Testing. Testing. Testing... After 300 test restaurants enjoyed solid results, Wendy's is adding the 3rd meal to 5K burger joints this year. Investors weren't feeling the most important meal of the day, dropping the stock 12%. Here's the 1st problem: History. Wendy's tried adding breakfast 3 times before ('85, '06, '10). It failed all 3 times.
Breakfast isn't a no-brainer... despite what Mom said. You'd expect that adding a meal would grow profits. Not necessarily. Wendy's downgraded its profit expectations for 2019 because breakfast is hard to make — and it hasn't even unveiled the menu yet (square-shaped waffles TBD).
- It's expensive. Wendy's is dropping a cool $20M across the stores before the first egg is cracked.
- You need more people. Wendy's currently opens at 10am. Early bird gets the 5am morning shift, and Wendy's is hiring 20K new workers for it.
- Franchise owners don't love this. 95% of Wendy's are owned by other people (not Dave's Legacy). You see Baconator hashbrowns, they see new training, updated fridges, and re-organized pantries that this announcement requires.
But breakfast is where the habits are... Those daily meat/egg/cheese + coffee pit stops are consistent habits that grow revenues for fast food. That's why everyone at the restaurant convention is talking about new plans for on-the-go breakfast options - not boring boxed lunch. Wendy's will need to break morning diners from their faithful Dunkin, McD's, Starbucks, and even Taco Bell rituals.