Quick-service restaurant chains looking to break into the market for breakfast — as Wendy’s and Taco Bell plans to do in 2012 — will need deep pockets for marketing and a strong coffee offering, researchers said.
Industry analyst Dave Jenkins, founder of market research and consulting firm CustomersDNA, shared key drivers for restaurants looking to enter a competitive scene during a conference call hosted by Bernstein Research on Thursday.
Jenkins noted that 64 percent of Americans visited a quick-service restaurant once for breakfast in 2011. That customer base is not expected to grow, he said, meaning quick-service brands will need to concentrate on frequent morning customers, especially “dual” customers who purchase food and a hot beverage — who average 11 restaurant visits per month.
“Changing [morning restaurant visit] habits is very difficult,” he said. “The more critical number is the 10 percent of the population that’s in the marketplace for breakfast on a weekly basis. They’re pretty consistent. I don’t see much movement in the expansion of breakfast [from 64 percent of all Americans].”
For Wendy’s, which has set a goal to get breakfast items into 1,000 U.S. locations in the near future, and Taco Bell, which just launched its First Meal menu to 750 units in 10 states, to succeed in breakfast, they must steal market share from McDonald’s, Subway, Starbucks Coffee and Dunkin’ Donuts, Jenkins said.
Doing so depends on marketing and coffee, he added.
In the past year in the quick-service breakfast market, “the big got bigger,” Jenkins said, noting that McDonald’s, Subway, Dunkin’ Donuts and Starbucks all increased morning sales and “fortified their breakfast and coffee businesses to protect themselves from each other.”
McDonald’s poured resources into hot coffee and its McCafe lineup to fend off Dunkin’ and Starbucks, while those coffee chains introduced new food offerings to cut into McDonald’s share. Subway built its breakfast market share to about 1.6 percent of the market, spending an estimated $50 million in advertising to do so, Jenkins said.
“It looks like many of the smaller chains and independents in the market — the people who weren’t doing all the advertising spending — lost breakfast market share,” Jenkins said. “Burger King lost some share as well. Marketing does work. You have to be out there all the time and persistent in getting your message through.”
He compared Wendy’s chances to successfully roll out breakfast with recent performance for Subway, which he estimated added between $35,000 and $45,000 per year to its average unit volume. Wendy’s has stated before that it is targeting $150,000 in incremental sales to its average unit volume of about $1.4 million.