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McDonald's units in Chicago offering $1 breakfast items

OAK BROOK Ill. McDonald’s units in the Chicago area this week began offering several breakfast items for $1 to drive traffic during the morning meal.

The nation’s largest hamburger chain confirmed Wednesday that it is selling six items for $1: the Sausage Biscuit, the Sausage McMuffin, medium coffee, two hot cakes, two hash browns, and the Fruit ’N Yogurt Parfait.

Aspokeswoman for Oak Brook-based McDonald’s said the new program in Chicago is one of several promotions in markets across the country meant to provide value to customers. Some local-market deals include two-for-$2 offers or items priced at $1 other than those offered in Chicago.

The limited-time offer in Chicago is not an extension of McDonald’s popular Dollar Menu, the spokeswoman said, nor is it a test run for a permanent value menu at breakfast.

“The nature of this is to provide flexibility. ... This is not a test,” she said, “this is just one market of many that is using a local-market option to meet the needs of its customers.”

While quick-service franchisors like McDonald’s and Burger King have clashed before with franchisees over deeply discounted items, which tend to put enormous pressure on restaurant margins, McDonald’s Corp.’s regional leaders and its franchisees agreed on the terms of the dollar breakfast offering in Chicago before it was implemented, the spokeswoman said.

Among the chain’s breakfast initiatives this year was the May 5 nationwide rollout of its McCafŽ espresso-based beverages. McDonald’s marketed the premium-coffee drinks with national TV ads and free samples of the McCafŽ Mocha on Mondays between July 13 and Aug. 3.

Ralph Alvarez, McDonald’s president and chief operating officer, noted in the chain’s most recent conference call with investors that much of McDonald’s marketing focus had been devoted to the morning meal. National advertisements in the chain’s second quarter promoted the regular breakfast menu and the McCafŽ launch, he said, in addition to ads that featured McDonald’s regular Dollar Menu.

The brand’s coffee business has grown from 2 percent of sales to 5 percent of sales “over the past few years,” Alvarez said, adding that those results have exceeded the company’s expectations.

Though breakfast had been a growing daypart for the restaurant industry in recent years, the recession has halted its momentum, even as it fares better than other dayparts, according to data from market research firm The NPD Group.

For the three months from April to June 2009, guest counts at breakfast fell 2 percent for the whole restaurant industry, compared with the same three months in 2008. Traffic was down across all industry dayparts, the data showed, with declines of 2 percent at lunch, 5 percent at dinner, and 1 percent at evening snack occasions.

In the quick-service segment, breakfast traffic was flat for the spring 2009 period compared with a year earlier. Traffic plummeted 6 percent at dinner for quick-service restaurants, while guest counts fell 2 percent at lunch and 1 percent for evening snacks.

“Breakfast has slowed, but it’s holding up much better than lunch or dinner,” said Bonnie Riggs, an analyst with Port Washington, N.Y.-based NPD. “The reason for that is tied a good deal to high unemployment. If we’re not on our way to work, we’re not going to the drive-thru for coffee.”

An offer such as McDonald’s $1 breakfast items should help quick-service chains keep their morning-meal traffic more resilient than that of other dayparts.

“It’s deal-related occasions that have been keeping the industry from suffering steeper traffic declines,” she said. “Dollar menus and value menus have served the hamburger category well, so it seems logical that they’d offer a value menu for breakfast as well.”

Contact Mark Brandau at [email protected].

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