News

QSR breakfasts mostly resistant to inflation

August 9, 2010

As more quick-service restuarants join the breakfast club, a 2010 study by Intellaprice finds that most operators are conservative with their price points. Breakfast offerings are up just 3 cents compared to 2009.

According to Leslie Kerr, president and founder of Intellaprice, a restaurant pricing firm, there is an increased focus on the daypart because of the growth potential. Taco Bell, Subway and Quiznos most recently started offering breakfasts, and others have stepped up breakfast innovations (such as McDonald's oatmeal and and egg white flatbreads at Dunkin' Donuts).

"A lot of brands are adding breakfast menus, and price is one key reason. It's the most affordable meal to eat away from home, so this attracts consumers who are nervous about high-priced restaurant meals. Operators who want a piece of the action expand their offerings, knowing it's an opportunity to increase profit," Kerr said.

She adds the success of QSR breakfasts have to do with a perfect storm of a slow economy, low-cost meal options, new advertising, and a "copy-cat effect" of competitors stepping into a new category or adding items.

Breakfast has also mostly been resistant to inflation. Intellaprice's study finds that QSRs are up 1.3 percent compared to 2009. Breakfast offerings average $2.84 this year, up from $2.81 last year.

"The increase is modest and reflects an effort by operators to be conservative and retain customers," Kerr said.

Conversely, the study, which is conducted annually, concluded that prices were up 3 percent in 2009 compared to 2008 levels.

"This is consistent with what was happening economically," Kerr said. "In early 2009, the recession was in its infancy, so operators were more aggressive in price increases. As the situation worsened, operators responded accordingly."

Offering breakfasts, however, does have its risks.

"While some may perceive it as easy-to-execute, this is not always the case. Wendy's tests and retests breakfast without rolling it out for that reason," Kerr said. "Not all QSRs will win. If customers can’t make the leap that their favorite late night venue should become their new breakfast spot, operators will struggle for share."

Intellaprice surveyed nearly 2,300 quick service and convenience store locations for its 2010 breakfast study.

Other findings of the study include:

• Beverage items increased 2.1 percent vs. 2009 levels, while food items were flat
• Value/combo offerings were up 0.6%, or 3 cents, and averaged $5.07 in 2010
• Healthy breakfast offerings, averaging $1.61, decreased 2 cents, or 1.1 percent vs. 2009. These items often include snacks and value menu items, thus the lower price point.