Champion of Breakfast

Let’s talk about breakfast.

Coronavirus changed our work habits. Goodbye to the commute. Hello to Zoom and Google Duo. Goodbye to that brewed Venti. Hello to instant coffee. Breakfast at fast food restaurants took a big hit. However, Wendy’s breakfast – a newcomer to the morning meal – managed to leverage itself into a breakfast powerhouse. Wendy’s is now close to or actually replacing Burger King as the second biggest breakfast fast food brand.

Even with the constraints from Covid-19 lockdowns and its late entry into the breakfast category (right before the lockdowns), Wendy’s restaurants are now champions of breakfast. Wendy’s has McDonald’s in sight.

There are several reasons for Wendy’s breakfast success. 

1. Breakfast is a routinized meal: Wendy’s leveraged this.
2. Our bodies crave very specific foods in the morning. Wendy’s menu hit all the right buttons.
3. McDonald’s breakfast was suffering even prior to coronavirus. Wendy’s kept momentum going.
4. How people eat really matters. We eat with our eyes first. 

Breakfast is a routinized meal: Wendy’s leveraged this.

Most of us know we should eat breakfast. Yet, most of us treat breakfast as a routine. We tend to have the same meal every day. Unlike lunch and dinner, breakfast is the meal that repeats itself day in and day out. We have habits at breakfast. We do not mind eating the same thing every morning.

There are data showing that breakfast is a routine because we perceive this meal as being utilitarian. We need to start our day; jump start our system; start our day’s feeding cycle; or look for a convenient way to eat before work. Unlike lunch and dinner, breakfast does not have a hedonic goal. On a spectrum from physiological to psychological, breakfast is at the physiological end. Research by food purveyor Bob Evans Farms indicates that we see breakfast as both a priority and a chore.  

One reason for breakfast’s physiological urge is that our morning chemistry is different from our coffee break, lunch, afternoon snack and dinner chemistries. AM meals have different needs from PM meals. Scientists agree that energy needs, energy expenditures and energy utilizations differ by daypart. As one food scientist said, “What one prefers to eat turns out to be inseparable from the time of day one wants to eat it.”

Lockdowns, which halted some routines, also allowed us to create new routines. With a unique breakfast menu backed by heavy marketing and great pricing, Wendy’s was able to generate interest helping us create a new breakfast routine. As one food analyst told CNN, Wendy’s leveraged our lockdown boredom by offering a fun, new breakfast menu during the Covid-19 crisis.

Even though Wendy’s introduced its exciting breakfast just weeks before the lockdowns, CNBC stated that Wendy’s timing of breakfast was a plus rather than a negative. This is because with upended morning routines, people had the “opportunity” to begin new routines.

And, Wendy’s created foods that our bodies crave in the morning.

Our bodies crave very specific foods at breakfast. Wendy’s menu hit all the right buttons.

When we eat meals, we generally do not think about what our bodies crave at that particular part of day. But, what we reach for is based on bodily needs. Chemistry is involved. As one researcher put it, we do not get up in the morning craving ice cream. 

We are in a biorhythmic upswing in the morning. In the morning, we are energy depleted. We have not eaten for 10 or more hours. Our blood sugar is low; our insulin is down; our stores of carbohydrates are almost gone. We crave carbohydrates. Carbohydrates have a calming effect. Since mornings can be stressful, our chemical signals ask for carbs to smooth things out. As marathoners know, carbohydrates quickly convert to glucose. This helps us get going. Paired with some protein, we are ready to face the day.

Wendy’s Breakfast Baconator, seasoned potato wedges, its Frosty-ccino beverage and Honey Butter Chicken Biscuit are unique, delicious, carbo-rich, protein offerings. Wendy’s added a spicier Hot Honey Chicken Biscuit in February 2022.

McDonald’s breakfast was suffering even prior to coronavirus. Wendy’s kept momentum going.

If you are going to take on your competition, it is good to have a weakened rival. Next to Wendy’s non-traditional breakfast menu, McDonald’s menu is rather conservative. McDonald’s is now promising to infuse its breakfast menu with more “modern, trend” items. However, according to CNBC reporting, in McDonald’s recent earnings call, breakfast was barely mentioned. CEO, Chris Kempczinski merely told analysts that breakfast “…was one area of pressure.” This is clearly due to the altered competitive landscape where Wendy’s has performed in a most stellar fashion.

With a strong marketing budget and an enthused franchisee community, Wendy’s entered breakfast with a bang. Wall Street assumed that other fast food rivals would counter Wendy’s. After all, breakfast is worth protecting. This did not happen. Instead, McDonald’s and others cut advertising, cut hours, cut promotions and did everything else possible to save cash. One of the first pandemic changes McDonald’s made was to end its all day breakfast.

