Breakfast A Bonanza for QSR Operators

By Rick Zambrano

As more consumers find managing their day-to-day lives more challenging and look for a third away-from-home meal, the breakfast space among the largest quick-service chains is heating up. McDonald's had enormous success with its oatmeal product and its breakfast value menu items during winter 2010, while Wendy’s — as announced in its first quarter conference call — has recommitted itself to its breakfast and is expanding its daytime offerings.  

For those QSRs truly competing in the breakfast space, the day part can represent 15 to 30 percent of revenues, based on data from Technomic, a Chicago-based consulting and research firm. That means for savvy operators, betting on the right trends can pay off big.

Competition Heats Up

QSR breakfast offers huge potential for restaurants that want to start competing in the space or expand the day part. According to Technomic, breakfast category for all U.S. restaurants is close to $45 billion.  While estimates vary specifically for QSR breakfast, it is widely accepted that it represents a $30 billion or more share of this market.

Wendy's admitted in its own conference call that breakfast was a big initiative for the quick-service chain known historically for its square-shaped hamburgers, and wildly addictive advertising campaign in 1984, featuring the memorable Clara Peller of “Where’s the beef?” fame.  The expansion of its breakfast in new and existing markets would add an approximate 10 percent lift to annual unit volume (AUV) according to company executives. Four markets have already tested the expanded breakfast offering.

"Breakfast is generally regarded as an underpenetrated day part compared to others and represents an opportunity to increase revenue without adding much overhead cost," says Darren Tristano, executive vice president for Technomic.

Fast casual concepts have also been adding heat to the breakfast fire with expanded menu options during breakfast. Many chains contributed significant development energies and resources to bringing portable options to bear during winter 2011.  Caribou Coffee, the second largest coffee chain based on operating units and based in Minneapolis, expanded its line up in January with the addition of oatmeal and the introduction of breakfast sandwiches across the United States.

Panera Bread, the unquestionable fast-casual chain leader, recently introduced a steak and egg breakfast sandwich, while concurrently building upon loyalty with its My Panera rewards program.  Massachusetts-based Dunkin' Donuts has been layering on option after option for not only breakfast, but all day parts. Its recent introduction of the Big N'Toasty breakfast sandwich targeted customers looking for portable options that were appetite quenching. Earlier last year, the coffee chain rolled out breakfast flatbreads made with egg whites, expanding its lower calorie options for guests.

Options, Options, Options

As we glean lessons from QSR chains like McDonald's and Dunkin' Donuts, their continual and gradual menu expansion and limited time offers provide insight into breakfast best practices. Wendy's test currently includes an artisan egg breakfast sandwich, "hand-crafted" oatmeal, a breakfast panini, enhanced breakfast potatoes, and a premium blend coffee. According to Technomic's Tristano, “adding a branded coffee to the menu (Seattle’s Best) can provide instant credibility in the space as coffee is a major factor in a successful offering."

In an earlier article, Scott Hudler, senior director of brand marketing for Dunkin' Donuts told Kandessa that in breakfast, particularly coffee, customers seek out great taste and value rather than the creature comforts of WIFI or "fancy couches".

Providing plentiful options for guests is key to leveraging current overhead, and providing incremental sales. Tristano offers up additional guiding points:

• Breakfast is an underpenetrated day part that creates additional opportunities without adding much overhead cost.

• In-store marketing can increase frequency from guests that are currently not using the QSR for breakfast.

Facilitate additional profitability to your restaurant by expanding the day part, which will increase revenue without sacrificing service and optimizing leveraged or fixed operating costs.

If the moves by the major players is an indication, expanding or branching out in breakfast not only leverages current operators' overhead costs, but can create a bonanza of incremental profit.

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Copyright: Kandessa Media. All rights reserved.

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This story appears in:  Food News & Trends