and repeat moving forward.”</span></p> <p><span>In general, Penegor continued, customer experience is improving across the brand as staffing levels rise. Namely, perception of speed and digital overall satisfaction have hiked. Penegor said Wendy’s had “very marked” increases in regard to the latter versus a year ago and is closer to pre-COVID levels. </span><br /><span>“But we knew even pre-COVID levels, we had a lot of opportunity to be even better,” Penegor said. “So we’ll continue to improve as turnover continues to improve as staffing continues to get better.” </span></p> <p><span>“The operations team have been very focused on speed,” he added, pointing to Wendy’s DSG 2.0 grills that lower cooking times from 155 to 80 seconds, as well as the brand’s recent grilled chicken wraps intended to lower complexity.” We’ve been talking about speed the Wendy’s way. We’ve been focused on it. We’ve been measuring it. We’ve made market progress and we know we’ve got even more progress ahead of us. So we do think that continued to be an unlock and the improvements in customer satisfaction don’t only just help you today, but that actually drives frequency into the future, and that’s the big unlock.</span>”</p> <div class="single-post-related-cat-chains"><a href="https://www.qsrmagazine.com/food/breakfast/" aria-label="View Breakfast Category Posts">Breakfast</a>, <a href="https://www.qsrmagazine.com/operations/fast-food/" aria-label="View Fast Food Category Posts">Fast Food</a>, <a href="https://www.qsrmagazine.com/food/menu-innovations/" aria-label="View Menu Innovations Category Posts">Menu Innovations</a>, <a href="https://www.qsrmagazine.com/story/" aria-label="View Story Category Posts">Story</a>, <a href="https://www.qsrmagazine.com/chains/wendys/" aria-label="View Wendy's Chain Posts"">Wendy's</a></div> </div> </article> </main> <aside class="sidebar sidebar--primary" role="complementary"> <div class="sidebar__sponsored-content"> <div 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