McD's franchisees foresee all-day breakfast

McD's franchisees foresee all-day breakfast
By Julie Jargon Feb. 20, 2007

Feeling the heat from new competitors, McDonald's Corp. is overhauling its kitchens to speed up and expand its breakfast service, a move many franchisees see as a prelude to all-day breakfast.

In a memo to franchisees obtained by Crain's, McDonald's executives said the "breakfast optimization" program is intended to bring greater efficiency to the production of Egg McMuffins, McGriddles and other morning fare.

In the memo, McDonald's calls breakfast optimization "a critical element — and important first step — of our 2007-2009 Plan to Win" and says the program is intended to "make it easier and more efficient for our managers and crew to deliver a quality breakfast experience."

But franchisees see a more dramatic change behind the new machines and reconfigured kitchen layouts called for under the program: abandonment of the traditional 10:30 a.m. cutoff for breakfast service at McDonald's. "That's the speculation on the street," says Oklahoma franchisee Steve Biddle.

A McDonald's spokesman denies any connection between the program and expanded breakfast hours, insisting that the effort is solely aimed at improving operations during what has become the chain's most important mealtime.

Not only is breakfast the fastest-growing segment of the fast-food day, it's also the most profitable, because eggs and pork cost less than beef and chicken. That explains why chains like Wendy's, Starbucks and Burger King are expanding their offerings. This week, Burger King will begin selling some breakfast items for $1. The chains are hoping to challenge the dominance of McDonald's, which has about 15% of the $50-billion to $60-billion breakfast market, according to Chicago restaurant consultancy Technomic Inc.

In a phone message to franchisees last month, Jan Fields, chief operating officer of McDonald's USA, said, "Breakfast is the next battleground for marketshare."

As lucrative as breakfast is for McDonald's, it's also the most challenging meal operationally, mostly due to the number and variety of menu items and the difficulty of staffing early morning hours.

The new breakfast program aims to address those challenges. The company is asking franchisees to spend about $10,000 to reconfigure their kitchens and install new equipment, such as holding cabinets for McGriddles and hotcakes, to shave precious seconds off breakfast assembly time.

That request makes sense given the heightened competition, but some franchisees see an unspoken motive behind the program. Their suspicions arise from remarks McDonald's CEO James Skinner made in September, when he told investors that all-day breakfast could be possible with a new cooking system under development in the company's innovation center in Romeoville. After his comments, McDonald's representatives quickly told the press that Mr. Skinner was merely "painting a picture of what is possible" and that all-day breakfast might never happen.

But now, some operators believe it could. "You put two and two together and it looks like this could be a step toward accomplishing breakfast all day," says a franchisee in the Southwest who spoke on condition of anonymity.

Mr. Biddle, the Oklahoma operator, says he attended a meeting in Oklahoma City recently where fellow operators were abuzz about whether the optimization plan is a precursor to all-day breakfast.

Richard Adams, a franchisee consultant and former McDonald's operator, says more than a hundred franchisees recently have told him they view the program as the groundwork for doing just that.

The company continues to insist that the kitchen efficiency effort and Mr. Skinner's all-day breakfast comments are unrelated. The plan in the works now, a spokesman says, is about "assessing restaurant operations behind the counter and evaluating what type of prep line best sets us up for success with the breakfast items we have currently and what we'll have in the weeks, months and years ahead."

Operators say they aren't opposed to altering their kitchens for speedier service — they just worry about how they'll handle any breakfast expansion. As the menu grows, it's becoming harder to fill orders within McDonald's 90-second target.

Manhattan franchisee Irwin Kruger isn't sure whether the new push is a harbinger of all-day breakfast, but if it is, the new equipment will be vital. He recalls serving Egg McMuffins all day at East Coast franchises he owned in the 1970s. "We were a different restaurant company then — there weren't so many items on the menu," he says. "Those were simpler days."
©2007 by Crain Communications Inc.

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