Traditional Restaurants Trend 2014: The Breakfast Battleground

QSRs gain momentum from strong traffic growth in the morning, menu innovation from chains

Robert Lillegard, Freelance writer

Abbie Westra, Director, Editorial, CSP

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While c-stores have been slowly muscling into QSR territory, there’s no question the industry is fighting back as if its life depends on it. That’s because it does.

Despite the long-term aspirations of convenience leaders, c-stores have foodservice; QSRs are foodservice. And the latter aren’t letting themselves be backed into a corner.

“What’s really keeping c-stores from stronger growth is the morning meal,” says Bonnie Riggs, restaurant industry analyst for The NPD Group. Morning-meal traffic increased 4% at QSRs last year, compared to a 1% decline for convenience retailers.

Riggs says that the top-performing categories in 2013 were gourmet coffee/ tea, fast casual and doughnut. Much of this growth was fueled by unit expansion, which has undoubtedly put breakfast-minded c-store operators much closer to the nearest Starbucks or Dunkin’ than they’d like to be.

Technomic senior director Donna Hood Crecca agrees with Riggs that breakfast has given QSRs a nice jolt. “There’s a lot of innovation and blocking and tackling as new folks like Taco Bell come in, both in terms of indulgent items and healthier items,” she says.

Breakfast competition from other QSRs is causing some well-publicized woes for McDonald’s, as well as those participating in Technomic’s Consumer Brand Metrics study.

“Whenever you’re the big guy, everyone takes shots at you,” Crecca says. “McDonald’s [has] high traffic, high sales, but it doesn’t score real high across a lot of attributes. There’s definitely room to improve.”

On the flavor front, Justin Massa, founder and CEO of Food Genius, is finding a growing incidence rate of spicy menu items—just like at c-stores. He has noticed chains taking a regular menu item and adding hot sauce to create a limited-time offer. “McChicken to [Hot ’n] Spicy McChicken is a great example,” as well as Subway’s Sriracha Steak Melt and Sriracha Chicken Melt, he says.

“The other thing that we saw—and we think this was more of an artifact of trying to add a better veneer to existing healthy options—was the number of salad dressings offered as options grow,” Massa says. “It wasn’t a growth in salads, but there was a greater array of salad dressings offered.”

QSRs are competing in anchor c-store categories such as coffee and doughnuts, but they’re also beginning to feel pressure from the grab-and-go aspect of c-stores—especially those with strong sandwich offerings such as Sheetz and Wawa. In reaction, says Rachel Tracy, managing director of Culinary Visions Panel, Chicago, they’re innovating upwards and putting pressure on higher-price-point restaurants.

“QSR has had to be the new fast casual,” she says, “where c-store is taking on the other option for QSRs.”

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