MCD McDonalds Corp

By Julie Jargon 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (December 28, 2018).

McDonald's Corp. wants customers to eat more breakfast during breakfast.

When the fast-food giant three years ago responded to widespread demand for breakfast beyond 10:30 a.m. by offering McMuffins, hot cakes and sausage burritos all day, consumers cheered -- and so did investors. McDonald's business got an immediate jolt, and all-day breakfast buoyed sales for nearly a year.

But the availability of breakfast anytime led to unintended consequences. More customers are forgoing morning visits and getting their McMuffin fix in the afternoon and evening, according to some franchisees. McDonald's has blamed slowing U.S. sales in recent quarters on softness in its morning breakfast business.

McDonald's recently added new Triple Breakfast Stacks, for a limited time, in an effort to generate excitement on a menu that has seen little change. The breakfast sandwiches with extra meat are offered beyond traditional breakfast hours only upon request.

The company is pushing the idea of a "holistic" breakfast, with ads encouraging customers to pair its breakfast items and McCafe coffee drinks, and it is testing baked goods including coffee cakes and muffin tops. McDonald's has also started offering more competitive breakfast deals, including breakfast sandwiches for $1.

Getting breakfast right is critical for a chain that derives a quarter of its sales in the morning. Rivals including Chick-fil-A and Burger King have upped their breakfast game with new products and deals.

They are all fighting for a shrinking market. Restaurant traffic growth at breakfast has slowed in the past three years as the entire eating-out market has softened, said David Portalatin, a vice president at market-research firm NPD Group Inc.

Still, breakfast sales are more profitable than lunch and dinner, because the cost of ingredients such as eggs are cheap compared with the beef and chicken in sandwiches served later in the day, and fewer workers are generally needed to prepare breakfast items.

"What that means for us is that we need to sharpen the focus on breakfast around products, convenience and value," said Linda VanGosen, president of menu innovation at McDonald's.

Whether the moves will be enough to compel more people to stop in for breakfast is unclear. The chain is running up against shifts in consumer behavior that could run counter to the idea of the morning meal altogether.

Levi Adams, a 21-year-old naval officer in San Diego, loves McDonald's breakfast burritos and McGriddles but doesn't have time to stop for breakfast on his way to work.

"When I was a teenager, I would get breakfast at McDonald's, eat lunch at school and then have dinner at home with my family," Mr. Adams said. "Now I wake up early every day, have coffee and an apple at home and get McDonald's breakfast on my way home in the evening. My eating habits have changed to fit my schedule."

Numerous McDonald's customers want burgers in the morning, according to thousands of people who have tweeted about it. A spokeswoman for the burger giant said demand isn't strong enough to warrant running the burger grill in the morning.

Offering a full menu all day adds complexity to restaurant kitchens, and the additions of all-day breakfast and fresh rather than frozen burgers in the afternoon have already slowed McDonald's service speed. Seeing a long line at a drive-through window can be a deterrent for consumers rushing to get to work in the morning.

McDonald's Chief Executive Steve Easterbrook in October said it is difficult to give consumers what they want when they want it -- and at the speed they expect.

"We are always going to want to introduce initiatives that are attractive to customers, which are reflecting where customers want us to go and their changing tastes," he said, "but at the same time, how can we maintain that discipline of making sure we take as much out as we ever put into a restaurant?"

Competitors have been making changes to meet the desire for breakfast any time. Wendy's Co. has started offering a Bacon Maple Chicken sandwich on a croissant bun for people who want a breakfast item at lunch or dinner.

Taco Bell doesn't serve breakfast all day, but its lunch items are offered at most restaurants beginning at 9 a.m. Melissa Friebe, Taco Bell's senior vice president of brand marketing and consumer insights, said: "Sometimes people order both a beef taco and a breakfast burrito in the morning."

Write to Julie Jargon at julie.jargon@wsj.com

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December 28, 2018 02:47 ET (07:47 GMT)

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