After two-plus years of sleepy sales at breakfast, the steadily improving economy appears to be spurring a modest rebound for morning transactions in the family-dining segment.
According to Mintel Research, after breakfast sales in family restaurants rose through the first half of the decade, they plummeted a total of 10.6 percent across 2008 and 2009. Still, operators at several U.S. chains say business is on the rise as recession-weary customers gradually return to their tables.
“Month by month, 2010 is looking stronger when compared year over year,” said Phil Greifeld, chief executive of Atlanta-based Huddle House.
That the chain serves breakfast 24 hours a day has helped it maintain its ground during the recession, Greifeld added.
“Even during this downturn, our core strength has held us very well,” he said.
But maintaining that momentum will not be easy, as more people eat at home and more operators, especially in the quick-service and fast-casual segments, look to capitalize on the daypart that has long been a family-dining stronghold. For some family-dining players the increasing competition means rethinking price points and offerings, while for others it means creating grab-and-go points of sale intended to lure younger customers from quick service.
There’s no easy fight in any segment of the restaurant industry, said Cheryl Ahlbrandt, senior vice president of marketing, research and development at Memphis, Tenn.-based Perkins and Marie Callender’s.
“But the battle at breakfast is magnified by so many other people getting into the same arena of the business,” she said.
Such “other people” include Subway, which in April rolled out a breakfast sandwich lineup at all 25,000 U.S. locations. McDonald’s and Burger King also have ramped up their breakfast offerings. Among the offerings on McDonald’s Value Menu are a McSkillet Burrito with sausage, a Southern-style chicken biscuit, and Bacon, Egg & Cheese McGriddles. Burger King also has a breakfast value menu with such items as a ham omelet sandwich and a sausage biscuit.
Some family operators say the proliferation of QSR breakfast offerings is not likely to greatly impact their sales because they appeal to a more time-pressed clientele.
“QSR offerings like that are really aimed at different dining occasions than ours,” said Mike Woodhouse, president and chief executive of Cracker Barrel in Lebanon, Tenn. “Drive-thru and grab-and-go aren’t areas we compete in, so those customers would not have been eating a traditional breakfast anyway.”
John Dillon, vice president of marketing at Denny’s in Spartanburg, S.C., concurs that patrons of the 1,100-unit chain want service at a relaxed pace. Still, he said, Subway’s play has the chain rethinking some of its own products.
“It definitely keeps us on our toes … which makes us more innovative and more groundbreaking from an affordability standpoint, and that’s good for customers,” he said.
The value proposition
Denny’s made one such bargain pitch this spring with the national rollout of a 16-item value menu featuring foods at $2, $4, $6 and $8. Six of the items are breakfast-centered, while the remainder is targeted toward lunch and dinner. Though Dillon acknowledged quick-service players’ breakfast successes, he said Denny’s new menu’s price position was more about innovative solutions for cost-conscious guests than a knee-jerk response to pricing in other segments.
“One thing that’s a constant right now is everyone is looking for affordability,” Dillon said, “and that’s one major strength we have as a brand.”
Tests in 2009 in six major markets, such as Los Angeles, Denver and Phoenix, yielded strong results, Dillon said, noting that he was reticent to gauge its national performance since the March 31 introduction fell at the end of Denny’s first quarter 2010. That late arrival denied the promotion a chance to help the chain’s first-quarter same-store sales, which slid 5.5 percent at company-owned stores and 6.3 percent at franchised units, adding fuel to a bitter proxy fight still underway at press time by dissident shareholders.
Waffle House also serves some items at lower prices. Waffle House’s Dollar$ Menu is served all day and includes seven affordably priced breakfast items. Though the chain is known for full service, Dollar$ Menu items are suitable for quick purchases if customers choose to take their repast on the road. Regardless of their choices, guests are welcome to grab a table and eat, said Pat Warner, spokesman for the Norcross, Ga.-based chain.
“Some customers tell us it’s actually faster to come inside here and buy something off the Dollar$ Menu than if they waited in line at the drive-thru,” he said.
The Dollar$ Menu, located on the flipside of the standard Waffle House menu, was created from existing items.
“There was no basic price shifting, either,” he said. “This was just another way to package them up for consumers and make it simpler to order them.”
Operators like Greifeld and Ahlbrandt insist “value” in the family segment doesn’t always imply low prices. Rather it more often points to the abundance of food on the plate. Priced at $5.49, Huddle House’s Big House Breakfast Platter costs five times as much as a quick-service dollar menu item, but it includes heaping helpings of bacon, eggs, hash browns, toast and grits. Denny’s Everyday Value Slam and All You Can Eat Pancakes platters come in at $4, and a bit less expensive is Perkins’ Get Crackin’ platters ranging from $3.99 to $6.99 and featuring varying amounts of bread, eggs and proteins. In each case, value implicitly guarantees a sated appetite, Ahlbrandt said.
“In our R&D work, we’ve learned that what tastes good and looks good on the plate in the test kitchen might not get the same response when you actually have to pay for it,” she said. “Sometimes the most important question at the end of a meal is, ‘Is my stomach full?’”
Another important question that might not be asked often enough is whether new items and LTOs are truly profitable, Ahlbrandt said. Sure, low prices attract buyers, and favorable commodities prices over the past two years have provided wiggle room that allowed for discounts that didn’t ding the bottom line. But relying on price slashing or product giveaways is not a sustainable tactic over the long term, she stressed.
