Bloomberg News

McDonald’s Dinnertime Egg McMuffins Frustrated by Grills: Retail

May 03, 2013

What’s So Hard About a 24/7 McMuffin?

Franchisees say McDonald’s has tried all-day breakfast before—and failed. One hurdle: labor-intensive menu items such as scrambled eggs. Courtesy: McDonalds

In the 1993 film “Falling Down,” Michael Douglas enters a fast-food restaurant and orders breakfast. The worker behind the counter informs Douglas he’s a few minutes too late, and Douglas becomes unhinged.

Twenty years later, breakfast still ends too early for many people -- 10:30 a.m. on weekdays and 11 a.m. on weekends -- at most McDonald’s Corp. (MCD:US) restaurants. So when Don Thompson, the Oak Brook, Illinois-based company’s president and chief executive officer, said in late April that he was considering serving breakfast all day, a lot of Americans thought it was about time.

Not so fast. Back in 2006, then-CEO Jim Skinner announced that the chain was considering operational improvements that would make it possible to offer breakfast 24 hours a day.

“It’s a concept for now --- no specifics yet,” Heidi Barker Sa Shekhem, vice president for global communications, said in an e-mail in response to a request for an update. A few breakfast items are offered all day in select countries.

Although breakfast accounts for only one-quarter of McDonald’s U.S. sales, it dominates the market. A 2012 study by Scarborough, a New York-based market research firm, found that among the adults who said they’d eaten a fast-food breakfast in the prior month, 48 percent had visited a McDonald’s.

Still, all-day breakfast?

“It’s been tried and failed repeatedly,” said Richard Adams, a restaurant-franchisee consultant in San Diego and former McDonald’s restaurant owner. “It just makes the operation too complicated.”

The chain, which has about 14,100 McDonald’s stores in the U.S., has conducted test runs in a few stores over the years, he said.

Scrambled Eggs

One of the biggest obstacles to a McDonald’s breakfast 24/7 is logistical. There may not be enough “grill capacity” to cook both eggs and burgers, said Don Boodel, who owns two McDonald’s restaurants in the Denver area.

And burgers, like other meat, need to be cooked at a higher temperature than eggs. At breakfast, the crew cooks the bacon and sausage ahead of time. That solution might not be possible during a busy lunch shift. Then there’s the scrambled egg.

“It’s something you’ve got to dedicate yourself to, stirring the eggs,” Adams said. “You’ve got to keep them moving; you can’t just let them sit there.”

During peak times, McDonald’s already struggles to quickly serve drive-in customers, said Darren Tristano, executive vice president at Chicago-based research firm Technomic Inc. About 65 percent of McDonald’s U.S. business comes from customers in their cars.

Cheaper Fare

Another problem with all-day breakfast is that the morning fare costs less than lunch or dinner meals, so some customers might trade down.

Still, “there’s nothing better on the menu than breakfast,” said Barry Klein, a former franchisee who now is a marketing consultant in Chicago. “The value is sensational. And there’s a slightly healthier halo to what they serve then.”

The Sausage, Egg & Cheese McGriddle is the exception: It has 550 calories and 31 grams of fat.

McDonald’s, which has more than 34,400 restaurants worldwide, has become less valuable to investors during the past year. The Big Mac seller is trading at a premium (MCD:US) of about 21 percent to the Standard & Poor’s 500 Index on a price-to- earnings basis, compared with a 28 percent premium in May last year.

The company rose 0.8 percent to $102.92 at the close in New York. McDonald’s has gained (MCD:US) 6.1 percent in the past 12 months, while the S&P 500 has advanced 16 percent.

First-Quarter Sales

Sales at U.S. stores open at least 13 months dropped 1.2 percent in the first quarter, the company said on April 19. The decline is due in part to a “challenging eating-out environment,” Thompson said during a call with analysts that day.

“Throughout the year, we will feature even more compelling new products in the United States, especially in our four key growth categories of chicken, premium beef, breakfast and beverages,” Thompson said.

Klein and other observers suggested that restaurants could offer only the breakfast sandwiches all day; they’re easier to make and sell better than pancakes and scrambled eggs anyway.

Or they could experiment with serving breakfast until noon, said Tristano of Technomic. Until then, he said, there’s always the once secret Mc10:35. Customers arriving minutes late for breakfast can often prevail on McDonald’s crew to put leftover eggs from the Egg McMuffins on their burgers.

To contact the reporters on this story: Susan Berfield in New York at sberfield@bloomberg.net; Leslie Patton in Chicago at lpatton5@bloomberg.net

To contact the editor responsible for this story: Cristina Lindblad at mlindblad1@bloomberg.net


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    (McDonald's Corp)
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