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Eateries Work To Catch Drive-Through Early Birds

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The Associated Press

Published: August 5, 2008

NEW YORK - After watching more customers stream into drive-throughs for a quick morning meal, family dining restaurants such as Denny's and IHOP are telling their fast-food competitors to back off breakfast.

In an attempt to lure diners back to the table - or at least to the curb - the chains are introducing more portable products, offering to-go and curbside pickup programs, and remodeling their locations.

The moves come as breakfast has taken on far more importance to fast-food chains that traditionally put little effort into the morning meal, but now see opportunities to expand sales and profits at that time of day. Some are even thinking about serving breakfast all day at some point - a switch that would directly challenge the 24/7 breakfast menus that drive a large part of sales at family dining restaurants.

"We're being attacked," Denny's Corp. chief executive Nelson Marchioli said. "We can't let that happen. We have to take back what was ours to begin with."

That won't be easy, restaurant analysts say, considering the premium consumers place on convenience, speed and low prices.

"It's hard to beat fast food," said Bob Goldin, executive vice president of consumer research firm Technomic Inc. in Chicago. "The demographics and lifestyle trends are working against" family dining chains.

Complicating the issue is the slow economy and consumers' desire to spend less on eating out. Fast-food chains have been a beneficiary of people's reluctance to part with their cash since they offer food at lower prices than most casual dining or family dining restaurants. Many fast-food chains also routinely offer special deals with even lower prices.
Goldin said the fast-food chains, particularly McDonald's Corp., use price and promotion "aggressively and effectively."

Denny's - which has built its business on breakfast dishes such as the Grand Slam - has seen its sales decline as consumers have cut back on spending and shifted to cheaper fast food. In the second quarter, same-store sales, or sales at locations open at least a year, fell 2.8 percent systemwide.

The company launched a to-go campaign last month that features a layered, dome container meant to keep pancakes hot and bacon crispy. Marchioli said he has seen "a nice increase" in the company's takeout business since introducing the packaging, which is available for the restaurant's full menu.

Denny's is also offering two new breakfast skillets for $5.99 each, both to eat in and to go, and is testing a hand-held Grand Slam.

"Customers are telling us, 'I'd get up 10 minutes earlier for this,'" Marchioli said.
IHOP also has been promoting its to-go options in the past year, driving carry-out sales up from about 2 percent of its business to nearly 4 percent, said Patrick Lenow, spokesman for the chain's parent company, DineEquity Inc.

Lenow added that IHOP also is looking into developing "more portable foods for dashboard dining," but declined to give specifics.

The demand for to-go options has helped McDonald's, the nation's No. 1 hamburger chain, build its breakfast business into what President and Chief Operating Officer Ralph Alvarez last month called the company's "fastest-growing segment."

The chain's breakfast menu has expanded in the past year to include chicken biscuit sandwiches, a premium coffee blend and espresso-based drinks at some locations.

Burger King Corp., meanwhile, rolled out a breakfast value menu last year, and CKE Restaurants Inc., which operates Carl's Jr. and Hardee's, has introduced a slew of new breakfast items. The latest is the Monster Breakfast Sandwich, available at Carl's Jr., that features two eggs, bacon, sausage and cheese between grilled sourdough bread.

New products such as the Carl's Jr. sandwich may make it even harder for family dining chains to compete.

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