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Breakfast Brawl

By Jamie Hartford

Your mother was right, breakfast is the most important meal of the day —though not just because it boosts metabolism. It can also build sales. Since 2001, the away-from-home breakfast market has swelled from $57.5 billion to more than $90 billion, according to market research firm Technomic. But in the battle for breakfast dollars, convenience stores are coming up short.

Consumers are frequenting quick-service restaurants more than two to one over convenience stores for their weekday morning meals, according to a Technomic study released in January. Lump in fast-casual restaurants, donut, coffee, bagel and smoothie shops, and convenience stores are getting creamed 20 to three at breakfast time. Over all dayparts, foodservice traffic at convenience stores has fared better than in restaurants, which have suffered seven consecutive quarters of decline, noted Bonnie Riggs, restaurant industry analyst with market researcher the NPD Group. But convenience store foodser­vice traffic growth has been driven largely by lunch and snack occasions."The morning meal is still weak for convenience stores," Riggs said. "There’s a definite opportunity there, but they’ve got their work cut out for them against the burger guys who have a lot more marketing clout."Declines in restaurant break­fast traffic and sales during the recession have also heated up competition. Restau­rants introduced 460 new breakfast offerings in 2009 —more than in either of the two prior years —according to market intelligence firm Mintel. With most consumers indi­cating that they don’t expect to buy breakfast more often this year, convenience store operators looking for a bigger slice of the breakfast pie are going to have to steal share, predicts Technomic’s Darren Tristano. "They’re going to have to be competitive and find a way to stand out and drive their share of traffic."

To stay in the fight, convenience stores must improve their offerings and perhaps lift a page or two from the QSR breakfast battle plan.

Quality Coffee
Starbucks revolutionized coffee culture in the United States by bringing bolder brews and fancy drinks to nearly every street corner. McDonald’s changed the game again by doing it cheaper. The result: McCafé, where even cost-conscious consumers are now coffee connoisseurs.

"Breakfast is the only daypart where beverage choice drives a lot of the pur­chase decision on where to get the food," said Dennis Lombardi, executive vice president of foodservice strategies for retail and foodservice consultancy WD Partners, which counts Wawa and Circle K among its clients. "You have to have an outstanding coffee program; if not, you’re nothing more than second class."

QSRs like Burger King and Subway have already upgraded their drip-coffee brews to compete with McDonald’s, and some convenience chains have fol­lowed suit. To keep their coffee pro­grams competitive, other convenience stores would be wise to do the same, said Andrew Hetzel, a Hawaii-based coffee industry consultant.

"Find a good regional or national roaster that has a better-rated product than the guys who are also selling you your toiletries," Hetzel said. "Your cost per cup will only increase a few pennies, potentially increasing your selling price, and you’ll be giving customers a cup of coffee they’ll come back for."

Breakfast Sandwiches With a Twist
Breakfast sandwiches are a must-have, with more than three-quarters of con­sumers indicating they purchase the items sometimes or often during the week, according to Technomic. But with nearly all of the major breakfast players serving up this staple, it can be hard to stand out.

To build buzz around their breakfast sandwiches, QSRs are turning to re­tooled versions of the classic. Last year Burger King made news with its Break­fast Shots, slider-style sandwiches fea­turing egg, cheese and ham, bacon or sausage. Dunkin’ Donuts brought back the Waffle Breakfast Sandwich it intro­duced last year as a limited-time offer this past March. Travis Halvorson, store manager with Cenex Farmers Union Oil Co. in North Dakota, says he’s seen success with unique offerings like breakfast pizza. avis Halvorson, store manager with Cenex Farmers Union Oil Co. in North Dakota, says he’s seen success with unique offerings like breakfast pizza. Jerry Weiner, vice president of foodservice at York, Pennsylvania-based Rutter’s Farm Stores, says the standard sausage, egg and cheese on an English mufï¬?n is still his stores’ best seller —but Rutter’s also offers options like chorizo and Canadian bacon. "Keeping the wide span of offerings attracts a broader con­sumer base," he said. "They don’t really get those options at normal QSRs."

Counteract the Drive-Thru
One offering QSRs have that most con­venience stores do not is the drive-thru. Instead of ordering from the comfort of their cars, convenience store customers have to park, get out and enter the store to make a purchase. The entire act can be inconvenient. Convenience stores would be wise to entice customers who are ï¬?lling up at the pump in the morning to come in and make a purchase. For starters, ensure a high level of customer service and pleasant in-store displays. Offering opportunities for cus­tomization is another attraction. "You can offer different creams or flavor shots that they can add to their coffee," Lom­bardi said. "Or in addition to the tradi­tional egg, protein, slice of cheese sand­wich, allow them to throw something else on there, like Tabasco sauce or mushrooms or Swiss cheese. The option for the customer to tailor that product creates an advantage."

Retailers such as Wawa, Rutter’s and Sheetz —all based in Pennsylvania —have touch-screen ordering kiosks that enable customization, giving customers the option to choose their toppings and sides with their breakfast orders.

And while convenience stores don’t have drive-thrus, they do have the upper hand when it comes to product variety.

For instance, QSR breakfast customers typically have to choose among the house coffee, milk and orange juice, or drink a soda with their breakfast. Con­venience stores can offer a variety of coffee drinks —both brewed and bottled —along with teas, juices and cooler doors full of additional beverage op­tions. What convenience stores lack in the speed of a drive-thru, they can make up for in selection.

MTO vs. Grab-and-Go
Convenience stores have come a long way since the microwavable breakfast sandwich. Still, many consumers con­tinue to view convenience store offer­ings as less than fresh, Technomic’s Tristano says. That can be a problem for operators trying to build a breakfast program.

When purchasing weekday breakfast items, more than half of the respondents in a Technomic survey said it was im­portant that the food was prepared fresh and made to order. Moreover, consum­ers who buy fresh-prepared food aver­age more visits, higher checks and more items purchased than convenience store shoppers as a whole, according to the NPD Group. Though "fresh" can have different meanings, most respondents in the NPD survey said it means they can see the item being prepared or that it’s made with fresh ingredients.

Weiner says Rutter’s fresh-prepared hot offerings outsell prepackaged items around three to two, but that doesn’t mean there’s not a place for grab-and-go items in the morning. At New Jersey-based Quick Chek, breakfast purchases are usually evenly split between grab­-and-go and made-to-order, says Jenni­fer Vespole, senior category manager for foodservice.

"You can never take away premade in our environment," she said. "It serves that person who is really looking for something quick."

Bundle of Tastiness
QSRs pioneered the combo meal, bun­dling food and drink items for less than it costs to purchase each separately, but they’re not the only ones who can pack­age up a deal.

Sara Lee Foodservice provides pro­motional materials to help convenience stores that serve its Jimmy Dean break­fast sandwiches bundle the product with a coffee in the morning daypart. Research shows such deals can increase check averages by up to 10 percent and raise basket size by more than 15 per­cent, according to the company. ara Lee Foodservice provides pro­motional materials to help convenience stores that serve its Jimmy Dean break­fast sandwiches bundle the product with a coffee in the morning daypart. Research shows such deals can increase check averages by up to 10 percent and raise basket size by more than 15 per­cent, according to the company.

The practice can drive new purchas­ing behaviors, says Catherine Porter, Sara Lee’s senior customer marketing manager for convenience stores. For instance, pairing the company’s premi­um sausage, egg and cheese biscuit with a coffee can encourage consumers to trade up from the cheaper sausage biscuit. Bundling can also get consum­ers to purchase high-margin items, such as potato sides, that might be con­sidered optional, says Rafi Mohammed, author of the pricing strategy book, The 1% Windfall.

Rutter’s uses its touch screen order­ing kiosks to suggest a bundle with hash browns and a coffee when a customer orders a breakfast sandwich. The upsell seems to work, as Weiner says nearly half of all breakfasts sold are combo meals.

To use bundling successfully, Porter suggests pairing items that are a natural ï¬?t (e.g., coffee and a pastry) and change deals frequently so customers don’t get too attached.

