Washington Restaurant Market Watch: Breakfast wars

Washington Restaurant Market Watch: Breakfast wars https://wahospitality.org/wp-content/uploads/2016/05/breakfast2016a.jpg

By Paul Schlienz

Customers love all-day breakfast, and McDonald’s numbers prove it.

The global quick service chain, which had been struggling, has made a stunning comeback since it instituted all day breakfast last year.

Just last week, McDonald’s reported a 35 percent increase in profits for the quarter that ended on March 31. This gain was surprisingly large and clearly driven by the company’s decision to sell some breakfast items throughout the day. This was McDonald’s third consecutive quarter of positive results.

Sales in McDonald’s stores open at a minimum of one year increased by 6.2 percent across the U.S., much better than Wall Street expected for the company’s essential American market.

“It’s still exceeding our expectations,” Steve Easterbrook, McDonald’s chief executive officer said of the company’s all day breakfast on a conference call. “Whilst we clearly added incremental visits and incremental spend across rest of day, our breakfast business has also prospered.”

Make no mistake about it. McDonald’s quick service competitors have noticed its success with its all day breakfast and are adjusting accordingly.

While arch rival Burger King has yet to follow McDonald’s lead and institute an all-day breakfast, it’s putting new emphasis on that first meal of the day.

This week Burger King introduced an Egg-Normous breakfast burrito throughout its U.S. outlets. This burrito is loaded with sausage, bacon, eggs, hash browns, cheddar and American cheese served with picante sauce. Additionally, Burger King recently junked its slower-selling English muffin sandwiches and added a supreme breakfast hoagie to its menu.

“We’ve invested more in breakfast,” Alex Macedo, head of Burger King North America, told Bloomberg. “The environment is very competitive.”

Taco Bell’s new morning menu options include $1 items like skillet bowls and sausage flatbread quesadillas. Subway is now promoting buy-one-get-one subs for the month of May that must be purchased before 9 a.m. Jack in the Box is heavily advertising a triple-cheese and hash-brown breakfast burrito. And Dunkin’ Donuts is now focusing on all-day items, including $1.99 Coolatta drinks sold at all hours.

“These bundled meals seem to be resonating with these chains’ customers and drawing more traffic to their stores,” Mark Kalinowski, an investment analyst at Nomura Securities, told the New York Times.

These breakfast wars are part of a much bigger trend. According to a study by researcher GfK MRI published by EMarketer.com, an increasing number of Americans grab eggs and coffee outside their homes. In 2015, more than 34 percent of U.S. consumers bought breakfast at quick service restaurants. This was an increase from 32.8 percent in 2011. In the meantime, fewer consumers are eating out for lunch and snacks. Reflecting this trend, dinner at restaurants increased by less than 1 percent.

McDonald’s Easterbrook is pleased with the way his company is riding the breakfast wave.

While there is still work to be done, we are on the right path to make even greater progress. I am confident that our continued efforts will deliver meaningful long-term value for all stakeholders into the future,” Easterbrook said.

And while McDonald’s is the most prominent beneficiary of the newfound interest in breakfast, many other quick service boats are rising with this tide.