“We develop our new products for particular price points first, and then we engineer them to be profitable by adding different components,” she said.
What the health?
Though family-dining menus commonly feature more healthful items such as salads and leaner proteins served at lunch and dinner, the best sellers at breakfast are the calorie-laden kind.
Despite fast-casual and quick-service restaurants menuing comparably more “better for you” items, some family segment operators say they are not planning large-scale changes in this area.
As Greifeld points out, Huddle House customers purposely come there because they know they’ll get a rib-sticking meal, and research does show that diners who eat healthfully during the week often want to relax their standards on weekends. Still, Greifeld said, his company isn’t deaf to cultural shifts regarding diets, so he expects small changes to creep onto the menu over time.
“We are in tune with those changes, and we’re working on it,” Greifeld said.
The chain soon will go completely trans-fat-free, and it’s working on posting nutritional information on its website. Past attempts to expand its healthful menu items saw mixed results, however.
“A good example was our hash brown sales going way up during the low-carb craze,” he said. “Honestly, when customers do come to us, they are expecting cooked-to-order breakfast, eggs, bacon, sausage, jelly and toast. That’s who we are.”
Same at IHOP. At a company that sells 700 million pancakes a year, it’s hardly surprising that starchy-sweet limited-time offerings such as the chain’s Hawaiian French Toast, Holiday Hot Cakes and Funnel Cake Carnival are among its best-selling promotions. At $4.99, their price is right for the times, generating visits from both new and repeat customers, said Carolyn O’Keefe, senior vice president of marketing for the 1,400-unit chain.
Cracker Barrel, however, is giving some more healthful items a try. In hopes of winning over some calorie-conscious patrons, it trialed a $5.99 Fresh Fruit n’ Yogurt LTO last year that Woodhouse said “was designed to take away the veto vote.” The item sold well enough to wind up on the permanent menu.
“We’re not trying to revolutionize Cracker Barrel, we’re just trying to broaden our appeal,” he said.
Timing is everything
Without question, quick-service and fast-casual options at breakfast win the lion’s share of activity on weekday mornings when younger, hurried customers choose convenience over comfort en route to work and school. Those who opt for full-service meals tend to “skew a little older during the week” since their schedules are a bit more flexible, Greifeld said.
But come the weekend, crowds of all ages arrive craving breakfast round the clock. Where a morning quick-service stop is a fill-up calculated to save time and money, operators said slowing down and gathering in groups for an indulgent full-service feast often occurs without such restraints. More importantly, such meals also are feel-good family events that evolve into traditions carried on for generations. Such nostalgia isn’t created at the drive-thru, operators said.
“Waffle House has been around 55 years, so kids who came here with their parents on Saturdays and Sundays are now grown and taking their kids here,” Warner said.
Unlike the less personal service experienced at the drive-thru, family-dining fans create friendships with cooks and servers who recognize them and know how to prepare their particular favorites.
“That builds lasting attachments to the brand,” he said.
In an increasingly time-poor society, do quick-service options have a better chance at earning the morning meal loyalty of the under-25 crowd? It’s a question that yields conflicting answers. Several operators said there’s plenty of evidence showing speed of service and hand-held convenience meets the needs of that age group. Yet most said history shows younger, convenience-dependent patrons evolve into full-service diners as meal occasions become less about sating hunger and more about socializing with friends and family.
Cracker Barrel’s Woodhouse agreed, saying that while the chain’s essence of wholesome country-style food and service will never change, it’s inevitable that theme will require occasional modifications to meet the shifting preferences of future customers.
“Our appeal already extends to a younger demographic through Cracker Barrel being a place where families eat together,” he said. “We’ll look at updated food trends over time and make adjustments, but I don’t think we’ll have a whole generation not coming to us because of what we already serve.”
Ahlbrandt said factors other than age would come into play, such as newer, bolder flavors demanded by younger patrons.
“This audience wants more flavor and more spice, food that isn’t bland, food that’s exciting and different,” she said. “That forces us to make sure we have things to offer them in a sit-down experience [at Perkins] or in a handheld form from our bakeries [at Marie Callender’s.]”
Bob Evan’s had up-and-coming generations in mind when it rolled out its first Taste of the Farm concept last December. The retail and carryout operation erected in one of its restaurants in Westerville, Ohio, is a kiosk-style set-up selling baked goods, grab-and-go items, self-serve coffee, pantry items and gift foods. Margaret Standing, the chain’s director of corporate communications, said in an e-mail that such changes are designed to “target a growing and younger demographic” and not a “response to QSR breakfast programs.”
The move to woo younger patrons to the family-dining fold extends into marketing as well. After decades in business, Greifeld said it was inevitable that Huddle House needed to do something to contemporize itself in order to get the attention of younger diners. The result was an aggressive and often humorous social-media campaign, something its core diners aren’t plugged into, but marketing that’s caught the notice of twenty- and thirtysomethings.
“We really immersed ourselves in social media about a year and a half ago and have found a lot of dedicated people on MySpace and Facebook,” he said. “For us it’s a new way to interact with a customer base that doesn’t respond much to print [advertising] any more. … Now we’re starting to get some traction by working on things that make the brand resonate well with that younger consumer base. That’s really encouraging.”