To get an idea as to just how big the business of fast food breakfast is, consider that McDonald’s
It’s why breakfast has been the only growing daypart in the industry throughout the past few years, and why competition in the space has intensified.
But that was in a pre-COVID-19 world, and the pandemic has abruptly changed everything. Of the narratives that have emerged from this crisis, a steep drop in breakfast visits is among the biggest headlines.
Consider the Q1 earnings round for context. At that time, the true ramifications of the pandemic–specifically shelter-at-home mandates that took morning commuters in need of a quick pick-me-up off the roads–were just starting to materialize. Yet every brand with a morning business spent time discussing the dire impacts of this compromised daypart.
Those impacts have continued. During last week’s Evercore
According to The NPD Group: “The morning meal, which represents a breakfast or morning snack occasion, has suffered the steepest transaction declines. Morning meal customer transactions at major restaurant chains fell by 18% in the week ending June 7 compared to same week year ago.”
This is compared to lunch transactions, down by 11%, and dinner transactions, down by 12%.
Placer.ai drills down even deeper on how much the pandemic has affected some of our morning mainstays. From May 1 through June 15, for example, 11.5% of Dunkin’s visits came between 6 a.m. and 9 a.m., compared to 15.7% during the same period in 2019.
There is an outlier here in Wendy’s, which poured tens of millions of dollars into marketing the daypart ahead of its launch March 2, shortly before the nationwide lockdown. During Wendy’s Q1 earnings call, CEO Todd Penegor said its new breakfast menu has been sustaining at approximately 8% of U.S. sales. Moreover, “it has proven to be profitable, even at lower sales levels than we anticipated,” Penegor said.
Wendy’s breakfast has received “overwhelmingly positive” customer satisfaction scores, but some of this tailwind could just be from the newness of it. Of course, time will tell.
By and large, however, breakfast has a long road to recovery. And not just fast food breakfast, either. Large franchisees for both Denny’s and IHOP have closed dozens of locations after experiencing double-digit same-store sales declines due to the pandemic, for example.
During its Q1 call, IHOP president Jay Johns perhaps summed up the challenge best, stating, “If you’re only going to order out one time a day, the places that are doing dinner … look like they’re winning more.”
It’s hard to tell at this point how long a breakfast recovery could take, particularly as coronavirus cases linger, even rise, in many states. The answer won’t likely come until workers return to their offices in droves.
During that Evercore conference, McDonald’s CEO Chris Kempczinski said the company is “just starting to turn the lights back on” its breakfast business. He predicts recovery will vary by market.
“Breakfast is a habitual daypart. Once you disrupt that routine, it takes time to sort of rebuild it,” he said.
Still, because we’re not sure just how many workers will actually return to a “regular” work cadence, the answer is not that simple. The coronavirus lockdown has forced companies to trust their employees to produce their work remotely and this massive operational shift has largely proven to be a success. How so? Massive companies like Barclays, JP Morgan, Capital One
Notably, more Americans want such programs in place. According to new research from Piplsay, 43% of Americans would prefer working from home even amid the reopening, while 66% of Americans are comfortable with a permanent work-from-home culture. Younger employees have more favorable views of working from home, so this trend perhaps has some staying power.
At the same time, Americans have grown accustomed to breakfast at home. The NPD Group finds that consumers are whipping up quite the morning spread during their work-from-home stints, with indexes for pork/pork dishes, pancakes, waffles, French toast and crepes eaten at breakfast all over 150 in April 2020 versus April 2019.
During a recent webinar, Susan Schwallie, executive director of food and beverage consumption for The NPD Group, said sales of breakfast appliances like waffle irons have done well during the crisis, adding, “It signals that we may not be willing, or it may be a struggle, to give back some of this time we’ve given to ourselves in the morning.”
That doesn’t mean restaurant brands are throwing in the towel on breakfast, however. Menu news, including for breakfast, has largely been paused since the pandemic hit. But that news is starting to pick back up again. Just this month alone, for example, Burger King added the Impossible Croissan’wich to its menu nationwide, the first chain to roll out the Impossible Foods sausage alternative. Starbucks followed this week with an Impossible Breakfast Sandwich. Where there is investment and innovation, there is reason for optimism.