Wendy’s stock jumps on plans for nationwide breakfast, European expansion
A drive-thru window of a Wendy’s restaurant in Peoria, Illinois.
Daniel Acker | Bloomberg | Getty Images
Wendy’s on Friday shared more detail about its plan to launch breakfast nationwide, add new products and expand in Europe at its investor day.
It also teased its unreleased third-quarter financial results. Wendy’s CEO Todd Penegor reported North American same-store sales growth of 4.4%, helped by the return of its spicy nuggets. The company is scheduled to report its earnings Nov. 6.
Between 2021 to 2024, Wendy’s expects annual global system-wide sales in range of 4% to 5%.
Shares of the company, which has a market value of $4.6 billion, jumped as much as 6.4% in morning trading. The stock is trading up 2.2%.
The burger chain announced its breakfast plans in September. Wendy’s plans to invest about $20 million to support its U.S. stores in preparation for the early 2020 launch. The company also cut its forecast for fiscal 2019 adjusted earnings at that time, expecting a decline in a range of 3.5% to 6.5%.
Wendy’s anticipates that breakfast sales will grow to at least 10% of its total daily sales.
The company has attempted to enter breakfast three times previously, and analysts have expressed skepticism that this time around will be different.
“We really are building this program in a different way,” Wendy’s U.S. President Kurt Kane told investors.
Kane said that the company worked with franchisees to create the breakfast program.
“They really pushed us hard to make sure that we had something that could work for our entire system,” he said.
Thanks to the company’s investments in the program, executives expect that breakfast will be immediately profitable for franchisees.
A slide from Wendy’s investor day presentation that appears to show Wendy’s breakfast menu
Menu items will include the Honey Butter Chicken Biscuit, Breakfast Baconator and the Frosty-ccino, but the chain is planning on limiting the number of breakfast items, compared to past launches. Wendy’s also created a new custom blend of coffee.
This time around will not include any equipment expenses, which previously could cost franchisees up to $10,000.
Wendy’s past breakfast attempts started regionally, which meant that advertising was locally based. The company is planning on using national media for its 2020 launch.
With the exception of Popeyes Louisiana Kitchen, Arby’s and Yum Brands’ KFC, Wendy’s competitors have all been in breakfast for years. Kane said that the company will be able to go head-to-head against Chick-fil-A with its chicken biscuit.
“We do anticipate significant competitive response,” Kane said.
Breakfast is not the only menu addition that Wendy’s has been exploring. Kane said that the chain is currently testing black bean burgers, which could be launched next year if it goes well.
Kane said the company is also exploring other meat alternatives. Restaurant Brands International’s Burger King has launched its plant-based Impossible Whopper nationwide, while McDonald’s is testing its own version made with Beyond Meat.
Global expansion plans
Between 2020 and 2024, Wendy’s plans to grow its global restaurant store count by 3% annually — double 2019’s expected growth rate. Some of that growth will come from Wendy’s expansion into Europe in the next 12 to 18 months. The burger chain has tried to enter European markets over the years.
By 2024, Wendy’s wants more than 1,500 international stores. It currently has roughly 950 international locations.
To launch in Europe, Wendy’s plans to reenter the United Kingdom, making the country its first European market. The company said that it’s done extensive research and talked with more than 3,000 British consumers.
“And yes, we’ve thought about Brexit,” Abigail Pringle, Wendy’s head of U.S. development and international president, told investors.
Chick-fil-A recently opened its first location in the U.K.
The next phase will be launching in European markets with a high potential of success, and Wendy’s is in discussions with potential franchisees.
In Wendy’s domestic market, the burger chain is looking to major U.S. cities and locations near military bases and college campuses. Part of its U.S. store growth will come from nontraditional locations, including dark kitchens, which are also known as ghost or virtual kitchens. Ghost kitchens are smaller format stores that are only meant to cook food for delivery orders.
Pringle said that the burger chain will have two dark kitchens open in high delivery markets by the end of the year.
Out of Wendy’s total U.S. sales, 2% come from digital channels. It wants to expand its digital orders to 10% of total U.S. sales by 2024.
Laura Titas, Wendy’s chief digital experience officer, said that the company will also launch in-app delivery, giving the company access to customer data and driving more people to its app. Mobile ordering leads to 20% higher check sizes for Wendy’s.
Titas also said Wendy’s will launch a loyalty program in 2020 to drive more frequent visits to its locations.