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    McDonald's Expands Dollar Menu to Breakfast in Windy City

    QSR is battling slowing morning sales nationwide, according to report.

    CHICAGO -- Crain’s Chicago Business reported yesterday McDonald’s Corp. is attempting to revive slowing morning sales by expanding its Dollar Menu to breakfast items.

    The deal at Chicago-area fast-food joints includes six $1 items: sausage biscuit, sausage McMuffin, medium coffee, two hot cakes, two hash browns and a fruit-and-yogurt parfait. The sausage sandwiches previously sold for roughly $2, according to Crain’s, which noted morning sales are falling across the QSR (quick service restaurant) industry. Oak Brook-based McDonald’s previously extended similar dollar breakfast offers in other markets, including Seattle.

    However, as other franchised chains have discovered, such discounting threatens to cut into the profits of McDonald’s franchisees. The move is also seen as a sign that the chain’s new McCafe specialty coffees have failed to boost breakfast sales sufficiently.

    Darren Tristano, an executive vice president of Chicago-based restaurant consultant Technomic Inc. told Crain’s "the new coffees have probably not done as well as they have hoped. I expect we are going to continue to see McDonald’s promote value to get people skipping breakfast or eating cereal at home to come to breakfast."

    Breakfast had been one of the fastest growing areas for fast food chains in the last couple of years, but those sales have been weakened this year by high unemployment, which has fewer people on the road looking for a quick bite on their way to work, according to the report.

    The NPD Group, a New York-based market research firm, reported morning meal sales at fast food restaurants dropped 2 percent this spring, compared to the previous year. Prior to that, breakfast sales at QSRs were growing at a 6 percent annual rate.

    According to the 2009 Convenience Store News Foodservice Study, 58 percent of c-store retailers said breakfast (6 a.m. to 9 a.m.) was their fastest growing daypart last year. However, they saw their greatest percentage of sales growth at lunch time. Lunch (11 a.m. to 2 p.m.) represented 43.2 percent of retailers’ foodservice sales, compared with 28 percent for breakfast (6 a.m. to 9 a.m.) and 22 percent for dinner (4 p.m. to 7 p.m.).

    "Breakfast sales are declining, and the only growth that we have had in the last two years has been based on price and not demand," Steve Plotkin, head of McDonald’s Western division, wrote in a memo to franchisees last month.

    In a separate memo, Plotkin told franchisees "the launch of Dollar Menu at breakfast has given the (Northwest) region a lift."

    He encouraged franchisees to look for ways to offer value at breakfast and find ways to sell more food, according to Crain’s.

    In May, McDonald’s introduced its new McCafe lattes and mochas nationwide. Executives claim the specialty coffees —McDonald’s biggest menu expansion in three decades—have exceeded expectations, but the heavily promoted new drinks have not generated large sales increases. Sales at U.S. restaurants open at least 13 months increased 2.6 percent in July, 1.8 percent in June and 2.8 percent in May, but a large part of that growth can be attributed to across-the-menu price hikes in the last year.

    Discounts can help grow sales, but they are not always popular with franchisees, who often see profit margins shrink when prices fall.

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