Back in the 1980s when Wendy’s (WEN) had success with its “where’s the beef?” campaign, the fast food chain decided to begin offering breakfast in a bid to expand sales. While that effort eventually fizzled out, the company never fully abandoned the idea. Just before the pandemic forced many businesses to close their doors in 2020, Wendy’s launched its fourth attempt at serving breakfast.
Despite the lockdown —, and perhaps helped along by Wendy’s aggressive marketing campaign — breakfast survived throughout the last couple of years. In fact, the company says its breakfast daypart is now profitable — the meal category makes up around 7% of its total sales, per Credit Suisse (CS). Executives say the target is around $3,000 in weekly breakfast sales per restaurant, but each location can break even with $2,000 in sales.
The reason breakfast is so important for fast food chains is margins, and what’s known as “sweating your assets.” Essentially, if breakfast isn’t being served the restaurant only has the chance to sell lunch and dinner, missing out on the chance to maximize its returns.
Margins come into play because breakfast includes easy-to-make handheld sandwiches, which keeps cars moving along the drive-thru, which grows sales. Coffee is also a huge part of breakfast, and it has a higher margin than food.
To go along with that profit potential, data suggests overall breakfast sales are on the upswing. Market research group NPD says breakfast daypart traffic at major chains is up 2% through August, when compared to the same time period in 2021. Meanwhile, lunch sales are down 3%.
Consumers have been making adjustments as inflation makes an impact in 2022. Dinner and lunch sales have been under pressure as inflation has spiked, with more would-be customers having learned to cook, or saving cash by bringing lunch from home.
In this current macroeconomic environment in which both prices and employment levels are high, breakfast is increasingly important. It’s a highly-saturated market, but when people do spend money on food away from home it’s likely to be something that’s easy to grab quickly at breakfast time. NPD analysis shows quick serve customer traffic is up 5% compared to 2019 levels.
The next frontier for fast food and breakfast is shifting to a familiar place – your smartphone and apps. As people fall into their morning routine, loyalty programs look to reinforce habits and drive profits. For fast food, the old adage is true: breakfast is the most important meal of the day.
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