Bottom line, Wendy’s hasn’t found a way to make breakfast profitable. Speaking at this week’s ICR Xchange Investor Conference, The Wendy’s Co. CEO Emil Brolick breezed through his A Cut Above/Recipe to Win presentation, stopping just long enough to essentially say, “Oh, and breakfast? Maybe in 2016.”
He pointed to a $14.6 million charge the company has taken for scrapping breakfast equipment at what he carefully explained are “underperforming breakfast restaurants. Not underperforming restaurants; underperforming breakfast restaurants.” In other words, the concept is sound but the morning meal just isn’t working.
Brolick said Wendy’s still will have 375 to 400 locations serving breakfast and will continue to support them (at least for now). But expansion of the test is off the agenda. “Breakfast is not going to be a top priority in this next three-year period. Longer term we may well come back to that,” he said. What would it take to rekindle the desire to establish breakfast at Wendy’s? Brolick says it would require finding “a much more profitable way to approach that daypart opportunity.”
Two years ago, Wendy’s was touting research showing breakfast driving QSR traffic growth. There was no question that it had to have a breakfast daypart to succeed. But requiring more investment in equipment (especially after hitting up its operators for equipment needed to make Dave’s Hot ‘n Juicy Cheeseburgers) doesn’t make sense now. The numbers apparently aren’t working as expected. The envisioned ROI of $140,000 to $150,000 per store per year from breakfast appears to be elusive in a marketplace that stubbornly resists full recovery from the recession.