For McDonald’s, 2019 is turning out to be the year of simplification. The company announced this week it’s refreshing All-Day Breakfast menus for local restaurants “to better serve customers after traditional breakfast hours.”
Ground-level operators will now have the ability to select the items they serve, and when. McDonald’s provided an example: In markets where McMuffins are most popular, restaurants can focus on those offerings during All Day Breakfast. If that market opts to simplify offerings, they can now decide to begin at 10:30 a.m. or continue featuring an expanded lineup before shifting to “customers favorites” at 2 p.m.
It’s a big change from the national-focused initiatives of old. McDonald’s said the shift would allow restaurants to provide a faster, better experience by reducing complexity and focusing on what’s best for local units and customers.
But, most importantly, the company added, 10:30 a.m. is still not the end of breakfast.
“We are proud of our breakfast, and it remains an important driver for long-term growth and momentum. This refresh follows a series of tests to improve kitchen execution and the overall experience for customers by focusing on local customer favorites,” McDonald’s said in a release.
This is the first time McDonald’s has considered shrinking the All Day Breakfast lineup since a select menu hit stores in 2015 before expanding a year later.
McDonald’s said the breakfast refresh could arrive as early as July and would be finalized by the end of the third quarter “as local restaurants determine what is best for them.”
In its most recent report—Q1 of fiscal 2019—McDonald’s spoke at length about the need to remove complexity from operations. Mainly, in the drive thru, where times have slowed for five straight years. The drive-thru concerns were especially prominent during breakfast hours. CEO Steve Easterbrook said improving speed of service was “clearly an opportunity for us.”
Much of the slowdown stemmed from menu changes, like All Day Breakfast, Fresh Beef Quarter Pounders, and Signature Crafted items—all products that simply took longer to make. The other note was value and how the message needed to localize.
Unlike past quarters, McDonald’s said it’s shifted to a strategy where the company complements a national message—like the 2 for $5—with local value, especially at breakfast as individual co-ops decide which items resonate best.
For comparison, in Q1 of last year, the vast majority of McDonald’s marketing spend was national and tied to the $1 $2 $3 Dollar Menu. “We've actually now swung to a little bit more of an equal balance certainly in this first quarter as we've got behind local value and local breakfast support as well,” Easterbrook said last quarter. “So I think all these things are helping just get the right balance in how we leverage our scale, but also recognize the local differences as you go around the country.”
He added that McDonald’s was “encouraged” by improvement in its breakfast business, which accounts for roughly 25 percent of sales. He credited investments like Donut Sticks, McCafe improvements, and other menu innovations, such as the Triple Breakfast Stacks.
Local value is something franchisees have pushed for in the past year. CFO Kevin Ozan said earlier McDonald’s heard the message loud and clear. “If you think about what they eat for breakfast in the Northeast of the country versus the Southwest of the country, it’s very different,” he said at the J.P. Morgan Gaming, Lodging, Restaurant & Leisure Management Access Forum in March.
“The franchisees were strong believers that certain aspects of value need to be driven locally,” he added. “And through our discussions, fair enough, I think they were right on that. And so we have moved some of that back to local.”
Operators can now pick which items slide into which value tiers. And now, they can do the same with All Day Breakfast choices and hours.
McDonald’s reported first-quarter global comparable same-store sales of 5.4 percent in Q1, including a 4.5 percent increase in the U.S. The stateside comps reflected successful promotions, McDonald’s said, including the Bacon Event, its $5 Mix and Match deal, and Donut Sticks, as well as a net positive impact from the EOTF designs.
Overall revenue fell 3.6 percent to $4.96 billion but hiked 2 percent in constant currency as McDonald's continues to refranchise. Operating income declined 2 percent to $2.09 billion. It was up 3 percent in constant currency and adjusted earnings per share dipped to $1.78 from $1.79.
McDonald’s sales lift wasn’t driven by guest counts in the U.S. The chain didn’t provide exact figures, only to say it was similar to recent declines (traffic fell 2.2 percent last year). Pricing was up about 2 percent in Q1 and average check drove the figure.