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NPD: Dark of night a bright spot for QSRs that stay up late

Early to bed and early to rise may have once made people healthy, wealthy and wise, but today’s savvy quick-service operators know there’s money to be made by staying up—and open—late.

According to new data from The NPD Group, a Port Washington, N.Y.-based global market research firm, the hours between 10 p.m. and 5 a.m. are turning into a lucrative daypart.

“We’ve been really seeing strong growth in p.m. snack,” NPD analyst Bonnie Riggs said.

For the year ended December 2006, visits to quick-service restaurants during the late-night hours accounted for only 5 percent of all quick-service traffic. But that traffic has seen considerable growth in recent years. According to NPD, from 2004 to 2005 traffic increased 3 percent, and from 2005 to 2006 it increased 6 percent, twice the rate of the quick-service segment’s overall growth.

“The reason [late night] is growing is increased availability,” Riggs said.

The convenience factor

For years convenience stores such as 7-Eleven and such fast feeders as Wendy’s and White Castle have catered to the late-night customer by offering late operating hours or 24-hour service. Now consumers have even more options, as an increasing number of quick-service chains expand their hours of operation by opening earlier or closing later.

Oak Brook, Ill.-based McDonald’s began extending its store hours in 2003, opening some units as early as 5 a.m. and keeping others open 24/7 or until midnight or later. According to the chain, more than 95 percent of the burger giant’s 13,700 U.S. stores now have extended hours.

Last year Irvine, Calif.-based Taco Bell extended operating hours at all of its nearly 6,000 U.S. units as part of the chain’s new “Fourthmeal” initiative. Today, the chain reports that most stores are open until 1 a.m., but some are open as late as 4 a.m.

Meanwhile, officials at Miami-based Burger King said their stores would begin staying open until midnight or later beginning May 10.

Late-night diners most often frequent hamburger, convenience store and Mexican outlets, which together accounted for more than half of quick-service late-night traffic in 2006. Burger purveyors had a 31-percent share, as consumers made nearly 67 million more visits over the previous year, an 11-percent increase. Convenience stores captured a 17-percent share, with consumers visiting nearly 24 million more times than they did in the previous year, an increase of 7 percent. Mexican captured a 7-percent share, as consumers made 12 million more visits, an 8-percent increase.

The young and the hungry

The assumption that most late-night diners are young people satisfying post-party cravings is a tired one, NPD found.

Though late-night consumers do tend to skew young—with the heaviest male users aged 18 to 49 and the heaviest female users aged 18 to 34—most aren’t coming from a night out on the town. Instead, the data reveal that half of the time late-night consumers go to quick-service restaurants from their homes. About one-fourth of the time they come from work, and another 16 percent of the time they come from shopping, errands or other activities. They only come from recreational or social activities about 12 percent of the time. NPD also found that men and women are almost equally likely to come in during late-night hours, with men accounting for 53 percent of late-night traffic and women accounting for 47 percent.

No matter where consumers come from, the most popular late-night hour to visit quick-service restaurants is from 10 p.m. to 11 p.m. In the year ended December 2006, more than 40 percent of such late-night traffic occurred at that hour. Other popular times included 11 p.m., with 22 percent of the traffic, and midnight, with 16 percent of the traffic. Only 9 percent of traffic occurred between 1 a.m. and 2 a.m., and just 5 percent occurred between 3 a.m. and 4 a.m. Around 5 a.m., the start of the early morning rush for many consumers, traffic increased to 7 percent.

While the majority of visits are between 10 p.m. and 11 p.m., the data showed that the majority of the growth comes from visits between midnight and 1 a.m. In the year ended December 2006, traffic during that hour increased 63 percent over the previous year.

Consumers with lower household incomes tend to be the heaviest users late at night. NPD attributes this to the influence of heavy usage among people aged 18 to 24, who tend to earn less money. Households with annual incomes of less than $25,000 accounted for 25 percent of late-night traffic in 2006. The second-heaviest users of late night were the biggest earners—households pulling in more than $100,000—which accounted for 16 percent of traffic. Households earning $45,000 to $59,999 and $75,000 to $99,999 each accounted for 13 percent of traffic. Those earning $25,000 to $34,999 accounted for 12 percent, $60,000 to $74,999 accounted for 11 percent, and $35,000 to $44,999 accounted for just 10 percent.

Late-night cravings

The top food items consumed during late-night hours are burgers, French fries and pizza, followed by salty snacks, ice cream, chicken nuggets/strips, breaded chicken sandwiches, doughnuts, tacos and breakfast sandwiches, NPD found. The top beverages are regular carbonated soft drinks, diet carbonated soft drinks, and regular or decaffeinated coffee, followed by bottled water, noncarbonated soft drinks, specialty coffee, tap water, iced tea, juice and milk shakes/malteds/floats.

With more operators vying for late-night business, many chains are trying to distinguish themselves by offering alternatives to such mainstays as burgers, fries and pizza.

Dallas-based 7-Eleven, which has operated 24/7 since 1963, reports it has been developing more fresh foods to meet local taste preferences. The chain’s late-night offerings include everything from sandwiches and taquitos to snacks.

“We constantly introduce new products to keep the selection fresh—at least 20 new items per week,” said Margaret Chabris, a 7-Eleven spokeswoman.

While there are no specific late-night menu items at Taco Bell, the chain says it regularly adds products that are available during all dayparts.

“Consumers late at night are motivated by convenience and a taste for something different,” said Stephanie Purdue, associate marketing manager of Taco Bell.

That something different is the chain’s signature “spicy, crunchy, melty flavors,” and the ability to customize menu items, an option chosen by more than 60 percent of late-night customers, Purdue said.

Among Taco Bell’s more popular late-night items is the new Steak Grilled Taquito, a warm flour tortilla rolled around carne asada steak and Cheddar cheese that comes with sour cream, guacamole or salsa for dipping.

While late-night consumers may crave unique flavors, they don’t spend more to have them. According to the NPD data, diners tend to spend about the same late at night as they do at other quick-service dayparts. The late-night check average is $4.66 for men and $3.97 for women. However, some chains, such as Taco Bell, report increased check averages during the late-night daypart.

“Understanding who the late-night consumer is…provides operators with an opportunity to offer and promote products that have a high appeal,” Riggs said.

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