Offer Healthier Options
With menu-labeling laws already on the books or being considered across the country, QSRs are adding healthier items to their menus —many aimed at the breakfast daypart.

Earlier this year Dunkin’ Donuts gave customers the option to order any of its breakfast sandwiches with egg whites; Starbucks promoted a line of 90-calorie­or-less beverages; and McDonald’s is testing oatmeal.

Though Technomic’s Tristano says there is often a disconnect between con­sumers’ desire to eat well and what they actually order, it’s clear they want to see healthy options on the menu. And though more foodservice customers in­dicated that it’s important that a break­fast item tastes good and is ï¬?lling, almost half also said it’s important that it’s healthy.

In response to requests from custom­ers for healthier breakfast options, Quick Chek in February launched an egg white turkey sausage omelet sand­wich on a multigrain roll with 350 calo­ries and six grams of fat. At time of press, Vespole said it was the stores’ third most popular made-to-order breakfast item.

Can’t Beat 'Em? Join 'Em
Convenience store operators intimidat­ed by the legwork required to build a breakfast program from scratch, or whose sales aren’t up to par, can consid­er partnering with rather than compet­ing against QSRs.

Partnering with a nationally recog­nized brand can lend credibility to a convenience store’s foodservice pro­gram, says Shultz Hartgrove, senior vice president of convenience development for sandwich chain Quiznos, which in March debuted a national breakfast pro­gram to court convenience stores.

"It gives [customers] that comfort in the c-store operator," Hartgrove said. "It’s perceived to be cleaner, safer and a better value because the consumer doesn’t have to make an extra stop."

Hartgrove says when convenience store operators open a Quiznos fran­chise on site in-store sales can improve, too. "People are clearly coming in and buying other stuff," he said.

But Steve Rosen, chairman and CEO of franchise consultancy FranNet, says partnering with a QSR doesn’t guaran­tee killer breakfast sales. Because so many breakfast offerings are similar across the chains, it’s important to choose a quick-service partner that has made a name for itself in the daypart. There are costs —including equipment, franchise fees and ad contributions —to consider, and the franchisor likely won’t grant exclusivity rights.

"You might ï¬?nd yourself spending a couple million only to ï¬?nd out they’re building another store right across the street," Rosen said. Before signing on, operators should do their homework.

"It comes down to how much that brand is worth," Rosen said. "Ask your­self, 'Will it bring more people into the store? What am I adding to the menu that I couldn’t do for myself? Am I going to be getting enough to justify what I have to give up?’"

Jamie Hartford is a freelance writer based in Hood River, Oregon. She specializes in covering the business of food.

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Subway Rolls Out Breakfast Nationally
If competition in the breakfast ring was �erce before, it got a lot tougher this spring with the entrance of heavyweight Subway. The largest U.S. restaurant chain by units debuted a new morning menu in most of its 23,000-plus locations in early April.

Like Subway’s other offerings, its new omelet sandwiches are built to order with the customer’s choice of toppings and condiments. They are available on the chain’s seasoned six- or 12-inch sandwich breads, a light wheat English mufï¬?n or flatbread.

"This is really an extension of what we’re known for and what we’re already doing," said Les Winograd, Subway spokesman.

Options include regular omelet sandwiches and four Fresh Fit Egg White Muf�n Melts, each with less than 180 calories and less than 4.5 grams of fat. Suggested prices range from $1.75 to $6.00, depending on the type of sandwich and size. Also available are sides such as yogurt and apple slices.

Though Subway franchisees have had the option to serve breakfast for some time, only around 9,000 previously chose to do so, Winograd says. Franchisees whose leases or other contract requirements prevented it were allowed to opt out of the new breakfast program, but a few days before launch the company expected wide-scale participation among its locations, including some in convenience stores.

"We felt that this was the right time to roll out breakfast nationally," Winograd said. "We have franchisee buy-in, a national advertising campaign behind it, and great products. We also just launched a national coffee program with Seattle’s Best Coffee, because you can’t have breakfast without good coffee."