‘Frescuits’ for Breakfast

By Sam Gazdziak, Senior Editor

Wendy’s breakfast expansion spreads to more restaurants and more consumers.

For years, Wendy’s International Inc. has kept its focus on lunch and dinner while its competitors delved into the breakfast sector. That has been changing, as the Dublin, Ohio-based chain has been rolling out a breakfast menu to more and more of its restaurants.
More than 75 Wendy’s restaurants added a breakfast menu in June. That expansion came after an extended test involving 150 restaurants in five markets. The company expects to offer breakfast in more than 650 restaurants by the end of August and in 20 to 30 percent of its total restaurants by the end of 2007.
“Breakfast is the fastest-growing business segment in the quick-service restaurant (QSR) industry, and we’re raising the bar by introducing a fresh, delicious, premium-quality breakfast menu,” said Kerrii Anderson, president and CEO of Wendy’s. “We believe it’s a better breakfast, and the positive customer reaction we’ve received so far bears this out.”
The breakfast menu includes items like a steak and egg breakfast sandwich, breakfast burritos, French toast sticks, cinnamon rolls and some regional items, including a chicken biscuit and sausage gravy and biscuits. The Big Breakfast Sandwich includes egg, cheese, hickory-smoked bacon and seasoned sausage on a Kaiser roll.
The company has also developed a Buttermilk Frescuit, a biscuit that is fresh-baked in the restaurant and is formulated to hold together and not crumble apart like other biscuits. The Frescuit will include egg, cheese and a choice of a breakfast meat — either sausage, ham or hickory-smoked bacon.
Sales rumors
While there may be an increased focus on the breakfast menu, hamburgers are still the pride of the company. A recent Zagat Survey® named Wendy’s as having the best burger in the QSR industry. The company’s square patties earned 30 percent of the vote, compared to 22 percent for Burger King and 13 percent for McDonald’s.
Wendy’s currently is hosting a contest where consumers can create their own custom hamburger from 54 varied ingredients, from pulled pork to chipotle mayo to pineapple. The winner will receive $25,000, and the winning burger may be added to Wendy’s menu as well.
In the midst of all these developments, the largest change may still be yet to come. In June, the Special Committee of Wendy’s Board of Directors announced it was exploring a possible sale of the company. James Pickett, chairman of the board and of the Special Committee, said the potential sale is the next step in investigating value-creating alternatives for its shareholders. “While a sale remains only one of the alternatives under consideration, we believe it merits more thorough examination.”
Same-store sales in the second quarter of 2007 were lower than expected, with an increase of 0.7 percent, compared to 3.8 percent in the first quarter. That lowered the company’s 2007 EBITDA (earnings before interest taxes depreciation and amortization) estimation from $295 million to $315 million, down from $330 million to $340 million.
“We’ve delivered 12 consecutive months of positive same-store sales through May, but the last two months have been challenging, as we’ve aggressively adjusted pricing to bring Wendy’s more in line with the market,” Anderson said.
She added that the strategy will pay off in the long run, “but it has pressured transactions in the short term.”