McDonald’s Offers Free Coffee!

Paul Ausick
March 28, 2014

Among fast-food restaurants the competition right now is fiercest over breakfast menus. To fight back against a threat from Taco Bell, McDonald's Corp. (MCD) is giving away free coffee during breakfast hours for two weeks beginning March 31.

Taco Bell, owned by Yum! Brands Inc. (YUM), has rolled out a new breakfast menu and is promoting the new menu using real people named Ronald McDonald. Starbucks Corp. (SBUX) expanded its breakfast sandwich menu earlier this month and added a new espresso beverage. Dunkin' Brands Group Inc. (DNKN) is also trying to carve out a niche in the breakfast market with a selection of food items targeting the health-conscious consumer.

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McDonald's is caught between its traditional role as the world's largest seller of hamburgers and the competition over the fastest growing part of the fast-food business -- breakfast. McDonald's is already the leader in breakfast food sales among fast-food restaurants, and it cannot afford to let its lead evaporate.

The company's coffee drinks were a big hit and contributed to the company's growth before the slowdown hit about a year or so ago. Now the company will try to leverage that popularity in an effort to beef up its same-store sales.

McDonald's efforts are complicated by the fact that it is not competing against its usual rivals like Taco Bell and Wendy's Co. (WEN), but coffee shops like Dunkin' Donuts and Starbucks. Will McDonald's mutate into a coffee shop? Not likely, but if this is where the growth is in the fast-food business then McDonald's must compete hard even to maintain its position, to say nothing of promoting new growth.

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