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Analysis: Not everyone intimidated by McDonald’s all-day breakfast

Analysis: Not everyone intimidated by McDonald’s all-day breakfast

Dunkin's CEO suggests his chain’s breakfast is the best out there

McDonald’s Corp. is clearly planning to roll out all-day breakfast, as early as this fall, assuming that various committees and franchisees approve the idea.

That has to be intimidating to some of its competitors, particularly those that sell breakfast items after 10:30 a.m.. McDonald’s is the biggest restaurant company in the world. It has the biggest marketing budget. And its breakfast items are popular and in-demand.

But at least one CEO isn’t intimidated. “I don’t think we need to respond at all,” Nigel Travis, CEO of Dunkin’ Brands, told CNBC. “We have in our view the best breakfast out there. We’ve been advertising the fact that we have all-day breakfast.”

Travis also mentioned one of the biggest arguments against adding all-day breakfast at the Golden Arches.

“We’re not going to have the operational complexity that all-day breakfast causes,” Travis said. “Clearly they’re going to have that challenge. So we think it’s going to be an opportunity for us.”

Travis’ comments do highlight the challenges that McDonald’s will have in implementing all-day breakfast nationwide. It’s tough to simplify a menu with a big new addition, for one thing, and there are competitors out there that have many locations and serve breakfast items at dinner.

Make no mistake, all-day breakfast is the centerpiece of McDonald’s menu plan. The company is working on simplifying the menu, and on regionalization. It is also working on a new value platform. But for those looking for the company’s next big sales generator, all-day breakfast is it. As one operator privately told me, “There is no Plan B.”

When the Oak Brook, Ill.-based chain reported second quarter earnings on Thursday, it mentioned all-day breakfast and menu simplification as part of its sales-reversal plan. Nowhere in the earnings report, and rarely in the following earnings call, was there any mention of the customization strategy that McDonald’s has been talking about for months.

This came days after a leaked memo revealed that McDonald’s was urging franchisees to prepare for a potential October launch — assuming that various committees and the chain’s operators OK the idea. (

In short, it appears McDonald’s is working quickly to make this happen.

“It must be working,” BTIG Analyst Peter Saleh said. “There must be something that they really like.”

Saleh suggested that investors are banking on all-day breakfast at this point. The company’s stock has remained steady for months despite sales problems in the U.S., home to 40 percent of the chain’s sales. That could put pressure on the company to convince franchisees that the idea is the right thing to do.

“What if they vote no?” Saleh said. “If they do, the stock is going to get globbered. At this point, people are waiting on all-day breakfast.”

It does make sense for McDonald’s to push all-day breakfast. Competitors that it once blew away, like Burger King, Wendy’s, Arby’s and Jack in the Box, have seen strong sales growth of late. Those competitors have grabbed market share.

Breakfast items have higher profits, in general. Consumers are also demanding it — three-quarters of them tell the National Restaurant Association, for instance, that they want breakfast available all day from restaurants.

Consumers have long told McDonald’s this is what they want. And the prospect of the expansion has generated significant, positive buzz for the company — something it desperately needs after three years of sales weakness.

But Saleh said that there are still questions, and competition from the likes of Dunkin’ Donuts is a big one.

“Dunkin’ is a huge competitor on the East Coast,” Saleh said. “It’s not really on the West Coast. Dunkin’ sells breakfast all day. When you come to the East Coast with breakfast all day, is it going to perform?”

In addition, he said, breakfast items are cheaper than lunch items, and that could reduce average check, by cannibalizing more expensive items.

Still, all-day breakfast would be arguably one of the biggest moves the company has made in decades. And Saleh noted that the company couldn’t afford to rest on its laurels or rely on the same strategies that might have worked in the past.

“I applaud them for trying different things,” he said. “They can’t stand still anymore. They have to move fast.”

Contact Jonathan Maze at [email protected]
Follow him on Twitter: @jonathanmaze

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