When Wendy’s refocused on the consumer at the center was the foundation of their new found success was hand held food for immediate consumption. They implemented a three step approach a new twist on the old Price, Value Service Equilibrium. The old formula for the price, value, service success was: Price + Quality + Service + Portability = Value.
That formula has evolved with Gen Z and Millennials today. Foodservice Solutions® Grocerant Guru® has once again retooled, reevaluated, calculated then evolved the formula and here is the new formula: Price + Quality + Technology + Portability = Value.
Focusing on the customer experience and digital touchpoints will drive incremental success at Wendy’s. Here is an example, on National Cheeseburger Day, Wendy’s offered one-cent Junior Bacon Cheeseburgers throughout an entire week. Also, earlier in the third quarter, Wendy’s celebrated National French Fry Day by offering free any size fry with any in-app purchase across four days.
CEO Todd Penegor told investors that “These types of deals “clearly drove folks in,” …He went on to say, “U.S. loyalty membership surpassed 35 million in Q3, and monthly active users increased almost 40 percent quarter-over-quarter to more than 5 million as the chain exited the period. ….We will continue to lean into impactful offers to drive further loyalty program growth moving forward.”
“We want to get folks into the app because what we do see is more frequency and higher checks over time for those consumers,” Penegor said during the chain’s Q3 earnings call. “So, we’re seeing all of that data happen. Early on, you’ve got maybe on par check, maybe slightly lower check with the offers that you see, but that’s more than made up by the lifetime value with the frequency that you get over time. And we can then really leverage all the data to really connect and have more personalized [messaging] rather than blanket offers out to the consumer environment.”
Penegor noted that Wendy’s is in the early innings of ramping up its one-to-one marketing ability. He added that the foundation is built; the chain just has to get the engine running effectively. Once it does, it will become a “nice generator to help our margins over time,” he said. In Q3, U.S. company-owned restaurant margin was 15.6 percent, an 80-basis-point lift year-over-year. CFO Gunther Plosch owed this to sales leverage and ease of inflation.
Here is more from the last earning call due to profitable digital expansion:
“Wendy’s global digital mix reached 13 percent in Q3, up 30 percent year-over-year. This expansion can be attributed to strength in all digital channels, including delivery. Penegor noted that “strong partnerships with third-party delivery providers” benefited the brand as it activated ads and exclusive offers tied to college football and new product launches. Wendy’s is on pace for $1.8 billion in digital sales this year, which would be up more than 20 percent versus 2022.
The U.S.’ mix increased to more than 12 percent, with quarter-over-quarter growth fueled by a “meaningful uptick in our loyalty program,” Penegor said. Internationally, the channel accounted for more than 18 percent of sales. In Canada specifically, the chain holds the No. 2 position in digital traffic share among the quick-service burger segment. Across the pond, the U.K.’s digital mix is now over 90 percent (12 corporate restaurants).
“Looking ahead, there is still significant digital growth to be captured,” Penegor said. “The large uptick in monthly active users last quarter and the increase in our digital sales expectation is just the taste of what’s in front of us. I am confident that continued execution of our plans alongside our key partners will drive our digital business in the years to come.”
Digital and off-premises are a major part of Wendy’s future restaurant prototypes. The company said in August that the first two Global Next Gen builds are open in Kansas and Oklahoma and that it has goals to debut more than 200 of them through 2024. Abigail Pringle, Wendy’s president of international and chief development officer, said Global Next Gen unlocks 400 times the digital order capacity. The upgraded design features self-order kiosks, conveniently located passthrough order pickup shelving, and dedicated parking for mobile order pickup to help create a more streamlined experience for digital-first customers. Moreover, the prototype has a specially designated delivery pickup window and parking spots designed to enhance the flow of restaurant traffic and offer added convenience for delivery partners.
Wendy’s cut development costs 10 percent with the Next Gen design. With no incentives, a levered payback for franchisees is about six years. If operators sign up for the chain’s Build-to-Suit program—which Penegor called the most attractive option for franchisees—there’s a levered return of three-and-a-half years. For the Pacesetter program, it’s four years. The Groundbreaker incentive offers a payback of five-and-a-half years.
As of October 1, Wendy’s was comprised of 7,166
restaurants. There were 6,010 U.S. locations, of which 403 were company-owned
and 5,607 were operated by 215 franchisees. In addition, there were 1,156
international units, of which 1,144 were operated by 106 franchisees
and 12 were corporately owned in the U.K.”
Foodservice Solutions® team is here to help you drive top line sales and bottom-line profits. Are you looking a customer ahead? Visit GrocerantGuru.com for more information or contact: Steve@FoodserviceSolutions.us Remember success does leave clues and we just may the clue you need to propel your continued success.