Here's Why The Food At Wendy's Is So Inexpensive
Wendy's is known for its fresh food. Its burgers are never frozen, and its salads are made in-house everyday. Despite this approach, the food at Wendy's remains inexpensive; in fact, the fast food chain offers one of the cheapest menus out there. How can this be? There are several reasons why the food at Wendy's is so inexpensive — and in this article, we reveal them all.
Wendy's boasts more than 6,500 restaurants, each of which marries fresh food with low prices. Maintaining and improving the profitability of these restaurants is the key to Wendy's success. Having low prices both helps and hinders this goal; low prices improve sales while simultaneously reducing profit margins. The chain has several ways of ensuring it continues to make money; these include maximizing sales volume, embracing new technology, and limiting food waste. These tactics — and many more — all contribute to the low price of your beloved Biggie Bag. Let's take a closer look at them.
Wendy's pays low wages
Labor is always one of a business' largest expenses. This is just as true for Wendy's as it is for every other fast food restaurant. That being said, Wendy's does limit its expenditure on labor by paying its staff low wages. Back in 2022, several Wendy's workers shared their salaries on a Reddit thread. Nearly all of those who commented, including managers, were paid no more than $15.50 per hour. Many crew members reported starting the job on as little as $11 per hour. A survey conducted by Indeed backs up this information. After receiving reports of 6,463 salaries, Indeed estimated the average crew member's wage to be $12.56 per hour. For comparison, Indeed estimated that the crew member wage at McDonald's is just over $13 per hour.
Even saving $0.50 per crew member adds up to a huge amount over the course of an entire year. These savings are directly reflected in the restaurant's low prices. To put it simply, Wendy's can afford to price its food so inexpensively because it is paying its workers less than some competing companies.
Wendy's has embraced automation
Wendy's has always embraced automation and is often among the first fast food brands to introduce new technology into its stores. In the past, this has included being one of the first brands to introduce drive-thrus to its restaurants – an act that changed fast food forever — as well as self-order kiosks and its own app. All three have increased sales while driving down Wendy's operating costs, ensuring that food prices remain low.
In 2023, Wendy's announced it was experimenting with automating its drive-thru by launching an artificially intelligent chatbot that takes customers' orders. The chatbot was designed to streamline the ordering process, thus maximizing an already incredibly profitable aspect of Wendy's business model. Not only is the chatbot supposed to make ordering quicker, it also leaves staff members free to perform other tasks. This further drives Wendy's sales and profitability, thus enabling it to maintain the characteristically low prices of its food. Finally, the chatbot has been programmed to maximize sales via upselling. If successful, this could increase the profit margin associated with each order. These comfortable profit margins further ensure that Wendy's can afford to keep the prices of certain foods incredibly low.
Wendy's relies on large sales volume
All companies that serve or sell a product have to decide whether to prioritize sales volume or profit margin. Wendy's, like nearly all fast food chains, leans more towards large sales volume. Essentially, this means that Wendy's business model is designed to sell very large quantities of food at low prices. The idea behind this is that even small profit margins yield a lot of money when hundreds or thousands of items are sold each and every day.
Drive-thrus have become an essential means of boosting sales volume at Wendy's. In 2023, it was estimated that a staggering 80% of food orders came from the drive-thru. Drive-thrus also serve more customers; some fast food brands experience 10-15% higher volume at drive-thrus than at the counter. Thanks to the sales volume both within the restaurant and at the drive-thru, Wendy's can maintain its inexpensive pricing.
Wendy's underwent corporate reorganization
Restructuring a company as large as Wendy's is no mean feat: It requires a lot of planning and money to be performed correctly. This did not stop Wendy's from embarking on a large-scale restructuring mission during 2023 that saw the size of the company's executive team reduced. Several senior positions were eliminated, including the role of the company's United States president. Estimates price the cost of the reorganization between $11 million to $13 million.
Wendy's believes this is money well spent, and many agree. The company's operations are thought to be more efficient and its business model streamlined. Indeed, Wendy's has performed well since the reorganization, including a healthy start to 2024: The company's first quarter report revealed that sales had grown both internationally and in the United States. These strong sales reaffirm the company's decision to focus on large sales volume and subsequent growth. The new leadership team's success makes it very unlikely that this tactic will be changed. As a result, Wendy's prices are all but guaranteed to stay low.
Wendy's balances out cheap food with premium options
Wendy's is known for inexpensive food, but that doesn't mean it only serves these foods. In fact, Wendy's menu also contains several premium options such as the Breakfast Baconator, a burger that's priced at $5.99 and the much-celebrated Pretzel Baconator. These premium foods play a very important role at Wendy's, subsidizing the inexpensive items and ensuring the brand remains profitable.
An overreliance on the sale of inexpensive foods has seen Wendy's become unprofitable in the past. During the latter part of 2018, an overdependence on cheap foods saw some store sales decline. As reported in Restaurant Business at the time, Wendy's ex-CEO Todd Penegor said, "The opportunity we have is how not only to drive [customers] into the restaurants, but how to get them to mix in more core and premium items. We need to have that right balance between driving them in and trading them up."
It might be perplexing to some, but the success of Wendy's premium foods is directly linked to the availability of Wendy's inexpensive foods. In recent years, Wendy's has done a better job of achieving this balance, and the brand is performing well. In other words, there's no danger of the restaurant brand prioritizing a high profit margin any time soon.
Wendy's sells some products with high profit margins
Interestingly, the best profit margins are not to be found in either Wendy's premium or value foods. Instead, the highest profit margins are associated with two specific products: drinks and French fries. It's thought that the profit margin for French fries served at Wendy's and other quick service restaurants lands anywhere between 75 and 90%. The margin on drinks, especially soda, is similarly impressive.
Sales of these items are through the roof. In fact, French fries were Wendy's most sold item during 2023, and Wendy's lemonade was the second most purchased beverage during the same year. The huge profits made on these two products allow Wendy's to sell other foods at very low prices. In essence, these two products subsidize Wendy's inexpensive foods. They even make up for the losses incurred by so-called loss leaders, foods that are kept on the menu even though the company loses money on them because they get customers in the restaurant.
Wendy's leans into promotions and bundles
Wendy's was the first fast food brand to offer a $0.99 value menu back in 1989. The company has continued to lean into promotions and bundles ever since. While a good deal for the customer, promotions such as the now-discontinued 4 for $4 and ever popular Biggie Bags remain profitable for Wendy's. In fact, senior members of the executive team have claimed these bundles and promotions actually boast better than average profitability.
The reason why many of Wendy's promotions and bundles are so profitable is that they're made up of small portions. For example, the $5 Biggie Bag Meal Deal is comprised of junior fries, a four piece set of chicken nuggets, a small drink, and a sandwich. These small portions minimize the cost of making the meal, thus allowing it to be profitable. Wendy's promotions and bundles are also known to boost sales. When the four for $4 promotion was introduced, the company saw sales increase by a significant margin in North America. As we've seen, Wendy's favors a high sales volume approach, which bundles and promotions actively support.
Wendy's focuses on breakfast
Breakfast is an especially lucrative part of the day for fast food chains such as Wendy's. This is partially thanks to the popularity of high profit margin foods at this time of day, most notably Wendy's freshly cracked, grade A eggs and coffee. Kirk Tanner, Wendy's CEO, highlighted another reason in an earnings call reported by Marketing Dive. During it, Tanner said, "We can grow our breakfast business significantly without adding incremental labor, which drives meaningful improvement of our restaurant economic model."
The extra revenue brought in by breakfast is hugely important to how Wendy's operates throughout the rest of the day. As we've seen, products with a high profit margin subsidize the low costs of other foods sold by the brand. What's more, the company's breakfast is also another opportunity to push promotions and bundles that result in high sales volume. This is exemplified by the brand's recently launched $3 breakfast deal.
Wendy's wastes very little food
Every piece of food that Wendy's orders in has to be paid for. Unsurprisingly, this means that Wendy's is loath to waste food, especially high cost items such as meat. What makes this challenging is Wendy's commitment to only serving fresh, never frozen beef.
The main way Wendy's minimizes beef wastage is using unserved patties to make the brand's chili. This ensures that even leftover food is monetized, giving the company the breathing room needed to price its food competitively. Another way Wendy's reduces food waste is reusing excess Frosty mixture the next day. Again, this cuts down on unnecessary waste, reduces the company's losses, and protects its profit margin.
Of course, reducing food waste is not only an economic choice, but an environmental one too. Wendy's has committed to reducing food loss and waste by 50% by 2030. Not all of these practices have been adopted with maintaining the company's low prices in mind. Some, including donating excess food and repurposing cooking oil, are being performed to boost the company's sustainability credentials.