MCD McDonalds Corp

By Heather Haddon 

Wendy's Co. is limiting menu items, including its signature fresh-beef hamburgers, at some locations as closures of coronavirus-hit meat plants start to squeeze restaurant supplies.

A spokeswoman for the Dublin, Ohio, chain said the company is continuing to regularly supply its restaurants with hamburgers, but that some menu items may be limited on a temporary basis given the meat-supply crunch.

"We're working diligently to minimize the impact to our customers and restaurants," she said.

Wendy's, known for its iconic "Where's the Beef?" television commercials beginning in the 1980s, serves only fresh beef at its 5,850 U.S. locations, making it more vulnerable to supply disruptions because it can't rely on frozen stocks that rivals such as Burger King and McDonald's Corp. tap.

An analysis of 185 Wendy's restaurants nationwide found that up to 10% of them had taken beef off their menus and only were serving chicken, according to Wall Street research firm Stifel.

The beef shortages come as Covid-19 outbreaks have temporarily closed around 20 meatpacking plants, from Pennsylvania to Washington state, reducing the country's overall beef production last week by 35% compared with last year's level, according to U.S. Department of Agriculture data. President Trump last week issued an executive order allowing meat plants to continue operating at the discretion of the U.S. Department of Agriculture, insulating meatpackers from state and local officials' calls to close coronavirus-hit plants. Meat production remains below normal levels, however, with many plants still closed and others forced to slow operations due to nervous workers staying home.

The supply problem is adding to the financial woes of restaurants grappling with big sales losses since the coronavirus forced dine-in closures across the country. The sales declines have kept restaurants more insulated from the shortages that have plagued grocery stores for weeks.

But restaurant sales are beginning to improve as some states start to reopen businesses and some consumers seek meals outside the home. Restaurants are now ordering more again, food-distributors say, and some chains are having to shore up their supply chains for meat at the same time.

McDonald's, which started putting fresh beef on its menu in 2018 to supplement its frozen patties, said it is monitoring the situation. A McDonald's spokesman said Tuesday that fresh beef remains on its U.S. menus.

Jose Cil, chief executive of Burger King parent-company Restaurant Brands International Inc., said Friday that the company is working with its suppliers to devise contingency plans if a disruption occurs. David Gibbs, chief executive of Yum Brands Inc., whose brands include KFC and Taco Bell, said last week: "We are talking about it daily."

Some Wendy's franchisees said they first started encountering fresh beef shortages several days ago. The lapses sometimes last several hours, owners said, and they've worked to substitute different sizes of burgers for those they lacked. Sometimes they have suspended offering others items that use beef, such as chili, and they are reducing waste by preparing burgers only immediately after they are ordered.

The company and its supply chain cooperative are putting plans in place to respond to the shortages, and owners awaiting news of more plans in coming days.

Many other restaurants and their distributors are seeing shortages and higher prices for a range of meat products.

"Costs have really jumped over the last few weeks," Shake Shack Inc. Chief Executive Randy Garutti said of beef prices Monday. "It's something we are watching literally every hour."

In addition to fast-selling ground beef and premium cuts like prime beef, meat suppliers are producing fewer items of boneless pork and poultry cuts because they require workers to process them more by hand, said Bruce Withrow, a director of meat protein in North America at Gordon Food Service Inc., one of the biggest food-service distributors in the U.S.

"We're hoping it's a six-to-eight-week issue. That's what we're planning on," Mr. Withrow said.

Wood Fruitticher Foodservice, a distributor for independent restaurants across the southeast, said it was told by its local Tyson Foods Inc. supplier last week that ground beef orders were canceled and customers should expect shortages. Tyson couldn't accept new orders in its system as it tried to catch up, the representative wrote to Fruitticher. Tyson didn't immediately respond to a request for comment.

Ted Jones, a meat purchaser for Fruitticher, contacted a local supplier and is having them process whatever beef they can get their hands on. Prices for ground beef have nearly doubled from wholesale costs at the end of March, he said. "It's wild," Mr. Jones said.

A representative of meat processing company JBS USA Holdings Inc. informed food-service distributor customers last week that frozen stocks of hogs had become depleted and shortages will likely continue amid disruptions to workers' availability. JBS didn't immediately respond to a request for comment.

Nathan Casper, who runs Araujo's Mexican Grill in San Jose, Calif., said his restaurants go through 150 cows worth of chuck roll, or about 3,000 pounds every week. Last week, he called his usual suppliers and couldn't find anyone selling.

"How do you run a taqueria without carne asada?" Mr. Casper said. "It's 65-70% of what I sell."

After calling more than 30 meat providers, he paid $5.50 per pound compared with the price of $2.80 per pound in February. People had cows, but nowhere to process them. They suggested he take the whole cow and try to sell the bits he couldn't use himself.

Wendy's customers have noticed the disruptions.

Lisa Nichols, a 47-year-old writer, said she and a friend recently tried to order large hamburgers from a location in Jackson, Miss., for delivery, but was told by a DoorDash courier that they were out. They switched to smaller patties, but Ms. Nichols said she's since found those to be unavailable as well.

"We thought it was pretty funny and made the obvious 'Where's the beef?' jokes to each other," Ms. Nichols said.

Lem Harsh, a 36-year-old sales director from Columbia, S.C., said he recently stopped at a Wendy's drive-through to find paper notices taped over the menu stating that there were no hamburgers due to recent beef shortages. He went to a McDonald's next door, where burgers were available.

Mr. Harsh said he still prefers Wendy's fresh beef to the frozen patties sold by other fast-food chains. "Eating that Big Mac reminded me why I prefer Wendy's over other hamburgers," he said.

--Julie Wernau and Jaewon Kang contributed to this article.

Write to Heather Haddon at heather.haddon@wsj.com

(END) Dow Jones Newswires

May 05, 2020 18:26 ET (22:26 GMT)

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