050102 New Fast-Food Battlefield: Breakfast

Los Angeles, CA - For many U.S. consumers, McDonald's Corp.'s Egg McMuffin sandwich, first introduced in the 1970s, is synonymous with fast-food breakfast, and that dominance has made many McDonald's rivals reluctant to go head-to-head with the world's largest fast-food chain in the breakfast market.

But now, chains like Burger King Corp., Starbucks Corp. Chick-fil-A, and CKE Restaurants Inc.'s Carl's Jr. are thling out premium menu items like salads and chicken strips in a bid to regain market share from fast-casual chains like Panera Bread Co., which sell gourmet-style food near fast-food prices.

Now, as the success of those products has revitalized fast-food chains' lunch and dinner hours, the companies are turning to the lazier morning hours for growth.

"We have restaurants where we'd be hard-pressed to handle more volume at lunch and dinner," said Brad Haley, executive vice president of marketing at Carl's Jr. and Hardee's "Breakfast represents an undeveloped day-part for us and a new breakfast promotion has the opportunity to bring in an entirely new customer."

As part of its effort to upgrade its breakfast menu, Carl's Jr. has introduced a premium coffee brand to its stores and last month began selling a burger topped with an egg, hash browns, cheese, and bacon it calls the Breakfast Burger.

Burger King, the No. 2 burger chain, is also testing a new breakfast item called the Enormous Omelette Sandwich, but was unable to give further details on the product.

McDonald's, for its part, added the McGriddle to its breakfast menu in 2003, and the quirky pancakes-and-eggs sandwich has been credited with helping the chain reverse sluggish sales in its U.S. business.

Still, one analyst said McDonald's is unlikely to rest on its laurels as rivals continue to add new breakfast items.

"It may be time for them to bring out a new idea," said Tom Miner, principal at food industry consulting firm Technomic.

Bill Whitman, a spokesman for McDonald's U.S. unit, could not say what new items might be added to its breakfast menu.

"We have a lot of things in the pipeline and a lot of things we're considering," he said.

Meanwhile, another formidable competitor during the morning hours, coffee shop chain Starbucks Corp., is also making inroads into the hot breakfast market.

The Seattle company is testing hot breakfast sandwiches like bacon, egg, and cheese on an English muffin at 80 stores in Washington state, and has said its food offerings represent a major opportunity to increase sales going forward.

At this point, the company has no specific plan to expand the program beyond those 80 stores, a spokeswoman said.

If and when that does happen, however, Miner said the impact on the fast- food breakfast market would be "huge."

"They are going to need hot food to grow anywhere near the level they have in the past," Miner said. "Consumers love to buy breakfast from them, and would even more if it were hot."

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