OAK BROOK, Ill. -- McDonald's Corp. said it is prepared to defend the Egg McMuffin's 30-year reign as breakfast champion from an old rival and as many as three fast-food challengers, reported The Chicago Tribune.
Jim Skinner, McDonald's CEO, told shareholders attending its annual meeting at the company's Oak Brook, Ill., headquarters that the chain is exploring expanding its dollar menu, currently limited to lunch items, to include the first meal of the day. That would counter Burger King's $1 breakfast menu and its version of the Egg McMuffin, a ham [image-nocss] omelet sandwich.
Breakfast is the fastest-growing category in the restaurant business, expanding at about 9% per year, as time-pressed consumers opt to grab something on the go rather than fix breakfast at home. McDonald's holds about a 40% market share in the breakfast category, according to the report.
In addition to Burger King, McDonald's soon could be facing increased competition from Subway, Taco Bell and Wendy's, all of which are testing breakfast products, the report added.
Wendy's has said that its breakfast test, at 160 restaurants, is to be expanded to 20% to 30% of its 6,600 restaurants by the end of the year.
Subway is testing a toasted breakfast sandwich at 7,000 outlets that offer breakfast, while Taco Bell is testing a breakfast program in four markets. No date has been set for either to expand nationally. Taco Bell spokesperson Rob Poetsch told the newspaper that the chain, which is offering breakfast burritos and soft tacos, wants to distinguish [itself] from the biscuit and muffin crowd.
McDonald's is facing competition at breakfast from Dunkin' Donuts and Starbucks, which are better known for their coffee than their food, said the report.
Ralph Alvarez , McDonald's COO, warned the newcomers would find it is more difficult to deliver breakfast than it is to develop the menu. Breakfast is not as easy as it appears, he said, citing challenges ranging from staffing and training to choosing restaurant locations. Driver's don't make left turns, he said, explaining that breakfast diners are in such a hurry they might stop at only the most convenient locations.
Bob Goldin, executive vice president of Technomic Inc., a food research and consulting company, told the Tribune that the challengers are not likely to have much impact on McDonald's breakfast business. McDonald's is going to fiercely defend its well-earned turf, he said. It has earned a tremendous amount of equity in the business that is going to be tough to dent.
In addition, Goldin said the company is going to become more formidable when it rolls out a 24-hour breakfast menu.
McDonald's is testing grill systems in Romeoville, Ill., that would allow its operators to offer breakfast around the clock, rather than the current system that requires them to stop breakfast to make way for its burgers.
We feel pretty good about breakfast, Don Thompson, president of McDonald's USA, told the newspaper.
The comments about breakfast came as the world's largest restaurant chain, which slowed growth in 2003 to about 1% annually to focus efforts on expanding sales at existing restaurants, is planning to increase the speed of its expansion to about 1.3% annually. The company is planning to add 800 new restaurants and remodel 2,000 worldwide this year. Most of that growth is to be concentrated in Russia and China. In the United States, growth is to be limited to about 200 new restaurants, Matthew Paull, executive vice president and CFO, told the paper. McDonald's operates 13,800 units domestically.
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