And it won’t be without big risk.
Cowen restaurant analyst Andrew Charles said Monday it may cost Wendy’s $250 million total in 2020 and 2021 to launch its national breakfast program. Charles said the enormous sum is concentrated in hiring 20,000 workers in a tight labor market, training, equipment and aggressive marketing.
“Breakfast does not provide Wendy's a competitive advantage, and thus does not lend visibility on either enduring sales growth or a growth plan with lower investment needs,” Charles wrote in a note to clients along with a downgrade in rating on Wendy’s to Market-perform. “We see risk breakfast requires intensified focus from management that could prove to be a distraction.”
Wendy’s surprised investors in early September with plans to hire 20,000 people to drive a nationwide rollout of breakfast in 2020. The menu — spanning 5,900 or so U.S. restaurants — will feature two premium-priced sandwiches that appear to be very differentiated relative to McDonald’s McMuffin and Burger King’s (QSR) Croisan’wich: Breakfast Baconator and the Honey Butter Chicken Biscuit.
Wendy’s will also lay the groundwork to a possible coffee platform rollout, starting with an iced drink coined the Frosty-ccino (Wendy’s Frosty and coffee).
Wall Street has quickly voiced its view on the plan — Wendy’s stock has traded 8.1% lower since the September 9 announcement. Recall that Wendy’s is no stranger to the broader breakfast game. The company made unsuccessful forays into breakfast in 1985 and 2007. Both times, the mighty McMuffin won out.
So, the investor cautiousness is understandable, especially considering the strong competitors with more established breakfast platforms.
Now all eyes will turn to Wendy’s key analyst day on October 11, where the company is expected to reveal longer term financial targets and more details on its breakfast entry.