McDonald's sees benefit in Taco Bell breakfast
April 23, 2014
by Monica Watrous
OAK BROOK, ILL. — The Waffle Taco hasn’t wavered McDonald’s Corp.’s confidence in its own breakfast platform. Despite a heated marketing battle with Taco Bell following the Mexican fast-food chain’s March roll-out of the morning meal, McDonald’s said it has seen no impact on its sales since the launch.
“We have had some of our major competitors that have made runs at breakfast, and it seems every year there is someone new that is making a run and none of them have really stopped their focus on breakfast,” said Don Thompson, president and chief executive officer, during an April 22 call with financial analysts to discuss first-quarter earnings. “We have not seen an impact relative to the most recent competitors that entered the space. One of the things that happens at breakfast if anyone enters, customers will try the breakfast, that it is new, it will be something that they have not seen in the marketplace, so we expect customers to try it. But what we are also confident in is our ability to execute our breakfast…”
New entrants into the market attract attention to breakfast, which, he said, in many cases benefits McDonald’s.
“Our breakfast continues to be a positive driver in our business in the U.S. and actually sometimes when these entrants come in, it causes us, it forces us, to focus even more on being aggressive relative to breakfast,” he said.
Part of that push included a free coffee offer McDonald’s launched shortly after Taco Bell’s breakfast debut. McDonald’s also stands behind its strengths in the day part, which include prepared products and quick assembly.
“We cook in our restaurants; it is not a microwave deal,” Mr. Thompson said. “We have grills and fryers and ovens, and so that is the reason that we are able to prepare breakfast. The other thing is our breakfast model is also focused on how we serve up that breakfast quickly to customers that are on the go. And so, we continue to focus on those areas of strength that we have. We have been serving breakfast now for over 30 years. And it is our strongest, one of our strongest day parts clearly.”
Value represents another focus in McDonald’s menu plans. Last year, the chain introduced the Dollar Menu & More, a revamp of its previous dollar menu with more variety and higher price points. The new value platform has performed to expectations, but Mr. Thompson said the chain hasn’t seen “any dramatic change to the usage” of the new dollar menu.
“Dollar Menu & More, as a per cent of total day sales, seems to be relatively in line with our historical averages,” he said.
Balancing value, core offerings and limited-time items is a priority of McDonald’s in its U.S. restaurants, which posted a comparable sales decline of 1.7% during the quarter. The chain also is initiating a “reset” in its U.S. stores, which will include an emphasis on proper staffing, scheduling and positioning of employees to build restaurant capacity in peak hours.
“The U.S. is focused on strengthening the customer experience through better operations and service execution, balanced focus between our core and new products and enhancing marketing effectiveness while maximizing our opportunities to grow our breakfasts,” Mr. Thompson said. “Today, customers choose McDonald’s because of our great products cooked in our restaurants and our kitchens. We crack fresh eggs, we grill sausage and bacon, we bake biscuits and we toast muffins, all to serve up a delicious breakfast that is accompanied by our outstanding McCafe coffee. These things truly set us apart and position us to continue growing this day part into the future.”