U.S. Markets close in 2 hrs 15 mins

Restaurants add dayparts to increase sales

Adam Jones

An in-depth overview of the U.S. restaurant industry (Part 14 of 22)

(Continued from Part 13)

Leveraging stores for higher sales

In the last part of this series, we saw how restaurants are making efforts to increase same-store sales through technological innovations. Now restaurants are entering into a new stage of increasing sales at existing locations by adding dayparts.

The concept

Restaurants that traditionally have served lunch and dinner are maximizing the use of their restaurant locations. After all, they pay rent or incur other property expenses that are usually fixed at these locations. By opening restaurants for different dayparts such as breakfast, afternoon snacks, or late-night snacks, restaurants believe they will sell more products throughout the day and improve same-store sales.

According to the NPD Group, a consumer market research company, traffic for the breakfast daypart increased 3% in 2013, making it the third consecutive year of traffic growth for the breakfast daypart. The PM snack was up 1%, but lunch and dinner traffic declined 1% year-on-year.

The results of adding dayparts

McDonald’s (MCD) has been offering a breakfast menu for the past eight years. Yum! Brands (YUM), which operates Taco Bell, began offering breakfast in 2014. But this strategy may not always improve same-store sales. Wendy’s (WEN), for example, scrapped its breakfast menu in 2009, which cost the company $14.6 million in related expenses to wind down this initiative.

You may consider exchange-traded fund (or ETF) Consumer Discretionary Select Sector Standard and Poors depositary receipt (or SPDR) ( XLY ) to get a wider exposure to restaurant stocks such as those mentioned above and café stocks such as Starbucks (SBUX).

There is more

Restaurants are also changing the perceptions of their brands by remodeling restaurants. Several restaurants have remodeled their restaurants in 2013. Let’s look at this next.

Continue to Part 15

Browse this series on Market Realist: