The U.S. fast food chain Wendy’s wants to expand in Australia, but the fight for market shares may be tough.
The fast food chain Wendy’s is actively working on expanding to Australia, the latest move of a fast food giant investing in the attractive but competitive Australian market.
Wendy’s president, international and chief development officer Abigail Pringle is going to talk to potential partners in Australia in order to roll out the company’s plan to open hundreds of franchised restaurants in the country.
“We believe Australia is a lucrative market for long-term growth. We think that the Australian market could be hundreds of restaurants,” Ms. Pringle told Australia Financial Review on Monday. The company is willing to consider various franchise models, such as royalty abatement, co-investment, and a partnership with an established food group that already operates other chains.
Wendy’s is one of the world’s largest fast food companies after McDonald’s and Burger King with about 7,000 outlets in 30 countries. About 1,000 of them are outside the United States, including 400 restaurants in Canada. The brand has also been in New Zealand for three decades but there is currently no Wendy’s in Australia.
The move to the Australian market is part of a larger international expansion strategy with the goal to have 8,000 to 8,500 restaurants opened by the end of 2025. Wendy’s has also the intention to recruit master franchisees to build and open restaurants in Ireland and Spain, and grow its footprint in Mexico. In 2021, Wendy’s successfully relaunched in the United Kingdom after leaving the market in 2001 as a result of skyrocketing operating costs, which accounted for its second failed attempt at the time.
Australians make almost five visits to fast food restaurants in a month
Australia for Wendy’s is attractive as almost one in five Australians eat fast food at least 10 times per month, according to a 2021 market study from Roy Morgan, an Australian market research firm. On average Australians make almost five visits to quick-service restaurants in a month.
But it is also a competitive market with a lot of fast food chains. Five Guys launched in 2021. Taco Bell entered the Australian market in 2019 while it failed in 1981 and 1997 before.
McDonald’s entered the Australian market in 1971 and has now about a thousand restaurants. Burger King and its whopper are available in the 450 restaurants of the company’s only franchise operating under another name: Hungry Jack’s. KFC and Domino’s Pizza are the two other fast food restaurants with the most orders in Australia, according to Roy Morgan. Subway has also more than 1,300 locations.
It is not the first time Wendy’s has tried to set foot in Australia. Wendy’s, which was founded in Columbus, Ohio, in 1969 tried to expand to Australia in 1982 and withdrew three years later.
Mr. Cowin, the founder of Hungry Jack’s in 1971 in Perth, and his company bought all 11 Wendy’s stores in 1972, closed two outlets and converted nine into Hungry Jack’s stores. For Mr. Cowin, Wendy’s will struggle to differentiate itself in a massively-invested fast food market that also has a number of local brands like Grill’d and Guzman y Gomez.
Hungry Jack’s spends about 60 million Australian dollars (40 million U.S. dollars) a year in advertising, and McDonald’s maybe twice as much, according to Mr. Cowin who stresses the difficulties of getting market shares starting from scratch.
The Queensland University of Technology retail expert Gary Mortimer however considers they may succeed due to its recognizable brand and the factor of novelty. “There’s a sense of novelty and uniqueness – many of us have probably traveled to the United States, and if not, we’ve seen some of these brands on sitcoms and movies, so having that strong brand awareness is quite helpful,” he told news.com.au.
While the COVID-19 pandemic strongly hit the retail business and changed consumer habits, the Australian fast food industry resisted well with its quick service, take-away meals and food-ordering online applications. As the demand, and offer, for healthier choices increase, fast food may also appeal to Australians as a cheap restaurant option in the face of inflation.
The expansion also comes in the context of a potential broad organizational overhaul of the company, with potential staff reduction and new investments for 2023, according to the Wall Street Journal.
Wendy’s first restaurants in Australia are not expected to open for another year to 18 months as the company wants to find “the right partner.”