McDonald's to roll out breakfast dollar menu

McDonald's has announced will begin selling a variety of breakfast items for $1 early next month, a spokeswoman for the world's largest hamburger chain released the plan Thursday.

The move to add to its already popular dollar menu comes as McDonald's tries to fight a decline in U.S. sales, which have slipped following months of success when its cheap eats were a big draw for recession-strapped diners. November sales were down, and McDonald’s blamed the high jobless rate and the economy in general for the decline.

Dollar breakfast items added

Breakfast items to be added to the $1 menu, which already includes eight items for lunch and dinner time, are the company's Sausage McMuffin, a sausage burrito, a sausage biscuit, a small coffee and a hash brown. Some of the items are already sold for a dollar or less at some locations, although prices vary. Franchisees can set prices within limits, and McDonald’s will take that into account. For instance, a restaurant already selling a small coffee for 89 cents will substitute a larger beverage for its Dollar Menu.

Fast-food restaurant chains, which spent recent years expand their early morning business, have seen declining breakfast sales figures from business diners as unemployment climbs. It means fewer workers stop in for coffee and a breakfast sandwich on their way to the office. NPD Group’s market research has shown breakfast traffic fell 2 percent this summer at the nation's fast food restaurants.

At McDonald's, breakfast business is continuing to increase, although growth has slowed this year. McDonald’s has not publicly provided specific figures on its breakfast sales. Analysts feel that Thursday's move should McDonald's strengthen its breakfast business, in which it is still dominant among fast-food chains.

Fast food breakfast competition heats up

The dollar breakfast menu move will also put competitive pressure on McDonald's competitors, many of whom are also rushing to slash menu prices to keep customers, who are ever more reluctant to open their wallets, happy.

Dunkin Donuts is trying out a 99-cent breakfast menu in the Chicago area. Burger King's already has a nationwide breakfast value menu that includes hash browns, a ham omelet sandwich and a french toast stick 3-pak for $1 each.

Joblessness Hits McDonald’s November Sales in US

The recession has bitten deeper into consumers, and so the jobless rate and consumer confidence here in the US finally caught up with McDonald's Corp. in November; it seems high unemployment ate into sales.

Still doing better than rivals
The world's largest burger chain is doing better than its competitors, Most of them now aggressively pushing value menus and discounts of their own. The U.S. economy needs to pick up before McDonald’s can expect big improvements. Job growth will be the key to McDonald’s sales increasing.

On Tuesday, McDonald's said sales at restaurants open at least a year fell 0.6 percent in the U.S. This was the second consecutive monthly decline for same store sales, an important indicator of a restaurant chain's vitality. In October the same store sales fell 0.1 percent. November's overseas results were better the weakening dollar translated foreign revenue into more dollars. Outside the US, sales in locations open at least a year rose 0.7 percent.

Early Value Strategy adopter
Because of its size and the early adoption of a “Value” strategy with its increasingly popular dollar menu, McDonald's was an early beneficiary of the recession as families and diners in general traded down from more expensive restaurants. At McDonald’s last November, sales in locations open a year climbed 4.5percent in the U.S. and 7.7 globally. The recession’s length is making hard to maintain that momentum Todays reported results were only the fourth U.S. sales decrease in 6 1/2 years.

Increasing competition from rivals trumpeting their own deeply discounted menus as they adjust to the new consumer mood is also affecting McDonald’s. Taco Bell has a value menu that begins with items for 79 cents, and Wendy's is advertising $2.99 combos. Burger King has also heavily pushed a $1 double cheeseburger, against resistance from it’s own franchisees, that it claims as being a bigger and better value than McDonald's $1 McDouble burger.

Overseas Sales Stronger
In Europe, sales in locations open at least a year rose 2.5 percent, thanks to stronger business in the U.K. and France. But the figures were still short of what had been forecast. In other parts of the world, sales in locations open for at least a year in the Middle East, Africa and Asia/Pacific dropped 1 percent. Last year, the figure for these areas rose 13.2 percent.
Meanwhile, McDonald’s system wide sales — a figured based on results at company owned restaurants as well as those operated by franchise owners — climbed 10.1 percent. Adjusting for foreign currency fluctuations, system wide sales were up 2.3 percent. McDonald’s, based in Oak Brook, Ill., runs more than 32,000 restaurants in more than 100 countries.

New Burger King Restaurant Design Continues Competitive Differentiation

Article Headline / Source Burger King's New Restaurant Design (http://adage.com/globalnews/article/?article_id=139526)
Question With Burger King's (BKC) current sales trend weak and high stakes earnings call coming up at month's end, is the newly announced Burger King restaurant design viable? Is it likely to attain investment payback? Can the franchisees fund it with the tight credit conditions now underway?

