The Future of Fast Food?

Wendy's (NASDAQ:WEN) couldn't have picked a worse time to roll out a new breakfast menu than last February: The pandemic closed down businesses and eliminated the need for anyone to stop in on their way to work.

Yet with the economy reopening and people reestablishing their morning routines, the breakfast daypart helped the fast-food chain notch the highest global same-restaurant sales growth in over 15 years.

So successful is the menu that Wendy's is developing an all-new type of restaurant that will help drive expansion, one that could point to the direction the rest of the industry should take.

McDonald's drive-thru window


Make that to-go

The drive-thru window has been a fixture of the fast-food experience, but it became absolutely essential to the restaurant industry's survival during the health crisis.

  • McDonald's (NYSE:MCD) said 90% of its second-quarter sales were via the drive-thru window, and it's sustained the chain since.
  • Restaurant Brands International (NYSE:QSR) said drive-thru sales at Burger King were up 28% in the third quarter as it converted a number of single-lane drive-thru restaurants to double lanes.Fast-casual burger champ Shake Shack (NYSE:SHAK) announced its future expansion plans will fully incorporate drive-thrus alongside walk-up windows while retrofitting existing locations.
  • Chipotle Mexican Grill (NYSE:CMG) also continues to add Chipotlanes to its restaurants.
  • Yum! Brands' (NYSE:YUM) Taco Bell recently introduced its Go Mobile store design that has one drive-thru lane for traditional ordering and one for mobile pickup.

Wendy's, though, is going one step further, with CEO Todd Penegor telling analysts during its recent earnings conference call the fast-food chain has "a new appetite to look at drive-thru-only restaurants."

He also says the burger joint is pursuing a mix of designs and it's important to have a portfolio of different-size restaurants. Nonetheless, as cities and states start imposing new restrictions as new cases of COVID-19 flare up, Wendy's could be pointing the way forward for how fast-food chains should look at their restaurant expansion.

“Digitally native dining”

The pandemic has already changed how consumers consider dining out. Outdoor seating has become commonplace at many casual dining chains during the crisis, a solution to the problem of limited indoor seating, but one that might not work so well in the winter.

Yet that doesn't really work for fast food, where efficiency in getting people served and on their way is key. It's why digital signage, mobile ordering, and even delivery are fast becoming staples.

Chipotle Mexican Grill has recognized this, as its first digital-only restaurant is about to open. It saw mobile orders triple last quarter, so its newest restaurant features no dining room and no line for indoor ordering.

That's similar to the Starbucks (NASDAQ:SBUX) pickup-only stores that were first unveiled last year, and have accelerated with the advent of the pandemic.

Touch and go

Obviously, fast-food restaurants won't completely do away with their dining rooms; as Wendy's Penegor says, they need an assortment of styles to fit the different needs of their customers. But it also seems clear that the off-premise model is going to be the preferred one, and may become dominant.

Tomorrow's fast-food restaurant is going to transform into one that is all-digital and has a drive-thru window at its core.

With a smaller footprint, it will cost less to build and maintain, and be more efficient in getting the food to the customer. And it ought to be a more profitable model to deal with a future where consumers are demanding social distancing be built in.

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