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Extra8/5/2008 12:01 AM ET

The battle for breakfast

Under siege by the fast-food giants, IHOP and  Denny's fight back with offerings like to-go meals and curbside pickup.

By The Associated Press

After watching more customers stream into drive-throughs for a quick morning meal, family dining restaurants like Denny's and IHOP are telling their fast-food competitors to back off breakfast.

In an attempt to lure diners back to the table -- or at least to the curb -- the chains are introducing more portable products, offering to-go and curbside pickup programs and remodeling their locations.

The moves come as breakfast has taken on far more importance to fast-food chains, which traditionally put little effort into the morning meal but now see opportunities to expand sales and profits at that time of day.

Some are even thinking about serving breakfast all day at some point -- a switch that would directly challenge the 24/7 breakfast menus that drive a large part of sales at family dining restaurants.

"We're being attacked," Denny's (DENN, news, msgs) Chief Executive Nelson Marchioli said in an interview. "We can't let that happen. We have to take back what was ours to begin with."

That won't be easy, restaurant analysts say, considering the premium consumers place on convenience, speed and low prices.

"It's hard to beat fast food," said Bob Goldin, executive vice president of consumer research firm Technomic in Chicago. "The demographics and lifestyle trends are working against" the family dining chains.

Complicating the issue are the slow economy and consumers' desire to spend less on eating out. Fast-food chains have been a beneficiary of people's reluctance to part with their cash, since they offer food at lower prices than most casual dining or family dining restaurants. Many fast-food chains also routinely offer special deals with even lower prices.

Goldin said the fast-food chains, particularly McDonald's (MCD, news, msgs), use price and promotion "aggressively and effectively."

Denny's, which has built its business on breakfast dishes like the Grand Slam, has seen its sales decline as consumers have cut back on spending and shifted to cheaper fast food. In the second quarter, same-store sales, or sales at locations open at least a year, fell 2.8% systemwide.

The company launched a to-go campaign last month that features a layered, dome container meant to keep pancakes hot and bacon crispy. Marchioli said he has seen "a nice increase" in the company's take-out business since the introduction of the new packaging, which is available for the restaurant's full menu.

Denny's is also offering two new breakfast skillets for $5.99 each, both to eat in and to go, and is testing a handheld Grand Slam.

"Customers are telling us, 'I'd get up 10 minutes earlier for this,' " Marchioli said.

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Wake up and smell the fried chicken
McDonald's now offers a fried-chicken breakfast biscuit and a fried-chicken sandwich, each dubbed Southern-style. It's one of the company's biggest product launches in recent years, and the debut of chicken on the chain's breakfast menu.
IHOP has also been promoting its to-go options in the past year, leading carry-out sales to rise from about 2% of its business to nearly 4%, said Patrick Lenow, spokesman for the chain's parent company, DineEquity (DIN, news, msgs).

Lenow added that IHOP is also looking into developing "more portable foods for dashboard dining," but he declined to give specifics.

The demand for to-go options has helped McDonald's, the nation's No. 1 hamburger chain, build its breakfast business into what President and Chief Operating Officer Ralph Alvarez last month called the company's fastest-growing segment.

The chain's breakfast menu has expanded in the past year to include chicken biscuit sandwiches, a premium coffee blend and espresso-based drinks at some locations.

Burger King (BKC, news, msgs), meanwhile, rolled out a breakfast value menu last year, and CKE Restaurants (CKR, news, msgs), which operates Carl's Jr. and Hardee's, has introduced a slew of new breakfast items. The latest is the Monster Breakfast Sandwich, available at Carl's Jr., which features two eggs, bacon, sausage and cheese between grilled sourdough bread.

New products like the Carl's Jr. sandwich may make it even harder for family dining chains to compete.

Dana Jackson, a Brooklyn resident who works in Manhattan, said she goes to McDonald's every other morning on her way to work.

"I just go for the tea," she said, carrying a large Sweet Tea, which has been added to menus in markets around the country.

Although Jackson stressed that she doesn't frequent the chain for its food, she carried a full McDonald's bag in her other hand.

This article was reported and written by Lauren Shepherd for The Associated Press.

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