NEW YORK CITY – In the quick-serve restaurant sector, competition is fierce, and innovation has become table stakes. Consumers today are value-conscious, but where “value” once meant low price, it has since developed into a polysemous signal for convenience, quality, and overall experience.
At the recent UBS Global Consumer and Retail Conference in New York City on March 12, Wendy’s CEO Kirk Tanner noted how the next phase of Wendy’s growth entails delivering against key demographics across all income thresholds, including families, younger consumers, and multicultural backgrounds.
These populations have dramatic potential: families make up 35% of QSR traffic, Gen Z shoppers, who often shape cultural trends, make up 21%, and Hispanic shoppers alone represent 23%, reported QSR Magazine. Additionally, Tanner mused that households making more than $100,000 per year represent one of the fastest-growing demographic groups.
The CEO dived into recent targets set by the company, including expectations to add 1,000 new restaurants globally by 2028 and annual goals of 3-4% net unit growth, 5-6% systemwide sales growth, and 7-8% adjusted EBITDA growth. However aspirational these targets may seem, Tanner contends the chain is primed to deliver.
Wendy’s recently outlined a three-pronged approach to capturing a larger market share, including:
- Doubling down on fresh and famous food by innovating on its core value proposition while leveraging key cultural collaboration touchpoints
- Mobilizing digital capabilities to improve the consumer’s dining experience
- Facilitating footprint growth through an approach that considers a location’s local impact while making it easier to partner with franchisees
A measured approach to innovation is at the core of the company’s strategy.
“Innovation often cannibalizes your core business,” Tanner warned.
“We looked at what we wanted to accomplish, and we built out innovation that was creative and built on the foundation that plays to our core strengths.”
Communicating Value
Wendy’s recently debuted Frosty “mix-ins” and sauces, allowing the brand to offer more flavor personalization options while streamlining operations. The two recently introduced additions include Frosty Swirls, which offer a sauce enhancement to its staple vanilla or chocolate varieties, and Frosty Fusions, which combine sauce, the Frosty, and mix-ins.
“[The] Frosty is one of the most iconic items on Wendy’s menu and we know that consumers are increasingly seeking new flavors and variety,” said Lindsay Radkoski, The Wendy’s Company’s U.S. CMO, in a statement.
In the past, when the brand innovated on the Frosty, it replaced the vanilla flavor with a limited-time offer, such as Orange Dreamsicle; however, Tanner noted that the reach was muddled as a result of taking away a core offering. Moreover, the logistics involved in these modifications could pose implementation challenges.
In its lunch and dinner lineup, Tanner noted how modifications are working to drive value.
Wendy’s age-old “fresh, never frozen” beef slogan is no longer moving the needle in terms of driving sales, as consumers today expect their QSRs to work harder on their value propositions.
“We know that the level of quality and the bar of what customers are expecting from us continues to raise, so we feel there’s a job to do to communicate that with the Biggie platform,” said Tanner.
The Biggie Bag is Wendy’s take on the $5 meal deal popular at fast-food chains, featuring a customizable choice of burger nuggets, fries, and soft drink.
Quality has become a given for these consumers, so marketing and further differentiation will play key roles in Wendy’s next era. Tanner feels confident in the offering’s competitive edge.
Capitalizing on Dayparts
In assessing the landscape, doubling down on mealtimes and dining occasions complements Wendy’s strategy. Tanner ceded that the chain is a laggard to the breakfast category having only launched five years ago. Despite this, the ROI has been significant.
“Our competitors started [with breakfast] in the ‘70s,” said Tanner. “I see it being a tailwind as we build out its potential.”
Tanner identified that beverages as a clear innovation lever, noting new offerings in the pipeline. A successful coffee product is a key investment area, as it could bring consumers into the store in the morning and create a routine for shoppers.
“To execute beverages in QSR is simple and our priority,” said Tanner.
Beverages may also bring customers in for lunch, dinner, late night and between meals. Although the dinner day part is the brand’s bread-and-butter, as it targets the profitable family consumer base, the Wendy’s sees growth potential in late-night and snacks.
Making It Happen – Emerging Technologies
Technologies supporting all-day dining abound. On the operational efficiencies front, Wendy’s FreshAI, currently available at roughly 100 locations, has an automated chatbot built as the voice of Wendy herself takes a customer’s order in English or Spanish, freeing the employee historically delegated to taking orders for other tasks.
The chain is integrating this service with digital menu boards that update with a customer’s order request, ensuring accuracy, which Tanner contends is the single important aspect of how customers interact with QSRs.
These menu boards also provide an opportunity to prioritize different menus based on the time of day and even weather conditions. Although, highly controversial when it was announced last February, with news sources noting how the technology could be used to instate “surge pricing,” Wendy’s stated that it will instead be used to improve customer experience and value.
“Digital menu boards could allow us to change the menu offerings at different times of day and offer discounts and value offers to our customers more easily, particularly in the slower times of day,” said the company in a statement.
Tanner noted that in addition to rolling out drive-thru menu board adoption, the chain is bringing the technology inside the store for similar reasons. He added that the company’s data leveraging capabilities are in its early stages, but he imagines that loyalty app information can integrate into these technologies to facilitate improved store experiences.
Tapping Into the Culture
Cultural relevance is another important lever for the brand, informing its international growth strategy by making the stores “locally relevant,” while, domestically, finding opportunities to capture interest, particularly among youth.
In the U.S., the chain’s recent collaboration with SpongeBob ushered in a new era.
“SpongeBob gave us an opportunity to look inwardly and think about … how we can elevate our core business with these collaborations,” Tanner said. Since then, the chain debuted another successful partnership with the Girl Scouts featuring a limited-time Thin Mints Frosty. These relationships continue to be an unlock for Wendy’s to promote brand awareness for its target demographics.
These initiatives also play into larger trends, such as the “kidult” movement and “nostalgia” factor integrations. Similar initiatives from other QSRs include a McDonald’s Happy Meal deal in Spain for adults celebrating the 30th anniversary of Friends as well as Taco Bell’s Decades Menu featuring classics from the ‘50s onward.
In this vein, Wendy’s recently announced a collaboration with tortilla chip brand Takis. Tanner is excited to debut chicken sandwich and fries offerings that incorporate the iconic chip.
Takis are culturally relevant to multicultural Hispanic populations while also connecting with Gen Z audiences, as the brand has experienced a resurgence on popular social media platforms. As such, the brand synergizes with Wendy’s growth trajectory.
Consistently among these recent and announced partnerships are end-products that emphasize incremental changes to the core menu with changes that can be integrated and scaled into existing platforms.
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