As rivals wake up to a breakfast business valued as high as $34 billion, McDonald's has begun to test morning items on its Dollar Menu, along with a Dollar Menu and More offering, in as many as 20 markets nationwide, including Chicago; Pittsburgh; Baltimore; Washington; Columbus, Ohio; Raleigh-Durham, N.C.; Austin, Texas; and Grand Rapids, Mich.
'A lot of latitude'
"There's a lot of latitude in each of the markets to determine what offerings will work best with the strategy," a McDonald's spokesman said.
McDonald's began running TV spots via Arnold, Boston, in October to promote its Breakfast Dollar Menu and More. The spots show toasters, blenders, coffee pots and mugs recycled after being rendered obsolete by the McDonald's menu.
Items on the buck-or-less menu include the sausage biscuit, chicken biscuit, sausage burrito, fruit and yogurt parfait, two hash browns, 16-ounce soft drink, and 12-ounce coffee. The buck-and-up menu includes the sausage McGriddle, egg-and-cheese biscuit, CinnaMelt, and fruit and walnut snack salad. Separately, McDonald's is testing a 24-hour breakfast menu in Romeoville, Ill., outside of Chicago.
BK's morning menu
Burger King, meanwhile, is testing its own morning value menu in New York in hopes of becoming the first chain to launch nationally, management said in its November first-quarter earnings call. This spring, the Home of the Whopper plans to roll out a menu that likely will offer six items for a buck or less and a few more items at $1.39 or less, according to a knowledgeable executive.
The centerpiece of the menu will be a Hamlette sandwich with shaved ham, scrambled eggs and a honey butter sauce. BK also will feature a $1 sausage biscuit on that menu, which is now being tested in markets including New York; Salinas, Calif.; and Indianapolis, according to the executive.
Others attempt to cash in
McDonald's most likely feels its rivals are attempting to cash in on its primo position in the hottest daypart in fast food with mash-ups of two big trends: value menus and breakfast. Estimates vary, but with more than $30 billion in annual sales, fast-food breakfast is as big as the entire pizza category. One in every seven fast-food visits is for the morning meal, and breakfast accounts for up to 15% of total revenue, depending on who is doing the tallying.
It's not surprising, then, that execs at the major fast-feeders not yet open for breakfast are salivating over potential sales.
In a Dec. 5 analyst presentation, Taco Bell President Greg Creed estimated the breakfast market at $34 billion, with McDonald's controlling 27% and Burger King 17%. He said nearly three-fourths of Taco Bell customers (72%) surveyed in the past month said they purchase fast-food breakfasts. The chain will begin testing breakfast in three undisclosed markets in early 2007, with breakfast adding a possible $208,000 per restaurant.
Wendy's breakfast plans
Wendy's, in its October analyst meeting, estimated that McDonald's and Taco Bell spend one-fourth to one-third of their total marketing dollars promoting value offerings. Laying out its breakfast plans, Wendy's cited NPD Crest and Technomic data to demonstrate why it needed to invest in the hours before 11 a.m.
At least one of the top five fast-food chains is still on the fence, however. "Breakfast in our system is a restaurant-by-restaurant decision," said Mark Roden, chairman of the Subway Franchisee Advertising Fund Trust, adding that it would be a corporate decision by Subway owner Doctor's Associates to make breakfast a national mandate. Several franchisees in Chicago sell breakfast. "If they decided to make breakfast a national mandate, we would consider whether or not to market it."