Rise & Dine

Nation's Restaurant News, July 6, 1998

From a bagel and coffee to go at a local delicatessen to a lavish Sunday brunch at a five-star restaurant, breakfast in America is a work in progress.

Gone are the days when families sat at the weekday breakfast table together before Dad went off to work, allowing Mom time to get the children ready for school.

"Today breakfast tends to be far more convenience-driven and not menu-driven," notes one industry watcher.

With the number of dual-income families growing exponentially, speed and portability are two of the main drivers of consumers eating breakfast away from home. This double-earner demographic has ignited the growth of the morning daypart in many national quick-serve restaurants and also sparked the influx of gourmet coffee brands led by Starbucks that have flooded the marketplace.

Industry statistics tend to bear that out.

According to industry researcher NPD Group, the number of "deskfasts," or breakfasts eaten at the office, doubled between 1990 and 1996. Overall, the quick-serve industry credits breakfast with 24 percent of its growth during the past five years. Americans spend $16 billion on breakfast foods on an annual basis and at least 10 percent of all restaurant occasions are breakfast.

Recently, operators in virtually every segment have launched marketing and new product "offensives" in an attempt to grab higher pieces of market share. Gourmet coffee roasters like Starbucks and bagel operators like Bruegger's Bagel Bakery, Einstein/Noah Bagel Corp. and Chesapeake Bagel Bakeries have muscled in on breakfast. That daypart had long been the domain of a few select quick-service restaurant chains and family operators such as Bob Evans Farms, Denny's and IHOP.

Fill up at travel marts

Adding to the competitive mixture at breakfast are the combination "travel marts," which offer gasoline and a full convenience store where customers can fill up and grab breakfast at the same time.

And now, with the proliferation of smoothie drinks and other healthy fruit-blended concoctions, American consumers are staring at a plethora of morning menu choices.

"The breakfast landscape has changed considerably over the last 10 years," acknowledges Steve Pettise, former senior vice president of marketing for California-based IHOP Corp. He is now an industry consultant.

While at IHOP, the chain with a foundation built in the morning, Pettise led the marketing campaign several years ago that came up with the idea of promoting breakfast items around the clock.

"There are so many more options to choose from. Breakfast is a tough daypart to create loyalty; it's much easier to create loyalty at lunch and dinner. In the morning it takes great tenacity. And in the end, you may only be talking about 10 percent of sales. So to build sales in the morning you have to get innovative."

At McDonald's Corp., which forever changed the breakfast segment in the QSR industry with the introduction of the Egg McMuffin in the early 1970s, breakfast is estimated to account for roughly 20 percent of sales.

At Hardee's, whose made-from-scratch biscuits are an early-morning tradition in the Southeast, breakfast generates about 30 percent of sales. Despite Hardee's recent acquisition by Anaheim, Calif.-based CKE Restaurants Inc. and the subsequent conversion of some Hardee's 's units to the Carl's Jr. brand, the trademark biscuits have stayed on the menu.

Breakfast had traditionally been a segment that was slow to introduce new products, but recently several quick-service titans have volleyed with new product launches of their own.

McDonald's archrival Burger King, which for years countered the Egg McMuffin with its own Croissan'wich, finally tied into its sister company, the manufacturer Pillsbury, to launch "Cini-Minis," a cinnamon roll with icing on the side.

Wendy's jumps back in

Wendy's International, which retreated from breakfast several years ago after an unsuccessful test, returned to the segment in a big way after acquiring Canadian concern Tim Horton's.

Randolph, Mass.-based Dunkin' Donuts expanded its product line by joining the craze and rolling bagels into its 3,700 U.S. stores.

"We still sell a lot of doughnuts," says Laurie J. Kiely, director of retail marketing for Dunkin' Donuts. "But what the introduction of bagels has given us is a lot of incremental business at breakfast. Overall, it's helped our sales by about 10 percent."

Anaheim, Calif.-based Carl's Jr. was one of the inaugural QSR operators to open for breakfast. Recently the 700-unit operator unveiled several new breakfast combinations.

Still, with the QSR players jumping into breakfast or expanding the breakfast business they do have, many of the traditional full-service family chains are fighting back to retain that morning customer.

"Basically what you have to do with breakfast is appeal to all segments," says Jon Jameson, senior vice president of marketing for Denny's, the largest full-service chain in the industry with 1,600 units. "We've always had a good reputation with seniors, but now its up to us to attract the baby-boomers and the Gen X crowd as well."