How to Analyze & Decide Whether Your Restaurant Should Add Breakfast?

Everyone has been told that breakfast is the most important meal of the day. Nutritionally that's true, but whether breakfast improves the health of your restaurant may be another matter. You're looking for ways to increase sales, you have built a successful lunch-and-dinner business with lots of repeat customers ... you're already there paying rent and utilities ... why not?

These are examples of the thinking that leads operators to consider whether opening for breakfast is a logical next step.

Any good operator continually seeks new ways to boost sales and expand their markets. Adding dayparts is a great way to do that and is a goal of small and large operators alike. USA Today recently reported that Papa John's International, with 80 percent of its sales occurring after 4 p.m., views breakfast pizzas as a way to open new sales opportunities. The chain is apparently testing the item, which will feature scrambled eggs and cheese baked on pizza dough, with the option to add meat. Adding breakfast may be the move that boosts sales to where you would like to go, or it may be the thing that squeezes the bottom line even tighter.

A study by Consumer Report on Eating Share Trends, a research service that tracks consumers' away-from-home eating patterns, indicates that 18 percent of daily restaurant traffic is for breakfast. Breakfast day part sales slowly continue to rise as consumers attribute more importance to the morning meal and view it as a necessity; however, it is also likely to remain in third place for restaurant meal share in retaining its position of lowest check average when compared with average dollars spent in restaurants for lunch and dinner. It is easy to see that the potential is there, but not so easy to do unless you carefully examine the challenges. Like everything else about the restaurant business, there are many variables in play here and a thorough analysis must be made in evaluating whether opening for breakfast is right for your concept.

Breakfast by Any Other Name

There's nothing like walking into a restaurant and being greeted by the smell of fresh coffee, sweet maple syrup, bacon and eggs on the griddle, or warm muffins and pastries coming out of the oven. Where do you think of when you think "breakfast"? For many of us, places like International House of Pancakes (IHOP), Denny's, and Waffle House spring to mind. National chains that specialize in breakfast, and that have branded themselves on breakfast food, are a safe bet for many in search of a hot and hearty morning meal at a reasonable price. We can see by their marketing campaigns that these operators try hard to bring customers in for day parts other than breakfast as they expand their menus to feature more lunch and dinner offerings. In case you would not think of them at dinnertime for a salad or burger, they always remind us that "Breakfast is not just for breakfast anymore."

. . . 18 percent of daily restaurant traffic is for breakfast.

One thing is certain: "Breakfast" means many different things. There is "breakfast-on-the-go"; i.e., you grab something you can eat on the way to work or some other destination. That may be a breakfast or energy bar, breakfast sandwich, bagel, protein drink, or coffee and a muffin. Quick-service providers do a great deal of drive-through breakfast business for people on their way to work. Others stop in to the fast-food feeders for a consistent, value-priced breakfast. Many stop by Starbucks or other gourmet coffee places for a morning latte and pastry of some sort for their breakfast. There's hotel room service breakfast you order when traveling for business or on vacation. It is also typical of many hotels to offer a self-serve continental breakfast where you have a small buffet of coffee, juice, cereal and breads. The coffee shop breakfast is an American favorite for eggs, pancakes, breakfast meats, toast and juice.

The meal occasion varies as much as the location. It is very common today to "meet" over breakfast. Many business/networking groups, as well as civic and social ones, meet during the breakfast hour, before the workday begins. As people become more squeezed for time, all professions meet over breakfast as an occasion to conduct business bright and early. On the weekends we're most likely to go to breakfast with friends or family, or enjoy a Sunday brunch after church and for more social occasions.

In addition to where, how and why you eat, breakfast offerings vary by region. Different areas of the United States have unique breakfast specialties. In the South, liver and grits are one traditional breakfast food as is ham and red-eye gravy; the Southwest has huevos rancheros and breakfast tacos; scrapple is a favorite in the Middle Atlantic States; pork roll is rarely available outside New Jersey and Philadelphia; and New Englanders still occasionally indulge in fried salt-pork, and pie, though bagel sandwiches may be more

So, How Do You Know if a Breakfast Day Part is Right For You?

There are three basic areas to evaluate in deciding whether to add breakfast. Once you have determined that breakfast makes sense, there will be many more items to decide like hours, style of service and menu offering. These exercises will help you decide just how much of your business you would have to change to successfully introduce breakfast, and whether those changes make business sense:

Analyze your market. Does breakfast make sense for your location given the demographics of your market area? Proper analysis of your market will not only lead you to what may sell for breakfast and to whom, but also when. Good operators know that a feasibility study is essential in deciding to open a restaurant. It would not be prudent to spend a lot of time and resources to start a business where it was not likely to do well. The same holds true for adding a breakfast day part to an existing operation. A feasibility study is basically a test of the practicality of a business idea.

