Burger King Wants to Be the New Breakfast King

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Burger King Worldwide (NYSE: BKW  ) wants to get a piece of McDonald's (NYSE: MCD  ) breakfast business. To do so, Burger King is offering a free small roast Seattle's Best Coffee with the purchase of a Burger King breakfast sandwich.

Burger King is hoping this promotion gets more customers in the door and it can get some of McDonald's business, where it is the leader in the breakfast category. About 25% of McDonald's business comes from breakfast, so it's no wonder Burger King wants to make a bigger push with its breakfast menu.

What's on the menu?
Burger King has come a long way in breakfast, with 18 different sandwiches and burritos currently on its breakfast menu. This includes its famous CROISSAN'WICH sandwiches, biscuit sandwiches, muffin sandwiches, and a sausage burrito or a Southwestern burrito. Burger King also has its BK Ultimate Breakfast Platter, pancakes and sausage platter, oatmeal, hash browns, French toast sticks, and Cinnabon Minibon rolls. On the drinks menu, there's Seattle's Best Coffee, lattes, smoothies, iced coffees, and frappes. The menu certainly looks appetizing.

Coffee is a key component of the breakfast menu
Offering a free cup of coffee is a smart move by Burger King. Americans love a good cup of coffee and it's how most start their day. It's why McDonald's, Starbucks, and Dunkin' Brands Group's Dunkin' Donuts have such strong businesses, and it's why Burger King has partnered with Seattle's Best Coffee to brew the finest cup of coffee. According to Seattle's Best Coffee Vice President Jennifer Dimaris:

"We're focused on giving BURGER KING® guests a smooth, delicious cup of coffee, which pairs perfectly with a BURGER KING® breakfast. We know great coffee helps start the morning off right, that's why we put more than 40 years of roasting experience into every cup of custom blended Seattle's Best Coffee® served to BURGER KING® guests."

Seattle's Best is certainly good coffee. Starbucks offers Seattle's Best at its locations.

McDonald's hold on breakfast will be difficult to break
For Burger King to be successful with its breakfast menu, it's going to have to get Americans to change their daily routines. That is why McDonald's remains the leader in the breakfast category, ever since the company introduced the Egg McMuffin 40 years ago. McDonald's certainly isn't going to let go of its breakfast business without a fight.

McDonald's has been steadily improving its breakfast menu over the past few years. A big part of this improvement has been the roll-out of its McCafe's. McCafe's offer a variety of premium coffees, as McDonald's sought to capture share the premium coffee market dominated by Starbucks. McDonald's also introduced the 250 calorie Egg White Delight, its first new breakfast sandwich in 10 years. This new sandwich is a bid to attract more health-conscious consumers.

McDonald's hopes to eventually have an all-day breakfast menu
McDonald's hopes to eventually offer breakfast all day. So far, the reason why this hasn't happened is due to grill space in the kitchen. The current configuration of McDonald's kitchens prevents the chain from serving up burgers and McMuffins at the same time. McDonald's CEO Don Thompson is looking into improving kitchen operations to offer breakfast all day.

The one concern is that consumers might trade down since items on the breakfast menu are cheaper than McDonald's burgers and chicken sandwiches. However, that hasn't stopped McDonald's from offering breakfast after midnight, when traffic is typically slower. This gives McDonald's an advantage over the competition when it comes to late-night dining.

How do shares look?
Burger King Worldwide is trading at 23 times next year's earnings. Shares have a yield of 1.2%. Its operating margin is an impressive 44%, as almost all of its locations are franchised. McDonald's trades at only 16 times next year's earnings and has a dividend yield of 3.4%, which is one of the highest in the restaurant industry. McDonald's operating margin is 30%, as it still owns a good portion of its locations.

Foolish assessment
If Burger King is looking to become the new breakfast king, it will have to do more than offer a free cup of coffee. The chain is going to have to spend heavily on advertising to get customers to change their daily habits. While it's not an easy task, there's certainly the potential with a tasty menu and a premium coffee product. What was once referred to as the 'burger wars' among the fast-food chains is now likely to become the 'breakfast wars,' as Burger King looks to go toe to toe in this critical part of the day.

More in-depth analysis as you enjoy your breakfast
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Read/Post Comments (8) | Recommend This Article (2)

Comments from our Foolish Readers

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 January 12, 2014, at 6:03 PM, targitty wrote:

    The End of the "Made-In-China" Era ...Wrong. Ebay is selling and shipping more made in China for wholesale prices and consumers are cutting out the middle man. This going to "Boom" as the price of electronics go up.

  • Report this Comment On January 12, 2014, at 8:31 PM, Freidman wrote:

    Who the heck wants to drink a nasty cup of coffee from BK! Not for Free and Not ever!

