ORLANDO, Fla. – Much has been written about how The Wendy’s Co. is stepping away from the breakfast day-part in an effort to focus on re-establishing and growing other parts of its business. But comments made by Steve Hare, chief financial officer, at the Morgan Stanley Retail & Restaurant Conference, indicate the fast-food chain still has its eye on the morning meal occasion.
“We made the decision to pull out of those restaurants across the system where we were losing money in the morning day-part,” Hare said. “We will stay in breakfast. We will have about 400 restaurants that are profitable in the morning day-part continuing to serve this differentiated breakfast and we think, over time, while we are not ready to charge back in in the short term, I do think you will see us approach the business from a standpoint of establishing our coffee program.”
Hare said Wendy’s is in the process of developing its own brand of coffee called Redhead Roasters and that it is getting positive results in taste tests.
“We will establish that 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 day-part participation,” he said.
The decision to reduce the number of stores serving breakfast was an issue of consistency, he said.
“We really charged into breakfast saying, look, we are the only major hamburger chain in QSR that is not a participant in the breakfast category,” he said. “We see 25 percent of the traffic in QSR coming in that morning day-part. And the feeling was if we can consistently deliver A Cut Above menu in the breakfast day-part that we ought to be able to carve out a reasonable market share, so we pushed hard in that direction.
“But it got to the point where we were looking at sort of inconsistent market performance. 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 break-even level. So we had both company stores and franchisees losing money at breakfast and I think we came to the realization that there was no short-term event that was going to drive that because we were not seeing traction.”