How much is all-day breakfast worth to McDonald’s (MCD)? Apparently a LOT!
Bloomberg reports the fast-food giant believes it can increase sales by 2.5% a year by offering Egg McMuffins and other breakfast meals throughout the day.
The news service says that’s according to notes from a presentation to the company’s franchisees this month by Mike Andres, McDonald's president for the U.S., which said the move could help each location boost its top line by up to $30,000 a year.
But Yahoo Finance Senior Columnist Michael Santoli warns: remember from whence this comes.
“I don’t think it’s surprising how big the effect that McDonald’s is promising franchisees it will be,” he laughs. “This is the pitch from the home office to franchisees saying we’re going to help you out here and we have estimated it could be this kind of a bump.”
And Santoli says if the numbers are correct, that’s a big deal.
“2.5% in a relatively slow-growth business is nothing to sneeze at,” he adds. “The opportunity is clear-- customers have been clamoring for it.”
McDonald’s has been test marketing all-day breakfast in several cities over the past few months, and last month various sources reported an internal memo suggested the plan was going so well it could go nationwide in October.
Santoli notes the reason McDonald’s hasn’t done it already is because with some 13,000 franchise restaurants in the U.S., it’s a big ship to turn.
“It really has all along seemed to be a logistical operational problem,” he argues. “It wasn’t that McDonald’s was, on principle, opposed to the idea of serving Egg McMuffins at 3 o’clock in the afternoon. It was about workflow at the restaurants and they have to kind of get the franchisees onboard to do whatever has to be done to make it work.”
Santoli points out the all-day breakfast idea is just one of the innovations recently-appointed CEO Steve Easterbrook is trying out to boost sagging sales. And Wall Street is a believer.
“From the day he started in late January the stock is up to basically a new all-time high, up 9.5% or so,” he explains. “That’s better than the fast-food group in general and the markets.”
And Santoli believes the honeymoon for Easterbrook will continue.
“Investors are willing to bet that he’s raising the ‘competitive metabolism’ at McDonald’s a little bit,” he says. “And they’re thinking right now that he has a good chance at success.”
When asked for a comment by Yahoo Finance, a spokesperson for McDonald's didn't address the Bloomberg article but instead gave this response:
"Initial tests on McDonald’s all-day breakfast have been positive and we’ve expanded the tests to other markets to better gauge consumer response. While we know there’s huge anticipation among our customers, it’s still premature to confirm a national roll-out."
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