Dunkin’ Donuts Puts a Twist on a McDonald’s Favorite

Dunkin’ Donuts might have just found a way to increase traffic in the morning hours.

Mar 11, 2014 at 12:26PM

As you might already know, the Egg McMuffin at McDonald's (NYSE:MCD) drew inspiration from Eggs Benedict. As you might also already know, Burger King Worldwide copies McDonald's menu innovations by putting slight twists on them to make them more appealing. This is how the restaurant wars work -- every restaurant copies the biggest player or the most successful menu items. However, in this case, menu theft has come from a somewhat unexpected player -- Dunkin' Donuts, a subsidiary of Dunkin' Brands (NASDAQ:DNKN).

Arrival of the Eggs Benedict Sandwich
If you visit Dunkin' Donuts often, or if this new menu item sounds appealing to you, then you should know its ingredients: English Muffin, Black Forest Ham, Peppered Egg, and a Hollandaise-flavored spread. The latter is the most interesting, not only because it's likely to attract or turn off the most customers, but because it was the most challenging aspect of the new sandwich for Dunkin' Donuts.

Dunkin' Donuts wanted to design a sandwich that would be in high demand and wouldn't be messy. The reason why Dunkin' Donuts didn't want the sandwich to be messy is important: it wants to make the sandwich portable. Many of today's consumers -- especially millennials -- want something to eat while on the run.

Since Dunkin Donuts made the Hollandaise-flavored spread similar to cream cheese, it keeps the sandwich neat, which makes it more likely for the sandwich to see high demand from consumers on the go. Another benefit is speed. While McDonald's has recently been known for slow service due to its confusing menu, Dunkin' Donuts employees are used to spreading cream cheese on English Muffins and bagels. Therefore, the Eggs Benedict Sandwich should be easy to prepare, which will keep the line moving -- whether in-store or at the drive-thru.

Competitive breakfast
Breakfast is the fastest-growing restaurant category in the restaurant space, and Dunkin' Donuts is trying to capitalize on the opportunity. Dunkin' Donuts has announced that the sandwich will be a limited-time offer. The LTO, or limited-time offer, approach has been successful for the fast-food industry with a few exceptions (McDonald's Mighty Wings being one of them).

By taking the limited-time offer approach, Dunkin' Donuts doesn't lock itself into a commitment. If the Eggs Benedict Sandwich is well-received, then Dunkin' Donuts can always expand the offering. If it does exceptionally well, then it's possible that Dunkin' Donuts will make the sandwich a permanent fixture on the menu.

Whether accidentally or on purpose, Dunkin' Donuts' timing is very good here. Why? Because Yum! Brands' (NYSE:YUM) Taco Bell is unleashing its breakfast menu on March 27, and consumers are excited about the Waffle Taco and A.M. Crunchwrap. Nobody knows if the Waffle Taco or A.M. Crunchwrap will be hits or flops, but if it succeeds then it will likely steal some market share from Dunkin' Donuts and its Eggs Benedict Sandwich. Millennials love to share their experiences online through social media. If they hype up one new product over another, it will have an impact.

Dunkin' Donuts is attempting to differentiate itself from its peers. I'm a fan of Dunkin' Brands from the investing and customer perspectives. However, while the Eggs Benedict Sandwich certainly offers potential thanks to its convenience, and because it offers a twist on an already-successful, similar menu item at McDonald's, it's not exactly what you would call unique. A company needs to be unique in order to offer differentiation.

The Foolish takeaway
Unique or not, the Eggs Benedict Sandwich is likely to drive more customers to Dunkin' Donuts. Thanks to the neatness of the sandwich, customers can grab it and go, which is exactly what consumers want in today's fast-paced environment. Additionally, employees can prepare it quickly, which keeps customers happy. Therefore, the sandwich could be a mild growth catalyst for Dunkin' Brands. 

Dunkin' Brands offers growth potential, but perhaps not as much growth potential as these companies
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Dan Moskowitz has no position in any stocks mentioned. The Motley Fool recommends Burger King Worldwide and McDonald's. The Motley Fool owns shares of McDonald's. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Jun 12, 2015 at 5:01PM

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