Fast food giants have breakfast battle on hands

NEW YORK -- After watching more customers stream into drive-throughs for a quick morning meal, family dining restaurants like 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 -- 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 Officer Nelson Marchioli said. "We can't let that happen. We have to take back what was ours to begin with."

Locally owned breakfast joints are less concerned. Fast food and sit-down chain restaurants have challenged their businesses on multiple levels for years. Their best defense has been to cull a loyal customer base.

Karin Sales, who co-owns the Old Mill Cafe on Ninth Street in Modesto, says customers still are coming in -- they're just ordering less. To ensure loyalty, she offers an early-bird special from 5 to 8 a.m. that could keep a teenage boy full until afternoon. For $4.99, customers get a full plate of food they have to sit down and concentrate on to finish.

"There's no way fast food could compare," Sales said.

But consumers place a premium on convenience, speed and low prices, restaurant analysts say.

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

Complicating the issue is the slow economy and consumers' desire to spend less on eating out. Because they offer food at lower prices than most casual dining or family dining restaurants, fast food chains have been a beneficiary of people's reluctance to part with their cash. Many fast food chains also routinely offer special deals with even lower prices.

Goldin said the fast food chains, particularly McDonald's, use price and promotion "aggressively and effectively."

Breakfast lovers like Sharon Rowden, 56, of Modesto say those ads are effective, but the fast food experience can leave a bad taste in your mouth.

"After I've finished one of these, I regret it. I could make it better myself. If I'm going to spend the money, I should spend it on something that doesn't taste reheated," she said between bites of a turkey bacon, egg and cheese sandwich from Starbucks. "But this is all I have time for."

Denny's -- which has built its business on breakfast dishes like 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 also is offering two new breakfast skillets for $5.99 each, both to eat in and to go, and is testing a hand-held Grand Slam.