McDonald’s all-day breakfast menu, the fast food giant’s most successful promotion in recent years, turns 1 this week. To celebrate, the chain is putting more on the griddle.
All-day breakfast has been a huge driver in McDonald’s effort to turn around years of lagging sales. The world’s largest burger chain says giving diners the option of ordering breakfast all day has lured customers back in the door, boosted average sales and provided a spark for change across the company.
All-day breakfast has not been without complications, but as year two begins, McDonald’s is hoping that a breakfast menu expansion will be what it needs to keep the ball rolling. The chain this fall is expanding its all-day breakfast menu to include McGriddles, a popular breakfast sandwich.
McDonald’s announced it was testing all-day breakfast just days after its new CEO, Steve Easterbrook, took the helm last March. By Oct. 6 it was in all 14,000 U.S. stores. The promotion, which customers had requested for years, has been both a symbol of the company’s rapid change and a huge factor in bringing lapsed customers back and loyalists in more often.
But serving Egg McMuffins at all hours of the day isn’t as simple as just stocking more eggs, cheese and Canadian bacon. To consider rolling out all-day breakfast nationwide, McDonald’s had to reconfigure each restaurant’s kitchen, making room for an egg cooker that stays on the stove-top all day, a new type of oven and other equipment changes.
It also meant making space on the menu. Adding breakfast items to an already bloated menu would further slow order times, franchise owners warned, so McDonald’s scrapped lower-selling McWraps and other items to make room.
As participating restaurants expanded, customers responded. Although some franchisees expressed concern that customers would opt for cheaper breakfast items instead of a Big Mac or Quarter Pounder with Cheese, many actually didn’t choose at all: They bought more, on average, by adding a breakfast sandwich to existing orders. All-day breakfast also brought in more customers who hadn’t been into a McDonald’s in a while.
The new additions also blurred the lines between breakfast, lunch and dinner and brought more customers in between main mealtimes, NPD analyst Bonnie Riggs said, although most breakfast sandwiches outside of the morning hours were consumed at lunch.
In the months after the launch, McDonald’s customer satisfaction scores rose to new highs, and so did the company’s stock, making Wall Street happy and offering the biggest sign yet that the McDonald’s turnaround after years of lagging sales was starting to take shape.
In the past few months, growth at McDonald’s and the restaurant industry as a whole has slowed slightly as cheaper grocery prices have driven more Americans to eat at home.
Although it’s clear that all-day breakfast has been a boon to McDonald’s, executives are quick to underscore that the improvement underneath the Golden Arches is much deeper than the ability to get a breakfast sandwich at 10 p.m.
It’s actually the less obvious changes, like switching to real butter on the Egg McMuffins, or removing preservatives from chicken nuggets, where McDonald’s is making the biggest positive shifts, said Erik Hess, McDonald’s senior vice president of U.S. customer experience.
“The turnaround started happening before all-day breakfast was launched, but it gave us a lot of momentum internally in terms of listening to customers,” he said. “Our charge right now is to keep listening.”
Hess said that while “nothing is easy” in the quest to make the kitchen and cash registers flow quickly and smoothly, he’s confident that the additions the company is making on the menu won’t interrupt all the momentum in sales and order improvements.
In a recent survey by Nomura analyst Mark Kalinowski, franchisees reported mixed opinions about the evolution of all-day breakfast. Some said that the addition of new menu items has slowed order times, while others focused on hope that the added menu items would bring a boost in sales, albeit likely a temporary one.
McDonald’s is now testing all-day breakfast in Happy Meals in a small number of Oklahoma restaurants. If it’s successful, Happy Meals across the country could come with the option of griddle cakes or a breakfast sandwich next year, marking the first new entree entrants to the kids’ meal in three decades.
The latest incarnation of breakfast all-day benefits the company in two big ways: Happy Meals are one of the most important menu items for McDonald’s because they are popular with both kids and adults, and Happy Meal sales tend to correlate with larger purchases because a child eating a Happy Meal is usually accompanied by an adult with his or her own meal.
Kalinowski also noted that “the pace of innovation at McDonald’s seems to be accelerating” between all-day breakfast expansions and other new menu items being tested.
That’s a good thing for McDonald’s, which has enjoyed rosy year-over-year financial results since rolling out all-day breakfast. Now that all-day breakfast is a year old, the company’s financial results going forward will be measured against year-ago results that also were buoyed by breakfast.
In McDonald’s most recent post-earnings conference call, CEO Easterbrook said the company is focused on setting up success for the future but noted that he’s less concerned about short-term weak patches.
“In terms of sustaining trends, well, clearly, we plan to grow our business. But at the same time, we’re not trying to do that on a quarter-to-quarter-to-quarter basis,” he said. “We are mindful of the short term, but we have our eye aligned on the long term. And we believe we’ve got a number of the right drivers in place to give us sustained long-term growth here in the U.S.”