Sales of morning standards such as coffee, pancakes and doughnuts are feeding US restaurant traffic growth, outpacing lunch and dinner items. The trend is driven by an improving US job market, with more Americans on the go in the morning and willing to spend on meals outside the home.
It has prompted companies from fast-food leader McDonald’s Corp to North Carolina-based buffet chain Golden Corral to experiment with all-day breakfast. They are joining chains like Denny’s Corp, IHOP, Jack in the Box and Sonic Corp, which for years have offered breakfast anytime.
Taco Bell took the morning plunge about a year ago and breakfast now accounts for 7% of sales. Dunkin’ Donuts sells breakfast sandwiches all day and says they are a growth driver.
“When people work, they eat out more often. Fast-food chains are the first to benefit because (people entering or returning to the workforce) are going to go for the more affordable stuff, ” said Malcolm Knapp, whose Knapp-Track service keeps tabs on restaurant sales and guest counts.
“It’s hard to screw up breakfast … everything goes well with bacon, ” he added.
Breakfast visits were up 4% for the year ended May 2015, largely due to gains at fast-food chains, while lunch and dinner visits were flat, according to research firm NPD Group.
A 2014 survey by the National Restaurant Association showed 72% of US adults wished restaurants would offer breakfast items all day long.The trend has been on the rise since 2011, and has been a bright spot for big national chains. McDonald’s, Starbucks Corp and Panera Bread Co recently highlighted the strength of breakfast sales in their quarterly reports.
When a company’s breakfast business gets to scale, it can be very profitable, said Sanford Bernstein analyst Sara Senatore. She estimates that breakfast accounts for about 25% of McDonald’s sales and roughly 40% of profit in the United States.
Still, not every chain will win at breakfast.
“Consumers are generally reluctant to make changes to their morning routine, ” Senatore said. Beyond that, egg prices have soared since a US bird flu outbreak forced producers to cull millions of chickens.
Starbucks said it got a sales bump from its bakery expansion and new drinks like the “flat white”, an Australian import made with whole milk and more concentrated espresso.
Panera’s breakfast business grew faster than lunch and dinner during the latest quarter, but breakfast sales came with a lower margin.
McDonald’s, which dominates the fast-food breakfast category and is working to end a US sales slump that has persisted for more than a year, said its breakfast business has proven resilient to the industry’s intense competition.
Chief Executive Steve Easterbrook expects McDonald’s third-quarter global sales at established restaurants to grow, but warned that all-day breakfast is no silver bullet.
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