Please ensure Javascript is enabled for purposes of website accessibility

McDonald's About to Get Waffled at Breakfast

By Rich Duprey - Apr 5, 2014 at 3:00PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Another competitor has an idea about what diners want for their First Meal.

It's no joke: Not only is McDonald's (MCD 2.02%) getting squeezed by Taco Bell's entrance into the breakfast daypart, but privately held White Castle is about to waffle it with competition as well. The tiny-square-slider seller announced on April 1 -- April Fool's Day -- that it would not only offer Belgian waffle sandwiches in a bid to break into breakfast in a big way, but also that it would be making one of the sandwiches available on the menu 'round the clock. It wasn't kidding, and that means the burger king will need to scramble to counter the offensive.

Source: Facebook.com/WhiteCastle.

Same-store sales at McDonald's fell 1.4% in the fourth quarter last year and were flat for all of 2013 as guest counts fell, even though it enjoyed higher average check values. With sales sagging across all of fast food, the $50 billion breakfast daypart opportunity appears ripe for further innovation.

Not that waffles are anything new, as anyone who's been to DineEquity's IHOP chain can attest. What we're seeing is established players looking at their menus in new ways. Yum! Brands' (YUM 0.31%) Mexican food chain recently unveiled its Waffle Tacos, which are eggs, cheese, and bacon or sausage wrapped in a waffle, while Jack in the Box has had a waffle breakfast since 2012. White Castle is offering a similar bacon or sausage, egg, and cheese meal that is, well, sandwiched between two waffles, but it will expand the item with a chicken-and-waffle sandwich that can be ordered anytime.

The researchers at Technomic estimate McDonald's has a 31% market share of the daypart, which generates 20% of its $28.1 billion in annual worldwide revenue. While its McGriddles have popularly exploited the pancake side of things, it doesn't have a waffle offering, which in reality it probably doesn't need. It's fended off other pretenders to the throne like Wendy's, which has tried several times and failed to make any headway at all in the daypart.

Which is why I'm not so worried about Taco Bell or White Castle now making much of an impact, either. They might be able to incrementally grow revenues as a result of adding a breakfast item to the menu -- since they're open at odd hours anyway, they may as well cater to those who might want to grab a breakfast bite -- but McDonald's hasn't waffled in its response, as its recent free coffee promotion indicates.

As the competition copies itself in attempting to stand out, McDonald's as a stalwart leader may just keep getting better and better at breakfast.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

McDonald's Corporation Stock Quote
McDonald's Corporation
MCD
$247.74 (2.02%) $4.91
Yum! Brands, Inc. Stock Quote
Yum! Brands, Inc.
YUM
$113.83 (0.31%) $0.35

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
319%
 
S&P 500 Returns
112%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/30/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.