Wendy’s Teases The Idea Of A Drive-Thru-Only Model

Wendy’s is the latest company to push a “drive-thru-only” narrative, joining a growing list of fast food chains either committing to or thinking about adopting the model as consumers sharply shift their ordering habits.

During the company’s Q3 earnings call Wednesday, CEO Todd Penegor said, “We have a new appetite to look at a drive-thru-only restaurant and we’ve got some prototypes that are going out in place to continue to test and learn on that front.”

If Wendy’s does develop such a model, it would add to its diverse real estate roster of traditional freestanding restaurants, with 65-plus seats, to its Smart 2.0 design, with 30 seats, as well as some models in between.

It would also join several of its category peers who are going all in on the drive-thru and other off-premise channels. In September, for example, Burger King unveiled a new design that is 60% smaller than its traditional restaurants. It includes an area for customers to order through the BK app and have their food delivered to the car, dedicated parking spots for curbside delivery, pickup lockers for mobile and delivery orders, multiple drive-thru lanes and an external walk-up window.

Taco Bell also recently unveiled its new “Go Mobile” concept, set to debut in Q1 2021. These locations are about half the size of a traditional Taco Bell restaurant and also include a dual drive-thru and curbside pickup, as well as “bellhops” who facilitate orders.

This is just the tip of the iceberg of “drive-thru” and/or “pickup” news emerging these past few months. Del Taco announced a drive-thru-only prototype last month, accommodating smaller real estate sites, while Shake Shack

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plans to add its very first drive-thru lanes next year, as well as walk up windows.  

Chipotle is pressing the gas on its mobile drive-thru Chipotlane format, while Checkers & Rally’s is shifting one of its two drive-thru lanes just to mobile and delivery orders.

Even c-store giant Wawa and casual dining brand IHOP are re-thinking their footprints to include drive-thrus and pickup windows, respectively.

There are a few drivers behind this. First and most obvious is that shift in consumer habits. The COVID-19 pandemic has forced customers to acclimate to digital ordering and off-premise business as dining rooms shuttered across the country. As such, in April, May and June,  drive-thru visits increased by 26% and represented 42% of all restaurant visits, according to The NPD Group. Off-premise business overall has grown by triple digits at many chains.

It doesn’t seem likely that customers will rush back to heavy on-premise usage anytime soon.

“I think consumer behavior will shift permanently to to-go and delivery because people have learned how to use them and, frankly, it looks like they like them,” IHOP president Jay Johns told me last week.

Indeed, according to Rakuten Ready, over 85% of order-ahead for pickup customers plan to continue using the service in a post-COVID environment. New data from the National Restaurant Association shows that 32% of adults who ordered takeout or delivery said they expect to increase their frequency during the next three months, while just 22% plan to cut their off-premise frequency for lunch or dinner.

For Wendy’s, a significant potential for off-premise business also exists because of the Kevin Vasconi factor. For those unfamiliar, Vasconi was named Wendy’s new chief information officer in mid-October after serving in the same role at Domino’s. This is notable because Domino’s is largely understood to be a “tech company that sells pizza,” generating over 65% of its sales via digital channels.

There is plenty of reason to believe Vasconi will bring some of that playbook to Wendy’s. As such, we can expect digital orders to continue their steep growth trajectory under his leadership (those digital orders doubled year-over-year for the chain and are now over 6%, by the way).

We can probably also expect some bells and whistles not typically seen in the fast food space–pizza is just that far ahead on the digital front. Domino’s, for example, recently pioneered features like delivering to hot spots and automated phone orders via artificial intelligence assistant DOM. These digital enhancements might come at a dizzying pace, but Wendy’s has put a new COO, Deepak Ajmani, into place to ensure operations can keep up.

Third, there’s the breakfast consideration. While the daypart is down significantly across the segment, Wendy’s likes the runway it has in the morning. And it should. Wendy’s breakfast, launched in March, now makes up over 7% of total sales and consumer awareness of its morning offering is still only around 50%. Once those busy commuters start returning to their drive-thru routines in the morning, Wendy’s will be well positioned.