McDonald's is the world's largest fast food chain, and with good reason. It's an American icon. Some people really love it.

But McDonald's also has a big problem, and now a leaked internal document gives a strong indication of how it plans to try to solve it.    

The big issue: breakfast. Two years ago, McDonald's made a big deal about making its breakfast menu items available all day.

People cheered! And then a large number of them, who had been stopping by McDonald's for breakfast in the morning, started coming later in the day. Only, they were ordering the same things they would have ordered at 8 a.m.

That clobbered McDonald's on two sides. First, it obviously meant less traffic and fewer sales in the morning. But it also meant fewer sales and profit in the afternoon. Because McDonald's makes a lot more money on say, a Big Mac, than it does on an Egg McMuffin.

So not only did they suddenly have more people shifting from the morning to the afternoon, but some of those breakfast-orderers are now literally standing in the way of other customers.

This is real Harvard Business School case study stuff, so let's just summarize by saying it's a potential disaster in the making.  

Since then McDonald's has been willing to try just about anything to turn it around--including a new strategy, which in turn includes a new menu item, and which was revealed in a leaked internal memo obtained by Business Insider

Drum roll please... Introducing, Donut Sticks--which according to the internal description that Business Insider's Katie Taylor saw, will be "strips of sweetened dough that are deep fried until golden brown, then sprinkled with cinnamon sugar."

Unlike say, your Egg McMuffin, Donut Sticks will only be available in the morning, during breakfast hours.

I have to say, it sounds delicious. It also sounds a little bit familiar.

As Taylor points out, McDonald's Donut Sticks "appear to be markedly similar to Dunkin's Donut Fries, which the chain rolled out nationally as a limited-time offering in June."

In fact, on a Dunkin' (formerly Dunkin' Donuts, remember) earnings call in late October, Dunkin Brands CEO David Hoffman said Donut Fries "quickly became one of the best-performing limited-time offer bakery items in recent brand history."

(Fun fact: Hoffman started as a crew member at McDonald's and worked his way through the ranks, earning and an MBA and become the top executive leading McDonald's overseas expansion before joining Dunkin' in 2016.)

So, is this the strategy? I reached out to McDonald's for confirmation; thus far they've remained silent. But it seems like a fit. As I wrote just before the New Year, McDonald's has been on a tear to fix breakfast. Among its other plans:

  • Rolling out the Triple Breakfast, which is "basically a massive breakfast sandwich that comes with sausage, bacon, egg and cheese."
  • Trying to limit new breakfast items to "breakfast only." Besides Donut Sticks, McDonald's is also trying things like coffee cakes and muffin tops.
  • Pushing what they liked to call  "a 'holistic' breakfast," in which customers buy both sandwiches and McCafe coffee drinks.

It's all part of a trend where traditional breakfast places like Starbucks and Dunkin' are dropping the donuts and trying promotions to get you to come in later in the day, and traditional later-in-the-day places like McDonald's, Burger King, Wendy's, and even Taco Bell are trying to get you to come by for breakfast.

I'm not sure if it sounds like a winning strategy for all the chains to ultimately just emulate each other. But I'll bet a lot of people will be willing to give it all a taste.
 

Published on: Jan 5, 2019
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