Breakfast items are spreading across restaurant chains across the country as companies cook up strategies to cash in on the growing opportunity in this segment. A recent study by NPD Group revealed that breakfast is more than a single meal for a significant portion of customers. A person, on average, drinks/eats 1.4 times in the morning. And restaurant chains like McDonald’s (NYSE:MCD), Dunkin’ Brands (NASDAQ:DNKN) and Taco Bells are already expanding their menu to respond to the changing consumer lifestyles. 
We have a Trefis price estimate of $100 for McDonald’s, which is about 3% above the market price.
The study conducted on 27,000 people, revealed that 41% of respondents eat on two or more occasions in the morning, usually a small meal followed by coffee later on while 38% of the respondents restrict themselves to a single meal in the morning. With restaurants opening up as early as 5 or 6 a.m. and breakfast hours extending up to 11 a.m., the choice of offerings will determine how successful the restaurants are in tapping this opportunity.
Restaurants Offer More Choices
The proportion of McDonald’s restaurants that open early is rising with 40% of its outlets in the U.S. open 24/7 and 89% of its outlets open by 5 a.m. Apart from introducing Fruit & Nut oatmeal in 2011, the restaurant has also introduced bakery items such as muffins, cheese danish and banana breads in 600 of its outlets in 2012. A major reason why the average number of customers at a McDonald’s restaurants in a year keeps creeping up is because of the restaurant chain’s ability to attract customers at time slots which would otherwise be considered unusual.
Similarly, Dunkin’ Donuts expanded its breakfast offerings by introducing Angus steak & egg sandwich. Moreover, since all of the Dunkin’ Donuts’ restaurants are franchised, the additional restaurant sales will mean additional revenues for the company (since the company recognizes revenues as a percentage of sales).
In January, Taco Bell rolled out its breakfast menu named ‘First Meal’ at 750 of its locations in the U.S. From a business point of view, it makes sense for restaurants to attract a greater number of customers in the breakfast category since certain costs such as rental/occupancy costs remain fixed. The incremental revenues thus help drive the overall profitability, besides increasing the absolute profits.Notes:
- Consumers’ changing breakfast habits favor restaurants, nrn.com, March 21, 2012 [↩]