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    The Battle for Breakfast

    It's been more than 30 years since McDonald's introduced the McMuffin, and almost 40 years since Jack In The Box became the first fast-feeder to offer a breakfast sandwich.

    Today, quick-service breakfast is hotter than ever, as virtually every major chain is adding new menu items and, in some cases, rethinking their operational platforms.

    In a recent survey of 28 quick-service restaurants (QSRs), operators disclosed they had added 67 new breakfast items within the past year and a half, according to Maria Caranfa, director of Mintel Menu Insights, based in Chicago.

    "All are seemingly going after breakfast expansion at once," she said, noting that McDonald's attributed half of its reported 3.8-percent increase in same-store sales in July to breakfast items and coffee. "There is a war between traditional QSR and the coffee houses."

    Wendy's International expects to offer breakfast for the first time after testing a number of breakfast foods in a variety of location types. No rollout date has been set, but reports speculate an end-of-2007 or early-2008 timeframe for nationwide launch of the program, which will be centered on a portable hot breakfast sandwich. A variety of breads, including biscuits, pan bread, burrito wraps and bagels, are being tested. Full-market tests supported by television advertising are being run in Raleigh, N.C. and Kansas City. Selected stores, including standalone sites, inline stores, food courts and stores attached to Tim Horton restaurants, in selected markets like Columbus, Ohio, also are testing breakfast menu items.

    "We're also trying traditional home fries and an omelet bite – like a home fry, but stuffed with egg, bacon and sausage, which can be eaten with your fingers," said Denny Lynch, a spokesperson for the Dublin, Ohio-based chain, which now rings up about half of its sales before the dinner hour.

    Wendy's is also testing regional foods, like sausage and gravy and chicken biscuits. The QSR will upgrade its coffee program as various types are in test now.

    "[New breakfast programs] are being driven by consumer trends, competition from other QSRs and attractive margins," said Tom Miner, principal at Technomic, a Chicago food industry consultant.

    The potential profit of these menu items has McDonald's considering a new operating platform that would allow its sites to offer breakfast all day long.

    While there is no commitment or timetable for rolling out a new platform, McDonald's CEO Jim Skinner said at an investment conference that the change would "help our restaurants offer more variety with greater ease . . . Friends of mine and others [ask], 'Why can't I get breakfast all day?' Well, it's not compatible with our current operating system. It's too complicated to deliver the high quality product that we deliver at breakfast."

    But, that's not going to stop them from trying.

    Indeed, Burger King reportedly sells burgers at some locations in the morning, but has no plans to sell breakfast throughout the day. Still, last spring the chain offered for a limited time a French toast sandwich (two slices of cinnamon and maple bread, egg, cheese and either ham, sausage or bacon) and bite-size Cheesy Tots in the morning.

    In November, Burger King's chief executive told analysts the chain is testing a breakfast value-meal program.

    Jack In The Box offers its full menu at any time. "People will order a Jumbo Jack [hamburger] at 6 a.m. and a Breakfast Jack [sandwich] at midnight," said Kathleen Finn, a spokesperson for the operator of 2,000 units in 17 states, as well as approximately 50 Quick Stuff c-stores, each built next to a full-size Jack in the Box.

    In the last 18 months, Jack in the Box has added a number of breakfast items, most recently Minute Maid-branded orange juice and two Buttermilk Biscuit sandwiches, as well as the biscuits – la carte. Consumer and competitors can expect more soon.

    "With new players entering the breakfast market and long-time competitors building up their breakfast menus, it's important that we continue to offer high-quality products that appeal to a variety of consumers," said Teka O'Rourke, menu marketing and promotions director, Jack In The Box.

    Among the new players entering breakfast: coffee giant Starbucks, which plans to accelerate the rollout of its warmed foods program, including breakfast sandwiches, in company-operated stores. Today, more than 1,000 Starbucks in Seattle, Portland, Boise, San Francisco, Chicago and New York metro areas offer warm foods. Selection and pricing will vary by region, but some outlets will offer breakfast sandwiches made of premium ingredients, such as peppered bacon, eggs and natural, aged cheddar cheese on a toasted English muffin, and a reduced-fat sandwich of turkey bacon, cholesterol-free egg and reduced-fat white cheddar on a toasted whole-wheat English muffin. In some locations, warm breakfast pastries, such as cheddar corn muffins, cinnamon rolls, a variety of bagels, and a white cheddar brioche will be available, according to spokesperson Patric Rayburn.