Wendy’s also made a strategic move that helped the brand boost its new breakfast at the outset of the lockdowns. Prior to lockdowns, Wendy’s had made its first two and half hours of breakfast drive-thru only. Mobility at breakfast is critical. Also, prior to coronavirus, Wendy’s went on a hiring spree. So, although Wendy’s franchisees faced some staffing uncertainties, Wendy’s was much better prepared than its rivals. And, Wendy’s made sure that the changes needed to provide the new breakfast menu would cost franchisees only $10,000 per store. 

Of course, McDonald’s is still the leader in breakfast.  But, it appears as if its ring-fence around the morning meal is being challenged. True, its breakfast menu is familiar and comfortable, but there has not been much news in McDonald’s breakfast. Compared to Wendy’s, McDonald’s breakfast line-up looks tired. Innovation is a critical driver for Wendy’s. In fact, Wendy’s reports that menu innovation has been essential to the brand’s successful breakfast daypart.

Other morning breakfast brands, such as Burger King, are also looking at their menus, thinking about ways in which to refresh offerings à la Wendy’s.

How people eat really matters. We eat with our eyes first.

Yes, physiology matters. But, perceptions are important. Our eating is governed by our mind as well as our body’s needs. Our eating is actually quite mindful, even though we may be eating the same thing on autopilot

We eat with our eyes first. Then, as scientists relate, the food must pass the nose test, then, the mouth. The stomach’s cravings start with the eyes. There are many receptors that must be satisfied.

Food must look delicious. Then, food must smell delicious. Then, there is the satiation that comes from chewing and texture. All this before you swallow.

Portion size, size perception, bite height, texture and eating time are all signals for satiation. The fact is that when the eyes see a big portion, the brain signals that the food will be filling. If the food is dense, it will take longer to eat, which also makes the food seem more filling. When we see more food on the plate, we automatically expect to be more satisfied. 

Bite height matters. The wider you open your mouth, the more your brain tells your stomach “big food is coming”. The more you chew, again, is a signal of substantial food. The longer it takes to eat, the more our brain tells us “satisfied”. The denser the food, the more satiated we become. A potato is denser and more satiating than a croissant. Carbohydrate-rich and protein-rich foods are more satiating than snacks, confectionary and baked goods.

Wendy’s Breakfast Baconater is a big, dense, “open wide”, carbo-and protein-rich sandwich. The potato wedges are also dense and satiating. 

Prior to our coronavirus lockdowns, marketers would have said that people are not going to change their behaviors, let alone their breakfast behaviors. But, Covid-19 did something extraordinary. It gave people permission to change behaviors. From Pelotons to Amazon Prime deliveries to multiple streaming subscriptions, we made significant behavioral changes, including breakfast.

Yes, we mostly ate breakfast at home. But, many of us still used restaurants’ drive-thru’s for breakfast; we just changed our venue and our time for obtaining that breakfast. Furthermore, we really desired some newness to combat the stay-at-home drudgery. Wendy’s breakfast delivered on all fronts.

Wendy’s managed to make breakfast 8.5% of total sales as of late 2021. In its latest earnings call (March 1, 2022), Wendy’s executives told analysts that US same-store-sales grew 11.6% on a two-year basis driven in part by growth in breakfast. Promotions helped drive “significant trial of breakfast with meaningful increase in buyer penetration, but also increased Wendy’s breakfast awareness.” Additionally, Wendy’s reported that “Looking back on the full-year, the brand made significant progress growing breakfast sales by approximately 25%….” Aside from promotions, menu innovation was a significant driver of breakfast. The menu news drove trial of Wendy’s breakfast while “further ingraining the (Wendy’s breakfast) habit….”

The Wendy’s executive team shared its belief that “…the breakfast business in the US will accelerate in 2022 by approximately 10% to 20%, taking average weekly US breakfast sales to approximately $3000 to $3500 per restaurant by year-end.” Furthermore, Wendy’s breakfast is sending a strong message about the quality of lunch and dinner at Wendy’s. Wendy’s is not just growing breakfast, but growing the rest of the day as well.

Barron’s, the financial news magazine, reported on March 21, 2022, that Wendy’s is an excellent stock. David Palmer, a food restaurant analyst at Evercore ISI, told Barron’s that Wendy’s is “… an accelerating growth story….” Citing another advisor, Barron’s quoted, “They’re (Wendy’s) getting more aggressive on digital, and not just mobile ordering, but incorporating incentives to keep customers coming back” through the loyalty program. “And, compared to other burger-focused competition, they’ve got a good product. Along with consistent, steady growth… those reasons make it a top pick.”

Kudos to Wendy’s. 

The home of the square burger initiated breakfast at an awful time. One would think that Wendy’s would have failed. But, no. Wendy’s turned awful into awesome. Wendy’s offered new, exciting, deliciously satisfying breakfast items fit for our morning needs and our lockdown mentality, along with exciting and affordable promotions. And, because Wendy’s gave us unique breakfast items while leveraging McDonald’s’ weaknesses, we changed our breakfast habits. Wendy’s lucked out. But, so did we.