Major players in the fast-food industry, including McDonald’s (MCD), Wendy’s (WEN), Burger King” data-wpil-keyword-link=”linked”>Burger King (QSR), and Taco Bell” data-wpil-keyword-link=”linked”>Taco Bell (YUM), are engaged in a fierce battle to capture a share of the breakfast market.
According to Bernstein analyst Danilo Gargiulo, the competition for breakfast dominance has intensified as chains seek to counter declining foot traffic and expand beyond the saturated lunch and dinner segments.
With the cost of dining out remaining high, consumers may opt for breakfast as a more affordable indulgence, leading to a surge in morning sales for fast-food chains. Sean Dunlop, an analyst at Morningstar, suggests that offering breakfast items can attract a different demographic of customers and complement a restaurant’s core offerings.
McDonald’s currently leads the breakfast segment, commanding 35.4% of all visits to fast-food establishments between 7 a.m. and 10 a.m. Starbucks (15.9%), Dunkin’ Donuts (14.0%), and Burger King (4.5%) follow closely behind.
Wendy’s is aggressively pursuing growth in the breakfast category, with CEO Kirk Tanner emphasizing its potential to drive sales and margins. The company has allocated $55 million for advertising in the US and Canada to boost morning sales and introduced innovative menu items like the Cinnabon pull-apart cup.
Breakfast offerings are particularly lucrative for restaurants due to lower staffing requirements and cheaper ingredients compared to lunch and dinner items. Additionally, breakfast diners tend to be more loyal, which can translate into higher participation in loyalty programs and digital sales.
However, competition in the breakfast space is intense, with Taco Bell testing new breakfast options like breakfast tots, and Burger King offering promotions to attract customers.
Gargiulo notes that each chain has its own competitive advantage, with McDonald’s benefiting from its widespread locations, Wendy’s leveraging its fresh-never-frozen appeal, and Taco Bell targeting younger demographics.
Despite the potential for growth, executing a successful breakfast strategy requires careful planning to manage increased costs associated with extended operating hours and inventory management.
Beyond fast food, traditional players like IHOP are also adapting to the changing market dynamics. IHOP reported a 1.6% increase in US same-store sales last quarter, with a significant portion of total sales coming from digital and takeout orders.
As the breakfast market becomes more saturated, gaining market share will become increasingly challenging, with restaurants vying for the same pool of customers. Nonetheless, companies are optimistic about the growth prospects in the breakfast segment, driven by consumer demand for convenient and affordable dining options.