Breakfast the "Hot" Day Part

Wendy's is just one foodservice operator looking to cash in on breakfast.

Wendy's/Arby's Group Inc. is trading French toast sticks for breakfast wraps. Panera Corp. spent 2 years developing a new coffee blend, and Starbucks shocked everyone by starting up value meals in the AM, and handing out coupons for cents-off on its licensed retail products. Breakfast is suddenly important because sales are growing faster there than any other say part according to data mined by NPD Group, a consumer-research company. Burger King Holdings Inc. has added miniature breakfast sandwiches. Wall Street has shown mixed reaction to the news, but the strategy is for the long haul, or so the QSRs say.

Wendy's hopes to derive as much as 10% of its total revenue from the morning day part within 5 years, though they have entered and then left the breakfast wars in the 80s when its omelets flopped and they switched to late night promotions. The sortie into breakfast is good news for their bottom line: breakfast is about 25% more profitable than lunch or dinner items due to cheaper ingredient costs. Burger King already derives 15% of sales from breakfast according to media sources.

Disclaimer: our role as Burger King's licensing agency forbids us from revealing any internal information, and all matters reported here are from our agency's proprietary information sources in the food business.

Burger King and Wendy's will have stiff competition: McDonald's Corp. has long set the standard in QSR breakfast, with staples like Egg McMuffins, and their hugely-successful coffee lifting sales so much the Oakbrook, IL firm started opening some stores 1 hour earlier to cash in on the trend. The Golden Arches get 25% of sales and 40% of profit from breakfast. Overall. breakfast traffic climbed 2% last year, while traffic in the restaurant industry during other times of the day was largely unchanged. Restaurant sales account for 8.2% of all breakfast options, up from 6.2% in 1996, but far below the 75% of breakfast meals eaten at home.

One cloud on the breakfast horizon for restaurants is rising unemployment where fewer workers need a convenient start to the day or have fewer dollars to spend outside the home. Analysts also say this isn't the time consumers will switch from one chain's offering to another's new product introduction.

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