As more employees return to the office — and their daily commutes — fast-food chains are ramping up promotions and loyalty programs in a move to make fast-food breakfast a part of workers’ morning routines.
“Breakfast is the most profitable part of the day,” said Lauren Silberman, a restaurant analyst with Credit Suisse, a financial services company. McMuffins, Baconators and an array of coffee concoctions and donuts helped fuel $35 billion in fast-food breakfast sales in 2020, according to research from Credit Suisse. Researchers also found that breakfast drives more repeat business than any other part of the day.
Although the breakfast business still hasn’t returned to pre-pandemic levels, “it’s bounced back faster than other mealtimes,” Silberman said. “It’s actually surprising how strong the breakfast performance has been.”
Even as millions of workers continued to work remotely and children were only partly back to in-person school, customer traffic at fast-food restaurants was up by 11 percent in 2021, according to the National Restaurant Association, an industry trade group.
Peyton Willams, a banker in Palestine, Texas, can take a little credit for that. For the past two years, Williams, 31, has picked up breakfast from one of the same three fast-food restaurants near his office in Tyler. When he’s pressed for time, he grabs a McGriddle at McDonald’s. If the drive-thru is too busy, it’s bacon, egg and cheese on a biscuit at Dairy Queen or a burrito at Sonic.
“I can live without ever eating another fast-food lunch, but man, some of the breakfast items are fantastic,” William said. Fast-food breakfasts “are obviously made to be done faster, but, I mean, an egg is an egg. If they scrambled an egg to put on your meal, they scrambled an egg to put on your meal.”
To keep things moving, a lot of the bigger fast-food chains have invested in technology that can reduce wait times at the drive-thru. They’ve also stepped up rewards programs and special deals for customers who download their apps, which have become key promotional tools. McDonald’s, for instance, offers coffee, hot or iced, any size, for 99 cents. But it must be ordered through the app. Branded apps not only increase efficiency by allowing customers to order ahead; they also produce a steady stream of data that makes it easy for restaurants to feed them a steady stream of targeted promotions.
Smaller players, such as Taco Bell and convenience stores, including 7-Eleven and Wawa, are also looking to carve out a bigger piece of the breakfast market by offering low-cost breakfast sandwiches, two-for-one deals and discounts on coffee.
“It’s as competitive as it’s ever been in breakfast,” said R.J. Hottovy, the head of analytical research with the retail location analytics company Placer.ai.
McDonald’s, which is credited with putting fast-food breakfast on the map more than 50 years ago when it introduced the Egg McMuffin, still owns the morning, with about 27 percent of customer traffic, according to the food-service consulting firm Technomic.
But the competition is gaining steam. After multiple failures, Wendy’s reintroduced its morning menu in March 2020, with biscuit sandwiches, fresh eggs and the Breakfast Baconator: sausage, bacon, a fried egg and two layers of cheese, all doused in cheese sauce on a bun.
The timing was far from ideal. The pandemic was beginning to rage, and the restaurant business was collapsing. Like much of the industry, Wendy’s turned to online ordering, delivery and pickup. It also unleashed an ad campaign focused on trolling McDonald’s.
The company took out a giant billboard in Times Square in New York City to mock McDonald’s on the 49th anniversary of the Egg McMuffin, with a giant tweet saying, “McDonald’s has just announced a partnership with the NHL to provide them with hockey pucks,” and it produced a series of ads, including one featuring a former McDonald’s chef making a “chef’s kiss” after taking a bite of Wendy’s Baconator. By the end of 2021, breakfast sales at the chain were up by 25 percent over the previous year. In the fourth quarter alone, they accounted for 8 percent of store sales.
Wendy’s CEO Todd Allan Penegor told investors on a recent earnings call that the company was looking to grow its morning business by 10 percent to 20 percent this year, mainly by targeting people returning to their old routines.
Burger King, which gets 15 percent of its annual revenue from breakfast, and many smaller operators are also looking to boost their morning business. Burger King launched a line of Cheesy Breakfast Melts this week. After having tabled breakfast during the worst part of the pandemic, Taco Bell brought back its breakfast menu last year, along with several variations of the Toasted Breakfast Burrito.
“Fast food companies are positioned well to catch consumers looking to return to their pre-pandemic routines,” said Maeve Webster, the president of the menu and strategic consulting firm Menu Matters.
During tough economic times, fast-food chains typically benefit from consumers “trading down” from more expensive restaurants, Webster said. They may skip the hash browns or opt for regular coffee over an espresso drink, but they “are so desperate after two years of Covid to resume more ‘normal’ behavior that they are going to cling to it as long as possible until their financial situation starts to dictate otherwise,” she said.
But with the inflation rate higher than it has been in decades, and customer traffic starting to slip, fast-food operators are looking for ways to manage costs and step up promotions without continuing to raise prices, which have climbed by about 7.2 percent over the past year, according to the National Restaurant Association.
With food prices squeezing shoppers’ grocery budgets, “it’s more about the value proposition than the increasingly outdated idea that value is cheap prices,” Webster said. “Because, in the end, cheap prices mean cheap food, and with competition increasing [quick service restaurants] need to seriously consider how they are creating ownable and defensible competition points of differentiation.”
Peyton Williams, the Texas banker, says he isn’t likely to change his fast-food routine, unless McDonald’s brings back all-day breakfast and he can have it for lunch. He says that on occasion he’ll order from Chick-fil-A using his wife’s app, and then she’ll use the points to cover her quick meals on busy mornings. But when it comes to fast food, he says, he’s all about breakfast, any time of the day.