Daily Stock Market Updates

Filed under: Company News, McDonald’s, Food & Beverage, Restaurants

There will be a new player in the escalating battle for breakfast on Thursday when Yum Brands’ (YUM) Taco Bell rolls out its new morning menu, and the stakes are huge.

McDonald’s (MCD) is the name that most people associate with breakfast fast food. Ever since it introduced the Egg McMuffin in 1972, the world’s largest burger flipper has set the bar for convenient morning meals for people on the go.

The Waffle Taco will likely be Taco Bell’s signature breakfast item. The taco-shaped waffle wrapped around a sausage patty, scrambled eggs and cheese turned heads when it was tested in select locations late last year. However, it’s just one of the many items wooing commuters.

Naturally there will be eggy breakfast burritos and grilled tacos with either bacon or sausage. The A.M. Crunchwrap gives a morning spin to the Crunchwrap Supreme by blanketing hash browns, scrambled eggs and either bacon or sausage in a pressed and folded flour tortilla.

Tough Competition

McDonald’s is struggling these days, but it’s still a fierce competitor when it comes to the first meal of the day. Just ask Burger King (BKW), which finds itself copying McDonald’s more often than not, including hotcakes served with sausage and the Egg McMuffin. Just ask Wendy’s (WEN), which retreated from its nationwide breakfast menu a couple of years ago. It’s starting to work its way back in by introducing breakfast in some markets.

Even Starbucks (SBUX) has been feeling the threat of McDonald’s as the burger giant beefs up its McCafe line, offering guests drive-thru convenience that many Starbucks locations cannot. Earlier this month Starbucks ran a three-day promotion where it offered free coffee to anyone ordering a breakfast sandwich. It was meant to remind customers that it offers more than just java.

Breakfast seems like an easy decision for a fast food leader. Who wouldn’t want to milk more revenue out of a location by extending its operating hours? However, with Wendy’s coming up short and even Chipotle Mexican Grill (CMG) dragging its feet, it’s clearly not the no-brainer decision that it may seem on paper.

Brand Identity at Risk

A big risk in the move is squandering one’s identity. There’s a reason why cult burger faves — including Five Guys and In-N-Out — don’t follow larger peers by offering full-blown breakfast items. The limited menus provide focus with consumers.

Some have argued that the reason why comps at McDonald’s have suffered later in the day recently is that it has strayed too far from its core burgers and fries.

Taco Bell has also dramatically widened its choices, but it’s been holding up better in terms of sustaining its popularity. Its same-restaurant sales increased 3 percent last year, and that’s a welcome contrast to declines at many other quick-service concepts, including Yum Brands’ own KFC and Pizza Hut. Adding items have hurt some chains, but Taco Bell’s been scoring with its chef-inspired bowls and Doritos-dusted tacos.

However, a lot of consumers already associate Taco Bell’s traditional menu as either a late-night or early-morning meal. In 2007, its marketing department tried to introduce the “Fourthmeal,” positioning its brand as a place for teens and young adults to grab a late-night meal beyond breakfast, lunch and dinner. The Waffle Taco and A.M. Crunchwrap will be incremental additions, but they ultimately won’t move the needle in a material way.

Motley Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends Burger King Worldwide, Chipotle Mexican Grill, McDonald’s and Starbucks. The Motley Fool owns shares of Chipotle Mexican Grill, McDonald’s, and Starbucks. Try any of our newsletter services free for 30 days.

Permalink | Email this | Linking Blogs | Comments

http://www.dailyfinance.com/2014/03/25/waffle-taco-egg-mcmuffin-not-fair-fight/