R U open for breakfast? - Part 2
In part 2 Matthew McNamara of RBS Morgans gives his take on the breakfast trade.
QSR Media: What kind of a difference does the breakfast trade make to a QSR's performance?
Matthew: A QSR can leverage off the breakfast trade if they have the right mix of product, location, pricing and customer experience. There are not many QSR's which operate in this space or that do it well. The breakfast trade is seen as the traditional mix of bacon, eggs, sausage, coffee, etc. This does not provide too many avenues for alternate QSR's to enter the space without altering their shop layout, traditional product mix or target market. For a QSR operating in a shopping centre, the breakfast trade may prove difficult to penetrate based on location, as opposed to the same branded QSR operating in an airport. The difference in the location and the time of the foot traffic would really make the QSR think whether it is worth the equity investment in targeting the breakfast trade. There is also the difficultly of a QSR trying to enter the breakfast when their product offering is traditionally seen as a lunch or dinner time meal, such as Dominos or KFC. For example, if Dominos were seeking to enter the breakfast trade they would need to alter their menu to target the breakfast trade, such as a range of breakfast pizzas. This type of product offering may only work where the foot traffic is high at breakfast trade such as near a shopping centre, as opposed to positioned in a smaller suburb which may not see much morning traffic. On the other hand, KFC stores are traditionally located near other QSR's who do offer a breakfast menu where there is already attracted foot traffic. The issue is KFC’s product offering is targeted at lunch and dinner, as chicken is not traditionally eaten for breakfast in Australia. This is a situation which may affect KFC’s performance when targeting the breakfast trade, given their traditional product offering.
QSR Media: Who does it well?
Matthew: I believe McDonalds does it best. Their product range is ever evolving and their success with McCafe seems to be working well. Their breakfast offering has evolved from your on-the-go greasy breakfast to a café experience offering. McDonalds has leveraged off the cafe experience well using premium coffee beans and barista's, freshly baked pastries and a selection of healthy breakfast alternatives.
QSR Media: Any other comments?
Matthew: In my opinion, to penetrate the breakfast trade and be profitable you need to offer your potential customers a fresh and healthy experience to start their day. Customers are more conscious of the fuel they are putting into their bodies, such as their daily calorie, fat or carbohydrate intake. Breakfast is seen as the most important meal of the day and the fuel the customer needs to be at their best while tackling their daily tasks, so it is important to get the product mix right. As long as the QSR knows their demographic they can target their product mix for a greater customer satisfaction and business performance.
