Feeders eye remains of the day

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As fast food titans feel the squeeze from their own unit growth, they are increasingly looking for ways to draw consumers in during all times of the day.

Analysts and observers say that as chains get bigger, the way to drive sales is in each store rather than by adding units as smaller chains can do. The question is whether chains can move fast enough to keep consumers and Wall Street happy. So fast-feeders are trying everything from new menu items to brand extentions to acquisitions. "In the 1970s it was unusual for anyone to go to McDonald's for breakfast," said Harry Balzer, VP of NPD Group. "It took them years to build that business."

McDonald's is again leading the way when it comes to experimenting with its offerings to compete for share of stomach. Among its concepts aimed at attracting more consumers are Boston Market, Chipotle Mexican Grills, Pret a Manger and Diner in a McDonald's, along with its new McTreat coffee and dessert kiosks positioned to grab a bigger slice of the snack opportunity and its first U.S. McCafe coffee bar.

"They've found that the McDonald's brand doesn't lead to as much traffic [at dinnertime] as they would like, but also [that there are] other dayparts where McDonald's is not so strong, like snacking," said Dennis Lombardi, consultant with Technomic.

Of all fast-feeders, burger chains are the most dependent on breakfast and lunch sales, according to NPD. The two meal times bring in 61% of sales for burger chains, while all fast feeders draw an average of 48% of sales from the two occasions. Those numbers have held steady since 1993 and McDonald's clearly holds the lead for both.

McDonald's and Wendy's may be better off chasing the breakfast dollar. Despite fast feeders' continued interest in dinner, breakfast is where the big opportunity lies, said Mr. Balzer, who noted of the 365 annual breakfast opportunities, the average American eats only 13 of them in any restaurant. That compares to 52 lunches and 60 dinners per year in any restaurant according to NPD.

EXPERIMENTING

Wendy's International is also experimenting with its menu to encourage more traffic. In addition to monthly specialty-burger promotions, the No. 3 burger chain is testing in five markets four gourmet salads typically found in casual dining chains. "We want to increase same-store sales and one of the ways you do that is by continuing to build your business across all dayparts," said a Wendy's spokesman. "Consumers' expectations have changed. ... We see the salads as an opportunity for us to build on a solid business for us."

While the chain continues its late-night push focusing on sales after 10 p.m., it's also adding domestic units of its Tim Horton's coffee and bakery concept, already the largest in Canada. Meanwhile, the chain founded by Dave Thomas is still considering acquisition targets, perhaps in the fast-casual arena, along with possible joint venture opportunities as a way to grow sales.

One company attempting to capture consumers at all times of the day is Manhattan-based Xando Cosi, a 67-unit multimenu chain. The 1999 result of a $40 million merger between Xando, a gourmet coffee and liquor bar, and Cosi, a gourmet sandwich chain, the new concept's menu combines Starbucks-style coffee and panera bread-style sandwiches and soups, plus cocktails and flatbread pizza every day. The chain plans a stock offering in 2002.

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