OAK BROOK ILL. McDonald’s will debut its $1 menu of five breakfast items nationwide in January, a move that observers say was orchestrated to reverse two months of negative same-store sales. —
McDonald’s began testing a breakfast-for-a-buck menu back in August in Chicago, and the new Dollar Menu reportedly will include the Sausage Burrito, the Sausage Biscuit, the Sausage McMuffin, a 12-ounce coffee and a hash brown. At locations in Chicago, McDonald’s had sold such $1 breakfast items as the Sausage Biscuit and Sausage McMuffin, a medium coffee, two hot cakes, two hash browns, and the Fruit ’N Yogurt Parfait. —
Ron Paul, president and chief executive of Chicago-based research firm Technomic Inc., said selling discounted breakfast items should drive traffic in a daypart that has slowed down considerably and should build sales by driving purchases of other higher-margin items. —
“The last two months McDonald’s has had decreases in same-store sales, and this is a way to get people in the stores,” Paul said. “The hope is that the consumer will trade up and purchase some extras, like coffee.” —
McDonald’s reported domestic same-store sales decreases of 0.6 percent in November and 0.1 percent in October. McDonald’s officials had noted that while negative, the chain’s sales outpaced those of their quick-service competitors thanks to sales from the chain’s Dollar Menu and its line of McCafe premium-coffee drinks, among other things. —
“McDonald’s has always kind of owned breakfast, and this is an attempt to hang on to it and get their competitors where they’re vulnerable,” Paul said. “It shows that they still want to be successful in coffee. They’ve got to make their franchisees happy—it cost a lot to get McCafe into the stores, and they want the return on their coffee investment.” —
Breakfast sales have slowed lately, even at quick-service restaurants, which many industry observers link to the United States’ steady high unemployment rate. Not only are people cutting back on restaurant spending in general, but there are fewer people commuting to work in need of a morning meal, reducing sales during the early hours. —
Some securities analysts who follow McDonald’s already have said that the No. 1 burger brand’s sales should improve as unemployment flattens and the chain’s promotional efforts take hold. —
“We believe the combination of peaking declines in U.S. total employment matched with McDonald’s specific initiatives should allow comps to bottom, at least in line with our previously set same-store sales expectations of [between flat and 1 percent] in the first half of 2010 and 2 percent in the second half of 2010,” said John Ivankoe, an analyst at J.P. Morgan. —
Separately, McDonald’s also has extended its Snack Wrap line to include the Mac Snack Wrap, a version of the Big Mac wrapped in a flour tortilla instead of its signature sesame seed bun. Back in March, McDonald’s tested the product in several markets, including Houston, and launched the product at its restaurants in Canada. The suggested price of the Mac Snack Wrap will be $1.49, which the Houston Chronicle reported was the price during testing at Houston locations last spring. —
Ivankoe noted that an overwhelming majority of franchisees had approved the $1 breakfast menu, which in tests had led to traffic increases that were enough to offset average ticket declines. —
McDonald’s Corp. operates or franchises more than 32,000 restaurants worldwide.”— [email protected] —
