This is what McDonald's has to do to keep All Day Breakfast alive
There's no doubt that McDonald's All Day Breakfast has been a major factor in the burger chain's turnaround in the last year.
The promotion, which was launched last October, spurred same-store-sales growth for three straight quarters. However, during the last earnings cycle, growth fell short of Wall Street estimates, raising doubts about whether All Day Breakfast was a sustainable promotion for the company.
"[All Day Breakfast] has clearly given consumers greater choices, especially the younger generation, who want to have breakfast all day long," Darren Tristano, president of Technomic, told CNBC. "It's been part of [McDonald's] same-store sales growth, which hasn't been that robust. I think year-over-year, they are doing better, but if we were to look at this a year from now... I think that demand will stabilize."
McDonald's introduced all-day breakfast at its U.S. restaurants in a bid to attract more diners in the face of growing competition from rivals such as Chipotle Mexican Grill and Shake Shack. The move has helped the fast food giant see an uptick in sales, but the growth may not be strong enough for some investors.
Tristano noted that All Day Breakfast provides McDonald's an opportunity for greater innovation and product growth. He suggested that the burger joint should consider adding menu options with a bit more flavor, particularly spicy items.
In addition, Tristano said that taking advantage of seasonal ingredients like pumpkins and fresh fruit could resonate well with consumers and drive demand.
"[All Day Breakfast] provides [McDonald's] with a little bit more of an opportunity for innovation," Tristano said, explaining that the burger joint needs to differentiate itself in a competitive breakfast market.
The company has already begun testing a breakfast Happy Meal in 73 McDonald's restaurants in Tulsa, Oklahoma. If the test is successful, the promotion could get a nationwide release next year. This is the first time in 30 years that the company has added a new entree to its Happy Meals.
Last month, McDonald's shifted to an expanded All Day Breakfast menu that offers breakfast fans a wider selection including McGriddles, McMuffins, biscuit sandwiches, hash browns and hotcakes.