Burger King has long struggled to match the sales-generating power of its top rival, McDonald’s. That’s never truer than it is at breakfast.
Miami-based Burger King wants to change that. The fast-food chain, owned by Canadian operator Restaurant Brands International, is planning more innovation and marketing in the morning, believing it can quickly add sales and profitability in the process.
“Breakfast has been an opportunity for us for a long time,” Chris Finazzo, president of Burger King in the Americas, told analysts earlier this month. “We haven’t been as successful as we could be.”
Burger King has already started an a.m. push. It started a coffee subscription program, for instance, giving customers the opportunity to get unlimited coffee for $5 a month. It also started the BK Cafe, a platform with upgraded beverages important to morning commuters and similar to rival McDonald’s McCafe platform.
But Finazzo promised additional strategies, including more innovation and better marketing. “If we’re to grow breakfast, we need to invest our fair share of media behind the category,” he said.
A typical Burger King location generates less than $1.4 million in revenue per store, or roughly half of the nearly $2.8 million volume of a typical McDonald’s restaurant, according to data from Restaurant Business sister company Technomic.
And that comparison is even more lopsided in the morning. A typical Burger King generates about 15% of its sales at breakfast, or about half of the percentage of sales from breakfast at McDonald’s. Thus, that average Burger King location generates only about $205,000 in revenues at breakfast.
By comparison, the average McDonald’s generates four times that much: about $800,000. In the restaurant business, where unit volumes are critical for success, it’s like starting a 100-yard dash 150 yards from the finish line.
“If we’re able to capture around half of this gap, it would equate to more than a $100,000 improvement in average restaurant sales,” Finazzo said.
Burger King isn’t catching McDonald’s sleeping. The Chicago-based burger giant is focused intently on improving breakfast sales, believing it to be a primary culprit in traffic declines for the past five quarters.
It introduced new sandwiches last year and is now shrinking its all-day breakfast menu, which is mostly about reducing in-store complexity, but at least in part is being done to prevent the loss of some morning sales.
And Burger King faces other competitors, notably Taco Bell, which introduced breakfast six years ago and has gradually improved sales in the daypart.
But Finazzo says there is ample opportunity for the chain to improve its position in the morning. He said the breakfast daypart has grown by 7% a year for the past five years. And, he said, “It has strong margins, which makes it attractive to our franchisees.”
The company also has the room inside its restaurants in the morning and in its drive-thrus to serve more customers, given the comparatively weak business during that time frame.
Finazzo said the company has a base of products that appeals to customers. He said the chain’s Croissanwich is its second highest-selling sandwich behind the Whopper.
He also said that coffee, which is a key element in any breakfast offering, tests well against the chain’s competitors.
“We have a good cup of coffee,” Finazzo said. “What we don’t have is a great coffee experience.”
He said the BK Cafe platform, with better packaging, has helped its coffee unit volumes grow by 50%. He also said the chain has an opportunity to introduce new entrees, using new types of bread and flavor profiles “to differentiate ourselves from our competitors.”
“You can expect more on the innovation from us in breakfast, and we’ll have plenty of compelling reasons to talk about the daypart in the coming year,” Finazzo said.
But maybe the biggest challenge for Burger King is simply getting people to realize that the chain has breakfast in the first place.
“If you look at the daypart, you’ll find we under-invested in media,” Finazzo said. “We haven’t established a credible coffee program, and we haven’t offered the variety our guests expect. So for us to win at breakfast, we have to be much more deliberate and aggressive.”
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