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WASHINGTON, D.C. -- The nation's high unemployment rate has thrown millions of people out of work, scared shoppers away from stores, threatened the economic recovery, and now it's taking a bite out of breakfast, The Washington Post reported.
Breakfast sales had grown at a ravenous pace during the boom years as busy workers scarfed down sausage biscuits on the way to the office, but as the jobless rate hit 26-year highs, fewer people were heading to work, and even those who did worried about their spending. So they've been pouring bowls of cereal at home or simply sleeping in, putting breakfast on the back burner, according to the report.
"Typically, if you're unemployed, you're not getting up at six and not going through the drive-thru," said Jeffrey Bernstein, an analyst at Barclays Capital. "There is a direct correlation between unemployment and breakfast sales."
In the five years before the recession hit, breakfast sales jumped 64 percent, making it one of the fastest-growing sectors in the industry, according to The NPD Group, a consumer behavior research firm. But traffic slowed as the economy tanked and the ranks of the jobless soared. By the time unemployment hit 10 percent in the fall, breakfast traffic was down 4 percent.
This month, executives at Burger King reported that traffic rose during every meal except breakfast in the most recent quarter. They blamed unemployment for the falloff. Likewise, McDonald's chief executive Jim Skinner has said breakfast sales at its 14,000 U.S. restaurants were rocky in areas with high unemployment despite overall growth. And Wendy's jumped into the breakfast bandwagon three years ago, only to end up scuttling its menu amid poor sales. It hopes to relaunch the menu next year.
"When people start feeling economic stress, they tend to trade down," Dennis Lombardi, executive vice president at WD Partners, a food consulting firm, told the newspaper. "When they lose their job, they trade out."
Kathy Hasty, senior director of hot foods at 7-Eleven, said breakfast at her chain traditionally held up well during recessions even as other meals suffered -- but other downturns didn't come with double-digit unemployment. By late last year, sales of breakfast sandwiches were down 8 percent and she could fathom only one reason why.
"We have never seen it as significant as it is now," Hasty said.
Restaurants are trying to reinvigorate breakfast sales with new menus, lower prices and even giveaways. 7-Eleven launched a sunny ad campaign to combat the morning meal moratorium with a new product: a sausage, egg and cheese burrito rolled out last month at two for $2 or $1.19 each. That's a deal compared with its cheapest breakfast sandwich, which cost $2.49. Hot food sales jumped 6 percent after the launch, 7-Eleven said.
McDonald's introduced a breakfast version of its popular dollar menu last month featuring five items: a sausage burrito, sausage McMuffin, sausage biscuit, hash browns and coffee. The $1 breakfast menu was designed to give the chain "a strong national voice" on the meal at a time when customers are concerned about value.
In addition, restaurant chain Denny's gave away about 2 million free Grand Slam breakfasts recently in a nod to the tough economy, particularly for the 44 percent of its customers who make less than $45,000. The company said breakfast sales held steady while dinner and late-night dining drove down sales at established locations by 7 percent in the third quarter, according to The Washington Post report.
"People are so thankful for having an opportunity to have a free meal," Denny's chief executive Nelson Marchioli told the newspaper.
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