This was originally done for Gerson Lehrman Group's News

1) Burger King isn't a big "Value Menu" player

2) Tries to differentiate itself through flavor and selection

3) Unit allows for more upscale uses that QSR's are taking on in recession

The new Burger King restaurant design makes sense and addresses the fact that the fast food “niche” is growing and handling more tasks for differing groups of consumers.

BK hasn’t really played hard in value price arena, so a “weak” sales trend may actually bode well for the bottom line. If they are selling more “standard price” menu items as a percentage than their competitors, is that really weakness?

The new 2020 design is a more upscale look, also showing a commitment to full price items and a different marketing sensibility. The “Whopper Bar” concept and the hi-tech Coca-Cola fountain introduction, if only for tests, shows burger King is looking at other places than a .99 price point to grow sales volumes moving forward. They have always competed on flavor as a prime driver to their marketing campaigns, this is a variant on quality differentiation.

Whether the franchisees can fund the new design build out in times of tight credit is probably the same answer it would be in good times: the strong franchisees can, the marginal ones can’t. You have to think that investment payback may be marginally longer to due to the increased cost of the unit’s build-out, but will the design alone increase sales? Probably not.

In terms of how QSR’s/fast food are being used differently by the consumer during the economic turndown, this could be a winner. Having a nicer, more pleasing looking unit to host fast business lunches or take the family out, instead of an Applebee’s or a TGI Fridays, since budgets are bit tight, cannot be bad.

McDonalds July Sales Sizzling Hot

McDonalds (NYSE:MCD) reported a 4.3% increase in same store sales for July. Same store sales are considered the most important comparison statistic for multi unit restaurant chains and retailers. Here in the US, Same store sales rose 2.6%, which is being attributed to the new line of McCafé Espresso-based coffee drinks. McDonalds stock closed today at $56.02 a share, significantly off the 3 month high of $60.99 on June 3rd.

McDonalds is now switching advertising emphasis back towards value and meal combinations, although the “McCafé Monday” promotion that ran in July through August 3rd, giving away samples of specific coffee drinks on Mondays, turned out to be a good traffic driver, according to anecdotal evidence. The new launch now is 1/3 pound Angus Beef burgers, with a higher price point that McDonalds traditionally hits. The “Any size fountain drink for $1” has been a good component to the value message.

While restaurants overall are struggling in the economic climate, fast feeders, and McDonalds in particular, have acquitted themselves well. Americans love to go out to eat, and it seems that the casual dining houses are feeling the brunt of the crisis in consumer confidence. McDonald turning in a 2.6% same store sales increase in the US market, when the US GDP shrank 1% in the second quarter, shows that the Golden Arches continue to be a family destination and place for value conscious consumers to go.

Coffee Wars: Starbucks Moves into Alcohol

Starbuck’s (NASDAQ:SBUX) is testing serving alcohol at a couple of locations, to try out the idea as a way for increasing the later daypart business. Curiously, they are changing the name of the first outlet to “15th Ave. Coffee & Tea, inspired by Starbucks.” I guess the question remains what has been posed before; how badly do you need to beat a brand to destroy it from the inside?

Are Instant Coffee and Alcohol Brand Builders?

While the expansion of business in a weaker time period is always a bonus, there seems to be less respect for the core brand within Starbuck’s than there is from the outside. First, the instant coffee brand -VIA™ rollout, and now trying to be a limited-option bar in the evening.

Not Addressing Menu Overhaul

Actually the alcohol idea isn’t a bad one, but it would make more sense to include it as an overall remaking of the Starbuck’s menu. They seem to be running from the challenge being put forth by the QSR’s, McDonalds (NYSE:MCD) and Dunkin Donuts (Private), in particular, but all the big chains are jumping on the coffee bandwagon.

The way to get solid revenue increases driving at Starbucks is to commit to providing a viable light meal option to complement the beverage business, and this is something they seem reluctant to do. If Starbucks can’t drive revenue by coming up with a way make going there about more than just a side pastry or cookie, they lose the revenue war to the QSR’s challenge in the long run.

Fast Food Chains Challenging on Coffee

While Starbucks doesn’t need a “Dollar Menu” or to put french fryers in, a feature deli-style sandwich that goes with either a cold coffee drink or the newly-introduced beer or wine would seem to be a smart positioning move, and give them a chance at increasing per-ticket rings and putting more revenue into the later dayparts they are trying to improve.

Starbuck’s is running from what made it a premier brand ands a ubiquitous presence in all but the smallest of markets.

When you have a big ship to steer, you can’t do it with a gentle push, you need to give it a good shove. The QSR’s have issued a challenge to Starbucks, if they don’t make a solid move in response to come up with a light meal alternative, they will lose the revenue war down the road.