All-day breakfasts seem to be commanding much attention in the past few weeks.  Our Restaurant Analyst John Gordon reports that McDonald’s committed to a national US “breakfast all day” rollout later this year after testing it in the 94 unit San Diego DMA in mid-April.  They expanded the test to the 132 unit Nashville DMA in late June. Initial test results in San Diego revealed a 2.5% sales pickup, with 2.2 % traffic and .3% ticket gain, versus control markets. The estimated gross profit gain was said to annualize to $31K/year, or about a 53% flow-through rate, based on models. This data is for a very short period, and the quick rollout with so little data implies the difficult sales momentum pressures McD feels.  McD calls the all-day breakfast items (an 8-item limited breakfast menu–which consumers have noted and some confusion exists in store) a “favs” menu. Per staff, the two largest sellers are the Egg McMuffin and the Sausage and Pancakes item. Part of the reason for the “favs” was to avoid CAPEX for more grills.  McDonald’s is not selling hash browns after 10:30AM, no doubt to protect French-fry sales.  McDonald’s was deadly slow in adopting all day breakfast, part of the reason for which is the potential for negative gross profit mix shifts–gross profit cents per item of a Big Mac is over $2 more than an Egg McMuffin. To date, the “favs” were supported by a drive thru poster, in store window signs, and a plastic front counter display. Staff initially wore red T shirts supporting breakfast. I’ve seen no TV support in San Diego.  All day breakfast makes sense; it is now clear from company comments there was substantial latent demand. They will have to battle negative gross profit mix shifts that will show up later, but other chains, notably Jack in the Box (JACK) have done so, by improving lunch/dinner sales platforms.

We also noted a story just yesterday that White Castle is also now planning on jumping in to the “all-day breakfast” game.  They will be adding Belgium waffle sliders, previously an LTO, to the permanent menu and offer breakfast sliders, toast sandwiches and other items to their all-day offerings.