. . . Good operators know that a feasibility study is essential in deciding to open a restaurant; the same holds true for adding a breakfast day part to an existing operation.

You must do your due diligence by asking these types of questions: Am I mostly in a residential or commercial area? Who will come for breakfast? If your location is residential, you would likely see greater weekend traffic. If you are surrounded by businesses, you might see more weekday breakfast activity. Are there many offices around my restaurant that could bring employees in on the way to work, or perhaps beckon them for morning meetings?

You also need to sleuth your competitors to see who else is offering breakfast in your area, what they're selling, and for how much. This means looking at the products being sold for breakfast and how and to whom they're being sold. If you have a busy bagel shop next door with no seating and you're considering a full-service breakfast offering for the more leisurely diner, you may not have a problem. All of these considerations will help you analyze what to sell to. A fast-casual or quick-service concept offering grab-and-go breakfast items and carry-out meals will directly compete with fast-food providers, gourmet coffee and bagel shops, and anywhere else people stop to pick up something quick and easy on the fly. Quick-service providers have always maintained a stronghold over breakfast; the food is hot, fast and cheap. Whether that trend persists as the market continues to evolve with different offerings and options remains to be seen. It is very difficult to compete with the fast-food operators on price and that is one key factor in the purchasing decision, as is location, turnaround time, taste, health and variety. It is essential that you look at who is eating breakfast in your market and where.

The key is filling a market need where there is room for your product. Does your restaurant serve freshly prepared "gourmet" food to discerning diners who complain that there is nowhere around to get a freshly prepared breakfast made with the care you do the rest of your food? If so, you may be onto something.

Analyze your customer. Here we seek to determine what your customer wants, based on your current concept, and what they think about it. This is likely to be the component driving your idea to start offering breakfast in the first place. Are your customers telling you they would come if you had breakfast? What would they eat and how much would they pay for it? Here you need to really examine your current concept and image for those factors that would be complimentary to beginning the breakfast day part. If, for example, you sell a lot of alcohol, offer an active "happy hour" or late-night business that brings in customers for drinks, dancing and socializing, breakfast may compete with your current image and appeal. You have to consider how your breakfast would affect your current customer. You have to consider not only whether your current customer is likely to view your restaurant as a logical stop for breakfast, but also if they would stop coming for another meal or occasion if they started coming for breakfast. This means really getting your arms around what you're selling today. To really understand, you need to spend a lot of time talking with your customers. One potential downfall of starting a breakfast day part would be taking away sales from other day parts' business when those sales could be more profitable due to higher check averages, higher number of diners per table per meal, better margins, or from skewing your image and concept such that your operation does not hold the same appeal. You do not want to simply "rearrange" current sales when doing so means you would add more expenses and thin your bottom line by spreading what you're currently doing over a greater number of hours and little more.

The 1,200-unit IHOP offers a great example of how much marketing and branding a concept mean. IHOP is one of the best known, and oldest, "breakfast" restaurants in our business. We all know we can go there for a stack of hot pancakes, have lots of different choices for eating them, and get them virtually any time of the day. What would you guess is the percentage of total sales IHOP does during breakfast hours; 60, 70 or 80 percent? IHOP's breakfast sales, 7 a.m. to 11 a.m., account for 35 percent of their total business. Surprised? Consumers know IHOP for breakfast food; that is what they have branded themselves on since 1958. Stacy Roughan, of IHOP's corporate offices in Glendale, California, explained the success and solidity of their branding efforts further by explaining that even though only 35 percent of their sales occur during breakfast hours, 70 percent of all sales are of breakfast items. Many of the customers enjoy breakfast meals during other parts of the day even though IHOP offers a full menu that includes sandwiches, salads, burgers and steaks. You are not likely to visit an IHOP when in search of a romantic dinner with wine, but you are likely to visit when you feel like pancakes and eggs. What does your brand say?

Analyze your operation. Decide on the offering that best meets the needs of your customer and works within the confines of your existing concept, and allows you to easily adjust staffing to manage this day part. This is where you really put pencil to paper, looking at what it would take, operationally, to pull off a new day part. Some of the questions you would ask: How much labor would I need to add? Would I need to purchase new equipment to make breakfast? What are the inventory items I have to start stocking to do breakfast? Would my staff need different uniforms or additional training? Would I need a different menu or could I add on a breakfast section to the current one in a way that makes sense?

The 'S' Word

A common reason we found not to open for breakfast is the "S" word: staffing. Some operators have a hard enough time finding labor for lunch and dinner and do not see a benefit in spreading out a thin labor pool over even longer hours. Can you find people to work the early morning hours required? Will your average check for breakfast be smaller than other meals? Will that mean the servers will make less in tips and be unwilling to work that shift without a wage adjustment?

. . . A common reason we found not to open for breakfast is the 'S' word: staffing.

What will be involved in training staff to serve breakfast? Will that be a natural extension of the training they have now and will your time commitment be reasonable? Is the local labor pool robust enough for you to find new employees interested in working the early shift? Perhaps you envision doing a breakfast where people order at a counter, eliminating the need for servers. That may work, but you need to determine whether that style of service will complement your product and existing concept. It may be that these issues would all work for you but you want to be sure.

There are no right answers to these questions. It will be your job to decide if you have access to the labor you need and that the labor is right for the job. The two-unit Buffalo Grille in Houston, Texas, is one of the busiest in the city for breakfast. If you drive by on either day of any given weekend you will always see a line of loyal customers out the door waiting to get in for the signature huevos rancheros or giant pancakes. The units are open for lunch and dinner as well as breakfast but generate 75 percent of sales during the breakfast daypart, 7-11 a.m. Daypart manager Tommy Schillaci is happy for the crowds but says that staffing breakfast and getting good people to work the early hours is the restaurant's biggest challenge.

When we asked Tammy Roberts Myers of the Ohio-based, 588-unit Bob Evans chain of restaurants about her company's experience with staffing breakfast, she said just the opposite. According to Myers, Bob Evans is known for breakfast and attracts employees looking for early morning work hours, usually people with families who do not want to work late. This point is important to keep in mind when you seek breakfast staff. Use common sense. Do not expect that your late-night staffers will be the best fit for the breakfast shift and vice versa.

Equipment and Menu

What about your current equipment? Can you use the equipment you have now for the preparation of breakfast items? Once you determine that you have the basic kitchen equipment required, you will want to check your supply of smallwares and tabletop items. You may have to purchase juice glasses, waffle irons, muffin pans, and hot tea pitchers.

The menu is probably the first thing you considered when evaluating a breakfast daypart. You may have breakfast dishes in mind that your customers tell you they like and want; there may also be more to consider. Americans love a hot and hearty breakfast; this consumption behavior remains fairly constant over time and across regions. However, health and diet trends among America's restaurant customers have evolved to complement heart-healthier lifestyles and can also be cyclical. Think of the recent fame of programs like the Atkins diet.

You may need to heed these changes. Many operators have had to "unbundle" breakfast menus and offer items a la carte, as well as introduce healthier choices so that people can customize their morning meal to be smaller and include less fat and fewer calories. You will often find things like fresh fruit, oatmeal, yogurt and single servings of items such as breakfast meats and breads to satisfy these changes.

Once you have settled on an introductory menu, and have tested the items, you need to thoroughly analyze it to see if it makes good business sense. You must price your menu and, most importantly, "cost out" each item to ensure that you have necessary profit margins from the start. National check averages for breakfast are lower than those for lunch and dinner. The popular breakfast items at Houston's Buffalo Grille ring up at 25 percent to 30 percent less than average check amounts for the other day parts. The good news is that breakfast dishes generally also carry lower food cost percentages. This certainly helps in making the case for breakfast but cannot be taken in isolation. You must anticipate the volume necessary to make those numbers work for your business and also factor in the overhead and other costs of doing business that will also be involved in opening for breakfast.

There are still more operational issues about doing breakfast that merit some thought. All of the operators we spoke to said the same things about customer expectations. People want breakfast food fast and very hot. There are challenges to getting food out as fast as it may be expected, 10 minutes or less sometimes, and keeping food like eggs as hot as they need to be to satisfy expectations, especially if your current operations function differently. To those you can add this: People do not expect to pay very much for breakfast either.

Is Breakfast the Most Important Meal of the Day -- for Your Business?

Once you are satisfied that it makes sense for your restaurant to proceed with breakfast based on local market analysis; those variables specific to your operation; and that your concept, image and brand all lend themselves to the breakfast day part you envision, test it. Try out your breakfast dishes. Serve them to current customers and employees. Ask for feedback. After opening for breakfast, carefully monitor the progress and be prepared to adjust based on what you learn. Be open to the possibility you may have to change course slightly, to make this day part a success.

Breakfast is the most important meal of the day; everyone knows that. But it may not be the most important thing you can do for your restaurant. Getting consumers to your restaurant to start their days off right could be a natural extension of your current operation and the jump-start to higher revenue and profits. You have to make sure you have answered all the right questions to prove that the endeavor will be financially worthwhile and that it's in line with your goals and restaurant concept.