This week’s announcement by Wendy’s Co. that it’s planning yet another big push into the breakfast market at its U.S. restaurants next year was met with skepticism by investors, who initially drove the stock price down 4% on the news. So how difficult will the challenge actually be?
I can give you three inside-baseball reasons why Wendy’s new breakfast push will struggle to succeed (again).
First, breakfast is a ritual for many people and therefore the most difficult market to crack. You have to offer a tremendously compelling reason to get people to change their morning habits.
Second, Wendy’s is located on the wrong side of the street for easy morning turn-in traffic in many markets. For decades, Wendy’s real estate strategy was to let McDonald’s spend all the cash required for scoping out the best real estate, and then they often just located across the street.
The concept was to “draft” inexpensively behind McDonald’s on choosing locations, but it proved to work against them once they began to implement a breakfast strategy. McDonald’s preferred, whenever possible, to choose properties where morning commuters — the ones who might drive-through for breakfast — had a right-hand turn into the lot. That left Wendy’s with the difficult left-turn dynamic.
Third, the Wendy’s staff likely will be tripping over each other behind the counter. The longtime routine in the morning is focused on preparing Wendy’s salads fresh each day, which is a big part of why those salads are so good and represent a significant contribution to the company’s profits.
And if those three reasons aren’t enough, here’s one more thing to keep in mind: Wendy’s said this week it will spend $20 million to compete in this space. That’s a drop in the bucket for this war. McDonald’s will spend more defending the breakfast daypart than some developing countries spend on their very survival.
This is just one perspective, of course. Wendy’s certainly sees the potential size of the prize, and given their commitment to freshness and product excellence, it may find a way to beat the odds. Let’s see if their team can surmount these challenges.
Images via CNN Business.