Serving value for breakfast

by Allison Gibeson
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In hopes of attracting more business during the most important meal of the day, an increasing number of restaurants have revamped their breakfast menus and reduced prices. Specifically, McDonald’s and Dunkin’ Donuts have dollar menus, Denny’s has its $2$4$6$8 menu, and Subway has breakfast combos for $2.50.

Such value offerings are necessary in an environment where consumers are visiting restaurants less, trading down to less expensive restaurant formats and spending less, according to a breakfast restaurant trends report from Mintel International, Chicago. Despite the trend, Mintel said eating out is still considered the primary way consumers spend extra money, and being value focused is helping drive more consumers to restaurants. Mintel said restaurant breakfast sales increased 7% from 2004-09, but in 2008 sales fell 0.6% followed by a 3% decline in 2009.

“Based on the convenience factor and the relatively lower penetration of breakfast sales away from home, breakfast has fared pretty well compared with lunch and dinner, especially dinner, which has struggled quite a bit, over the last few years,” said Darren Tristano, executive vice-president with Technomic, Chicago.

Mr. Tristano said restaurants have been working to enhance the value of their breakfast meals through a lower price point, flexibility on the menu, smaller portion sizes, the bundling of value meals, express service and take-out at breakfast. The all-you-can-eat style, such as all-you-can-eat pancakes at IHOP, also may be perceived as a good value.

“We’re seeing more innovation, more flavors, different formats of breads, unique offerings … and just variety and being able to get something at a low price point that is convenient,” Mr. Tristano said.

Dublin, Ohio-based Wendy’s International, Inc. recently updated its breakfast menu with prices ranging from 99c for sides to $1.99 to $2.99 for entrees.

“A real breakfast is a great breakfast — it’s prepared and cooked with real, wholesome, natural ingredients,” said Ken Calwell, chief marketing officer for Wendy’s. “Our new breakfast menu delivers a whole new experience with offerings like Asiago cheese and hollandaise sauce on a honey-wheat muffin with fresh cracked eggs, fresh cooked applewood smoked bacon and natural sausage; a panini with fresh-baked sourdough bread topped with cheddar and Asiago cheese; or a warm oatmeal bar made with fruit like cranberries and blueberries.”

Burger King Corp., Miami, last week introduced nine new breakfast menu items, including a breakfast ciabatta club sandwich, mini blueberry biscuits, a breakfast platter and Seattle’s Best Coffee. See story on Page 24.

One of the reasons restaurants are able to offer meals for lower prices on breakfast menus is the profit margin being made on coffee.

Eric Giandelone, director of food service research with Mintel, said the breakfast dollar value meals aren’t necessarily going to grow profits for restaurants, but they are doing what they were designed to do — keep customers coming into the store and keep customer traffic up. In return, restaurants look to coffee to drive revenue.

“(Coffee) is so important right now that companies are going to Starbucks to get help with their coffee menus,” Mr. Giandelone said.

Subway, Milford, Conn., and Burger King currently offer Seattle’s Best Coffee, and Irvine, Calif.-based Taco Bell is testing it.

“I think there is an expectation now from consumers that you are going to have good coffee or else they are going to go to Starbucks or Dunkin’ Donuts,” Mr. Tristano said.

Mr. Tristano also said the prices of breakfast foods aren’t that expensive as it is, so restaurants don’t have to sell a whole lot of coffee to generate profits.

In breakfast, many fast-food chains are directly competing on price and quality as most offer similar menu items, Mr. Giandelone said. He said in full-service, IHOP, Glendale, Calif., is trying to increase the value proposition of some of its products through offering items such as New York Cheesecake pancakes. Despite the new $2$4$6$8 menu, Mr. Tristano said Denny’s has seen some fairly significant sales and traffic declines in breakfast recently. However, he said concepts such as First Watch that serve breakfast and lunch have done well.

Mr. Tristano said consumers generally eat more indulgent at breakfast and lunch than at dinner, and consumers really aren’t demanding healthier breakfast items.

Overall, Mr. Giandelone said consumers are attracted to breakfast restaurants that are inexpensive, quick and located near many places of business.

In the future Mr. Tristano expects restaurants to offer more authentic ethnic offerings, such as Mexican-style meals, and to even begin offering more gourmet offerings, such as eggs Benedict. He said the gourmet offerings may help make for a shift to a higher price-point menu that allows for more indulgent offerings.

“What we are waiting for is some really sustainable signs the economy is improving,” Mr. Tristano said. “I think we have been really focused on how to provide value and lower price, but as the economy begins to improve with sustainable signs we’ll start to see more of an offering of a higher-priced breakfast, a better breakfast.”

Other breakfast products he said he expects to see more in the future include oatmeal, smoothies and yogurt.

Mr. Tristano said the most important factors between Monday and Friday for consumers choosing breakfast are convenience and price. On weekends it’s more about the quality of the food and the occasion.

Overall, Mr. Giandelone said the biggest obstacle for companies in growing breakfast offerings is unemployment, as fewer people are out on their way to work in the mornings needing to pick up something quick, and more people are very cautious in how they spend their money.

“Those restaurants that offer good quality value … these are the types of restaurants that are going to do better because they provide great value and convenience to diners in the morning,” Mr. Tristano said.

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