McDonald’s (MCD, Financial) will begin providing an all-day breakfast menu. Presently the Big Mac maker serves breakfast until 10:30 a.m. According to Business Insider, the company will first start offering consumers all-day breakfast menu at various locations in San Diego in April. If the test receives a positive response and turns out to be successful, the company shall start implementing the program in other restaurants locations as well. Let’s dig in to know the reason behind this move and the challenges that lie ahead.
What made McDonald’s to extend breakfast hours?
The increasing popularity of fast casual chains such as Chipotle (CMG, Financial) and Panera Bread (PNRA, Financial) has been hurting McDonald’s sales. The company also faces stiff competition from Taco Bell (a unit of Yum! Brands (YUM, Financial)) in the breakfast segment. All this has been squeezing the Oak Brook-headquartered company’s market share and adversely impacting its sales and profits.
In February, comparable sales at its U.S. restaurants slipped 4% over a year ago. McDonald’s new CEO Steve Easterbrook, who was appointed as the CEO in March, has stressed that the company needs quick changes to transform from losing market shares to reporting better numbers.
So, as a measure to boost sales, McDonald’s has decided to provide all-day breakfast. McDonald’s breakfast is already popular among millennials, and the move should help the company attract higher crowd to its restaurants. The company said, “We know our customers love McDonald's breakfast, and they tell us they'd like to enjoy it beyond the morning hours.” The test would help the fast-food chain understand the breakfast demand better and capitalize on it. However, there are challenges ahead of implementing the plan.
Challenges ahead
Customers enjoy McDonald’s breakfast menu, but breakfast items aren't available after 10:30 a.m. The company, however, sees potential in extending hours to cater to the demand. Not only would this help the company see higher footfall throughout the day, but it would bolster its sagging sales as well.
Testing all-day breakfast is a fantastic idea, but then arises the problem of capacity and other operational problems. Some popular breakfast items are sandwiches, hash browns, McMuffins, hotcakes and McGriddles. However, McDonald’s has to shift its kitchen from preparing breakfast to making lunch. Handling the two together is an uphill task as grills aren’t big enough to make both breakfast and lunch items. The restaurant kitchen simply doesn’t have the space to prepare a variety of items, ranging from breakfast to burgers at one time. This is even more challenging considering that, for most of its breakfast menu, McDonald’s uses a grill.
Scott Hume, an expert, describes the problem in these words:
"The 'McDonald's After Midnight' menu works when customer traffic is light. But it wouldn't work all day because it requires streamlining both breakfast and burger menus to a few all-star items."
In contrast, other quick service restaurants (QSRs) chains such as Dunkin Donuts (DNKN, Financial) and Starbucks (SBUX, Financial) use microwave which gets much easier to handle unlike McDonald’s. It prefers making the food items on a grill –Â a traditional method of preparing food.
Last word
It’s a tough task to streamline both breakfast activities and lunch together. This would require proper coordination for a smooth process flow such that customers’ waiting time isn’t increased. Early during the month, McDonald’s also announced shedding the use of antibiotic chicken and shifting to naturally raised poultry in two years. These moves, though hard to implement, are necessary for McDonald’s to turn around its flagging financials. The breakfast project shows how serious the company is to revive its brand in the home market. Time will tell how effectively McDonald’s manages to return to healthier numbers.
