What happens next Where's my refund? Best CD rates this month Shop and save 🤑
MONEY
McDonald's

McDonald's all-day-breakfast test in gear

Bruce Horovitz
USA TODAY
Egg McMuffin

This time, McDonald's may not lay an egg.

The fast-food giant began testing all-day-breakfast on Monday in the San Diego market and the chain has high hopes that it will be a huge hit with the key customer that the flailing chain craves most — Millennials.

The test encompasses 94 restaurants in the bustling San Diego market. If it takes off with consumers, there's a good chance McDonald's will continue expanding it.

"It's too premature to speculate — but we have lots of options if it's a big hit," says Pam Williams, U.S. marketing manager, in a phone interview, moments after she arrived in San Diego to observe the test. "It all comes back to what our customers tell us."

For McDonald's, this could be one of the more significant tests in years. It's balancing the growing demands of consumers — particularly younger ones —- for all-day breakfast with the reality of severely limited grill and prep space in most of its restaurants. What's more, new CEO Steve Easterbrook, who is eager to be a change agent, doesn't want to anger franchisees with a failed program at a time sales already are shaky.

"I think they can pull it off," says Scott Hume, editor of the BurgerBusiness blog. Ultimately, he says, all-day breakfast could attract incremental business by luring some Millennial customers who wouldn't normally go to McDonald's. "McDonald's executives believe they can do it," he adds.

That's due in part to the all-day breakfast actually being a limited version of breakfast — mirroring the McDonald's After Midnight breakfast menu. Sure, folks will be able to get items like the iconic McMuffin and Hot Cakes platforms all day long. But after 10:30 a.m., they won't be able to get breakfast items including McGriddles or Biscuit sandwiches, says Williams.

"We wanted to start with what customers tell us are their favorites," says Williams. "For this test, we're starting small."

Even so, it could spread national before the end of the year "presuming it does well and the San Diego restaurants don't encounter unforeseen problems," predicts Hume. "I just don't know if I'd bet the house on it."

To lure San Diego-area customers to at least try breakfast at non-traditional breakfast hours, McDonald's has mailed and e-mailed promotional coupons for breakfast items, says Williams. Breakfast items are priced the same all day long.

But she didn't try to mitigate the inherent problems with all-day breakfast. During busy lunch hours, for example, there will be less grill space for burgers and chicken — which could slow service. Also, the restaurants already have limited space on their menu boards. And there's some concern that some customers may end up trading down — purchasing lower-priced breakfast items instead of pricier burgers.

McDonald's will survey San Diego customers on their purchasing habits over the coming weeks, Williams says.

The notion of expanding breakfast began under former CEO Don Thompson — but Thompson was very concerned about the impact on operations. In recent months, however, customers have been even more outspoken about wanting all-day breakfast, says Williams, "to the point where the opportunity is too large to pass on it."

For McDonald's the all-day breakfast test also is about expanding one of its most powerful empires. McDonald's sells more breakfast than any fast-food chain and breakfast already accounts for about 25% of the chain's sales. Most recently, several fast-food chains have made competitive moves to steal breakfast share from McDonald's, including Taco Bell's recent move into breakfast.

"We are aware of Taco Bell and their breakfast plans," says Williams. "But this test is about our customers. It's about customers asking for McDonald's breakfast items."

Featured Weekly Ad