Wendy's business is on fire thanks to this deal -- and it looks like McDonald's and Burger King want in on the action
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.
The fast-food chain reported that same-store sales increased 3.6% in North America in the first quarter on Wednesday, largely in part due to the success of the chain's 4 for $4 promotion.
"We believe 4 for $4 is meeting a consumer need for value combined with quality," Todd Penegor, Wendy's CFO, said in a call with investors on Wednesday.
Wendy's launched the $4 for 4 back in October, selling a junior bacon cheeseburger, chicken nuggets, fries, and a drink for $4.
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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.
At the time, Nomura analyst Mark Kalinowski noted that Wendy'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."
On Wednesday, Kalinowski reiterated Nomura's "buy" rating on Wendy's in a note, noting that 4 for $4 "continues to prove popular with quick-service customers."
Since October, chains such as Burger King and McDonald's have debuted bundled deals of their own, as if to try to imitate Wendy's sudden success.
In January, McDonald's launched the McPick 2 menu, a bundled-bargain deal that helped drive a 5.4% increase in same-store sales at US locations in the first quarter. In March, McDonald's began testing a breakfast version of the deal.
Burger King answered with a 5 for $4 promotion, announced just days after McDonald's rolled out the McPick 2. In April, the chain's parent company Restaurant Brands International reported that Burger King's same-store sales increased 4.4% in the US and Canada, thanks in part to the bundled deal, as well as the successful launch of Grilled Dogs.
But this deal isn't the only reason 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, consumers have rated Wendy's the highest-quality choice out of the traditional quick-service restaurant burger chains. Value deals may bring in more customers, but higher-quality options are key in convincing consumers to return to the chain.
"There are largely two different consumer bases out there," Penegor said of bargain-shopping and quality-focused customers in the call. "We're trying to make sure we serve and meet the needs of both."
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