Wendy’s is gaining ground in the fast-food budget battles, thanks to a new type of deal that is dominating the fast-food industry.
Wendy’s on Wednesday reported that same-store sales, which it defines as sales at restaurants open at least 15 continuous months, increased 3.6% in North America in the first quarter, largely because of the success of the chain’s “four for $4” promotion.
“We believe ‘four for $4’ is meeting a consumer need for value combined with quality,” Todd Penegor, the CFO of Wendy’s, said Wednesday in a call with investors.
Wendy’s launched the promotion in October, selling a junior bacon cheeseburger, chicken nuggets, fries, and a drink for $4.
The bundled promotion was an instant boon to Wendy’s sales, with the company reporting in February that same-store sales were up 4.8% in the fourth quarter of fiscal 2015.
- Hollis Johnson
At the time,Nomura analyst Mark Kalinowski noted thatWendy’s management said it “may have attained a sort of first-mover advantage by being the first national burger chain to start promoting a bundled meal at this $4 price point nationally.”
Kalinowski reiterated Nomura’s “Buy” rating on Wendy’s in a note Wednesday, saying the “four for $4” promotion “continues to prove popular with quick-service customers.”
Chains such as Burger King and McDonald’s have debuted bundled deals of their own since October, as if to try to imitate the sudden success at Wendy’s.
In January, McDonald’s launched the McPick 2 menu, a bundled deal the company said helped drivea 5.4% first-quarter increase in sales at US locations open more than a year. McDonald’s began testing a breakfast version of the deal in March.
Burger King answered with a “five for $4” promotion, announced just days after McDonald’s rolled out the McPick 2. In April, Burger King’s parent company, Restaurant Brands International, reported that the chain’s sales at locations open more than a year increased 4.4% in the US and Canada, thanks in part to the bundled deal as well as the successful launch ofGrilled Dogs.
But the promotion isn’t the only reason that Wendy’s has seen a spike in sales.
Wendy’s emphasized that its sales growth was rooted not only in “4 for $4” but also in balancing promotions that attract value-centric guests with more expensive, higher-quality options.
According to Penegor, the Wendy’s CFO, consumers have rated Wendy’s the highest-quality choice out of the traditional quick-service burger restaurants. Value deals may bring in more customers, but higher-quality options are key in persuading consumers to return to the chain.
“There are largely two different consumer bases out there,” Penegor said in the call of bargain-shopping and quality-focused customers. “We’re trying to make sure we serve and meet the needs of both.”