This Is Taco Bell's Answer to the Egg McMuffin

Hold on to your stomachs, fast-food diners! Taco Bell operator Yum! Brands  (NYSE: YUM  )  wants you to start your day out with something new.

On Thursday, and in keeping with their long-standing "Think outside the bun" mantra, Taco Bell began rolling out their new "waffle taco" on a test basis in around 100 locations.

Source: Yum! Brands.

Call me crazy, but as a relatively big guy who appreciates the occasional early-morning gut bomb, I think this $1.79 creation looks absolutely delicious.

Of course, the 100 locations now serving it only represent a fraction of the 850 Taco Bell restaurants that currently offer breakfast nationwide, and that seems absolutely insignificant compared to the more than 5,700 Taco Bell locations the company currently operates in the United States alone.

But remember, as I mentioned in May, Yum! Brands recently outlined ambitious plans to double its $7 billion in domestic Taco Bell sales over the next eight years, and those plans revolve not only around building another 2,300 Taco Bell units (mostly in smaller towns), but also rolling out breakfast nationwide by the end of next year.

And for those of you who aren't particularly interested in the waffle taco, the test menu will also include healthier options like a yogurt parfait, oatmeal topped with strawberries, and, perhaps predictably, bacon-and-egg or sausage-and-egg burritos. 

The multibillion-dollar question
Of course, this raises the question: Should McDonald's  (NYSE: MCD  ) be worried about its new early-morning competition?

After all, Mickey D's has long dominated the early-morning daypart in fast food with its own ridiculously popular breakfast offerings, and newly introduced low(ish)-calorie menu items like the Egg White Delight sandwich this May were largely responsible for driving a 1% comparable-store sales increase in the U.S. for McDonald's last quarter.

Then again, while Taco Bell is only just getting started with breakfast, McDonald's 24-hour locations will all eventually begin catering to the late-night crowd by offering select breakfast items in a new "After Midnight" menu, which is active from 12:00 a.m. to 4:00 a.m. In addition, McDonald's operates more than 14,000 locations here in the U.S. already, so Taco Bell won't possibly be able to take McDonald's entire breakfast business by storm anytime in the near future.

Down the road, however, McDonald's would be foolish (with a lowercase "f") to ignore the threat posed by Taco Bell's breakfast, especially given its propensity for targeting nearly identical value-conscious crowds.

In the end, if the bun-free chain can manage to hone its efforts by identifying a popular flagship item like the waffle taco, you can bet they'll be able to run with the idea with an intensity few other McDonald's competitors can muster.

But we also shouldn't forget that this battle certainly doesn't end with the United States market, and profiting from our increasingly global economy can be as easy as investing in your own backyard. The Motley Fool's free report "3 American Companies Set to Dominate the World" shows you how. Click here to get your free copy before it's gone.

What do you think? Does Yum! Brands have what it takes to succeed in the fast-food breakfast segment, or is there no reason for McDonald's to worry? Let us know in the comments section below.

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 08, 2013, at 1:35 PM, mrdrysdale64 wrote:

    I am a fan of Taco Bell and a fan of breakfast tacos. The Taco Bells in the Houston/Galveston area do not serve breakfast. I for one would welcome a change. The waffle taco doesnt sound good to me but a breakfast burritto sounds great!

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