  • Report this Comment On January 12, 2014, at 8:41 PM, Seaumas2 wrote:

    Any person with a handle on personal nutrition and self respect knows that no fast food place, with its poor product nutritional standards should not be king of anything, especially breakfast. This is simply the worst demonstrable part of Corporate Capitalism at its most arrogant. I say let the executives and administration of Burger KIng, McDonald's, Wendy's and other such places demonstrate to us just how goo their food is for us by putting themselves on a strict breakfast diet of their own wares.. I know they won't, but they are willing to charge us outlandish prices for their substandard, but certainly tasty, products. And if parents are so lazy or uncaring of their childrens' and their own health, but have the disposable income to do it, mourn their poor health and loss of quality of life. After, this is America. Isn't Corporate elitist Capitalism a love story?

  • Report this Comment On January 12, 2014, at 9:32 PM, davewalzer wrote:

    Thank you for your info.

    In Clearwater, Fl. Burger King has almost no

    breakfast biz. Their prices run about $2.00

    more than Mikky Ds for similar food. They have no

    free coffee and don't seem to care from 3 stores i've been in.

    Mikky Ds is only a price and has lower quality food

    with "who cares, drop dead" owners--no heat in

    34 degree weather and nobody listening who can

    do something about it.

    Burger King has no promotion which reaches its


    suprise they have no breakfast biz ?

    dave w

  • Report this Comment On January 12, 2014, at 11:03 PM, caffinandy wrote:

    "Fast" food joints are a joke. It takes forever, is disgusting and costs a small fortune. Make your own food and you'll be healthier and save time and money.

    tl;dr Home-cooked costs $2.45 and takes 5 minutes. Fast-food is $5 and 15 minutes.

    Amazing math looking at 250 work days in a year:

    Home cooked costs $613 and 21 hours.

    Fast-food costs $1250 and 63 hours.

    What would you do with an extra $637 and 42 hours?

    Costs where I live:

    Egg & Cheese Muffin

    2 eggs: 30 cents

    1 whole grain english muffin: 65 cents

    High quality artisan cheese: 25 cents

    Butter for cooking eggs and spreading on muffin: 5 cents

    Salt and pepper: 1 cent

    Organic Fruit: 25 cents

    Electricity: 3 cents

    Time to cook and assemble: 5 minutes.

    Cost - $1.54.

    Upgrade to All Organic Options: $1.75


    Excellent locally roasted fair trade coffee: 15 cents (per 12oz)

    Cream: 10 cents

    Sugar: 5 cents

    Cost: 30 cents (with pour-over filter holder & metal filter. Paper filters add 2 cents.)

    Upgrade to All Organic: 45 cents.

    Time: 4 minutes for pour-over & french press. When eggs are done, so is coffee.

    More of a tea drinker? 15 cents total for organic tea, sugar & cream. 3 minute brew.

    So. For 5 minutes worth of effort you can have a well balanced, home cooked, organic breakfast with amazing coffee for a grand total of $2.20

  • Report this Comment On January 12, 2014, at 11:11 PM, VSTARGUY wrote:

    What took BK so long to decide to offer some head to head competition? Somebody steering their ship fell asleep at the wheel. I've always prefered BK

    to Mickey D's because it always tasted better.

    I've always thought BK's needed to improve their image in the market place AND be more astringent in the hygiene of their eating establishments and staff!

    There's always room for improvement. Start with the trash coming out of their sound systems. No I'm not looking for Lawrence Welk or Guy Lombardo but the crap they play...Rap n' Crap just doesn't make it when eating good food. There's a whole retired clientele out there if you marketing guys haven't noticed. They are consistent spenders, not big ones but consistent for sure.

    Lean a little their way and reap the bennies. As far as breakfasts go...why not? But do it with some gusto and not a half baked attempt. I for one think you can displace Mickey D's....with better tasting entrees, fair prices and varied menu choices, why not! You want some pointers? I'm your man...

    contact Luck!

  • Report this Comment On January 12, 2014, at 11:23 PM, VSTARGUY wrote:

    On another note: These senior customers are retired and have worked all their lives and IMO deserve the small luxury of congregating at the local BK in the mornings and afternoons to meet with friends and fellow co-workers for a pleasant time of social kibitzing. If you want to cook at home that's fine but the seniors need to get out and socialize more AND

    it shouldn't be expensive or not nutritional either.

    These folks have paid their dues.....isn't it time we did something for them like show a little good will and serve them decent nutritional food they don't have to prepare for themselves! BK has the opportunity to ingratiate that retired segment and cater to them as much as they do for the toddlers....After all toddlers don't spend the money....the seniors do! Marketing guys...wake up. There's a huge forest out there....stop catering to a few trees!

  • Report this Comment On January 12, 2014, at 11:26 PM, Marymoosem wrote:

    Try bringing back the sourdough roll. That was their best breakfast sandwich.

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Related Tickers

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BKW $0.00 Down +0.00 +0.00%
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