Bigwigs battle for breakfast bucks
Fast-food chains see easy growth potential
Your new breakfast of champions likely comes in a fast-food wrapper.
Morning is the new hot time for the super-competitive quick-service restaurants, which each want to entice hungry, possible groggy customers. National chains, already duking it out for lunch and dinner, now want a chunk of those a.m. dollars.
McDonald’s unveiled its Triple Breakfast Stacks (two slices of American cheese, two sausage patties, bacon and egg and served on a choice of McMuffin, biscuit or McGriddles cakes) Tuesday. During Burger King parent company Restaurant Brands International’s earnings call Wednesday, CEO Daniel Schwartz discussed the popularity of the breakfast menu at its Tim Hortons chain in Canada. And rumors that Chipotle Mexican Grill will get into the breakfast game weren’t quashed during its earning call Thursday; CEO Brian Niccol – the man who helmed Taco Bell during its successful breakfast push – evaded an analyst’s question on the topic.
“Breakfast is still the meal occasion most likely to be prepared and eaten at home,” said David Portalatin, vice president and food industry adviser for research firm NPD Group. “It’s sort of the final frontier for restaurants.”
Breakfast is the only part of the day that has seen major growth, according to NPD. U.S. fast-food restaurants had close to 41.2 billion visits in the 52 weeks ending in August, including
7.3 billion-plus for breakfast. Those numbers are from up from more than
38.9 billion – almost 6 billion of them breakfast – during the same period in
2009.
The battle for breakfast is in full force. Chains from Sonic to Starbucks have been growing their morning-inspired menus. Plus, those already deeply invested in the morning continue to push the breakfast angle, from the limited-time Dunkin’ All You Can Meat breakfast sandwich (egg and cheese croissant with two strips of bacon, two slices of ham and a sausage patty) to name-changing IHOP’s return to its pancake roots this summer.
“Companies have focused for so long on changes in lunch and dinner – your typical burger and chicken nugget options – that they haven’t spent so much time innovating on breakfast,” said Ernest Baskin, an assistant professor of food marketing at St. Joseph’s University. “They are viewing it as white space, where they can introduce new things at relatively little additional costs.”
Breakfast isn’t always so bucolic, though. Wendy’s attempt failed, and even a morning move faces potential problems due to increased staffing and adding complexity – in the form of more ingredients and menu choices – to kitchens that are supposed to be fast.
When done right, though, breakfast provides room to grow sales and customer traffic, which pleases Wall Street.
“Lunch is historically the sweet spot for fast-food restaurants, and lunch is under attack,” Portalatin said, pointing to the growing number of telecommuters and flex-time employees and the rise of the on-demand workforce. “The traditional notions of place and working patterns (have changed), so demand for fast-food lunch simply isn’t there.”
Here are four reasons breakfast may become the most important meal for fast-food chains.
❚ Easy menu modifications: In most cases, chains’ morning food line-ups are simply riffs on their existing offerings. Companies reverse-engineer breakfast dishes, using ingredients and core menu items. Add an egg here; toss some fruit there.
“In most cases, they’re using products they already have in their restaurants to create new sandwiches. They try not to bring in more products,” said Peter Saleh, restaurant analyst at the financial-services firm BTIG.
❚ Convenience is key: The universal craziness of the morning rush can be alleviated slightly by sidling up to a restaurant and having your breakfast handed to you. Shaving a few minutes off that go-go-go period for a few bucks means the difference between a granola bar stuffed into a briefcase and a hot sandwich.
❚ It’s OK to toss the toaster: Bought breakfasts are gaining acceptance, a trend with roots in a key part of the morning meal – a cup of caffeine. “You can trace it back to the coffee business,” Baskin said. “A lot of people made coffee on their own. Now, people have transitioned, and coffee is easy to get to go.”
❚ A built-in fan base: “If you like X, why not try Y?” is a textbook way to get customers to come back. For companies that serve traditional later-day foods, like burgers, a strong pitch to their p.m. regulars strikes a chord.