    Starbucks projects some 6,500 locations will offer warmed foods by the end of fiscal 2008. The breakfast items will be offered all day. The stores, Rayburn said, will be staffed appropriately to facilitate the new food offering without affecting speed-of-service.

    The other coffee giant with many drive-thrus, Dunkin Donuts, recently offered a limited-time warm French toast twist breakfast item. This came out a month after the new Sausage Supreme Omelet sandwich, an extension of the chain's Supreme Omelet sandwich launched last February, which drove breakfast sandwich sales up 17 percent in that month.

    C-Store Retailers Respond
    All of this activity by QSRs has put pressure on convenience stores that have been trying to build a solid breakfast business. But c-stores are fighting back.

    A year ago, ExxonMobil Corp. introduced a line of proprietary gourmet breakfast sandwiches in hundreds of On the Run stores. The five sandwiches – including a sausage-only biscuit; a sausage, egg and mild-white cheddar biscuit; ham, egg and cheddar croissant; bacon, egg and cheddar English muffin; and sausage, egg and cheddar bagel, are presented under the "On the Run Cafe brand and are bigger in size than most fast-food items, while priced very competitively.

    "A quick, quality breakfast and coffee offer is critical to succeed in today's environment," Russ Ritenour, senior dispensed beverage foodservice manager, told Convenience Store News. "Customers told us through all of the coffee customer focus groups we've held that they need a complete offering – meaning variety – of morning products if we want them to choose a convenience store over other options for their morning stop. This would not only include breakfast sandwiches, but also fresh bakery, fruit and more."

    The stores have seen a noticeable up-tick in sales during the morning in the last year or two. Now, Ritenour said, the On the Run stores are "beginning to stack up to fast feeders nicely." In taste tests, consumers have ranked its gourmet coffee program above fast feeders in quality and overall offer.

    or the future, the c-store operator will develop limited-time-only and new-to-market items to not only maintain, but also increase consumer excitement and sales growth in the breakfast category.

    Still, the biggest challenge c-store operators face in competing with fast feeders at breakfast is getting gas customers into the stores, said John Matthews, president of Gray Cat Enterprises Inc., a consultancy based in North Barrington, Ill. "One of the biggest advantages fast feeders have is the drive-thru. If I have to fill-up the car, come in, order, stand in line – that turns into a 10- or 15-minute process. The majority of the world is running late. They will go to the path of least resistance. Even if I would do that on days I am there to fill up with gasoline, on other days I will zip through the Dunkin Donuts for a coffee and bagel. Convenience stores aren't as convenient."

    NOCO Energy Corp. has been working to correct this common complaint, while creating a unique experience for customers. All of its new builds will have drive-thrus. Three of its 33 NOCO Express stores, offer a Tim Hortons coffee and donut shop, which is more popular than area Dunkin Donuts, said Michael F. Newman, executive vice president for the Tonawonda, N.Y.-based chain.

    A new concept at a rebuilt location in Williamsville, N.Y. offers drive-through service and a 24-hour Nickel City Market Cafe. That new breakfast, lunch and dinner offer includes a selection of coffees, espressos, fruit smoothies, and breakfast sandwiches, doughnuts, muffins and bagels, all baked on-site. "Everybody talks about doing the same store over and over again," Newman said, noting fast-feeders often try to put a square peg offer into a round hole. "But we are trying to be more demographically sensitive.

    "It's about putting together different players in our stores, such as Horton's and Charlie the Butcher Express, which offers local favorites," Newman added, noting the chain is targeting women, 18 to 35. "But it's also about providing the customer with a total, unique experience. If you can't position yourself in a way to be someplace that people think is cool, you won't attract the customer. The Nickel City Market Café is new and different altogether. It's been so successful that our managers have been clamoring for that offer in other stores."

    With effort, c-stores can be competitive before noon, Minor said. "Convenience stores are uniquely positioned to do well at breakfast because of the size of the concept and their convenient parking," he noted. "You can pull in, run in and make a quick purchase and get out. The challenge is to have the product ready, but not too ready. It must be made just in time so that the quality is excellent. That is hard to do and involves integrating the foodservice operations with retail operations – which means customers only have to stand in one line. That is where most operations fall short."

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