Wendy's opens delivery-only kitchens in Canada to meet growing demand

Wendy's advertises a meal in Miami on Monday, March 1, 2010. (AP / Lynne Sladky)

Wendy's plans to open 700 delivery-only kitchens by 2025 to meet the growing demand from people who want their fast food brought to them.

Wendy's said the kitchens will primarily operate in big cities in the U.S., Canada and the United Kingdom, where the chain has fewer brick-and-mortar stores. The hamburger chain will open its first 50 delivery kitchens this year.

Dublin, Ohio-based Wendy's is partnering with Reef Technology Inc., a Miami company that runs 5,000 delivery kitchens in 30 cities worldwide.

In a conference call with investors Wednesday, Wendy's President and CEO Todd Penegor said Reef will build the locations and hire workers for the kitchens, each of which are expected to see sales of $500,000 to $1 million per year. Wendy's will get royalties of around 6% of sales.

Wendy's said third parties like DoorDash, Uber Eats and Grubhub will deliver the food.

Demand for restaurant delivery was already growing before the pandemic but surged when restaurants closed their dining rooms last year. Delivery accounted for 3.3% of U.S. restaurant traffic in the year that ended in June 2019, according to NPD Group. That rose to 8.4% in the year that ended in June 2021.

Wendy's said its digital sales ---- which includes delivery and mobile orders for pickup ---- hit 7.5% of total sales in the second quarter of this year. That's up from 2.5% in 2019.

Wendy's said it decided to expand its delivery-only kitchens with Reef after a successful test in Canada, where it opened eight kitchens late last year.

Wendy's isn't the first fast food chain to explore so-called ghost kitchens, which have no storefront and only prepare food for delivery. In 2019, Chick-fil-A began offering delivery from a DoorDash Kitchen in Northern California.

Wendy's shares were up 2% to $23.35 in afternoon trading Thursday.