HighlightsThe current domestic breakfast market is worth

$65 billion. In eight years it is predicted to swell in value to $83 billion.

Breakfast is the least expensive menu type, it

is about half the price of lunch averaging $4.50 per menu item.

The average price per item at QSRs has only

increased by 4% in the last year while fast casual saw an 18% adjustment from same quarter a year ago.

Family/midscale by itself accounts for 45% of the

breakfast menu items but only grew by 1% from same quarter a year ago.

QSRs were up 21% and accounted for 22% of the

breakfast menu items.

Fine dining, upscale, gourmet and fast casual

collectively represent less than 30% of breakfast menu items,

but they are the big story with a 81% and 35% increase respectively from the same quarter a year ago.

There have been

sharp increases at QSRs in menu items like breakfast wraps, breakfast burritos, breakfast sandwiches and French toast sticks.

Another sweeping trend which is not only showing

up in breakfast but also in other parts of the menu is the use of Southwestern and/or spicy fl avors.

Premiumization on the breakfast menu is

evident through alterations to sandwiches and other cuisine variations. Premium breads including croissants, pancakes, sourdough bread, bagels and ciabatta decorate popular breakfast sandwich fi llings.

The real opportunity for restaurants is to offer

variety and quality, while deliv-ering on speed.

Over the next two to three years we will likely

see the industry transform breakfast with new innovation and selection.

Breakfast ExplosionC

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Breakfast Menu ClaimsClaims have become an ever more important part of selling a menu item. The leading general claim was vegetarian/vegan with four times as many items as fresh the next claim. Claims associ-ated with diet or good for you such as low fat and low carb were also at the top of the list.

Fresh and seasonal, which can go hand in hand, appeared at the top of the three claim catego-ries: general claims, marketing claims and ingredient claims. The leading marketing and ingredi-ent claims had an underlying tone of goodness, with freshness, homemade and seasonal topping the list. Cholesterol-free ranked second under ingredient claims and it’s worth mentioning that it increased by 75% from the same quarter a year ago.

Top Breakfast Menu Claims

Vegetarian/ Vegan

Fresh

Low Fat

Seasonal

Low Carb

Top Breakfast Marketing Claims

Fresh

Homemade

Farm-Fresh

Crispy

Seasonal

Top Breakfast Ingredient Claims

Fresh

Cholesterol-Free

Crispy

Farm-Fresh

Homemade

Seasonal

Top Menu Item Dishes

1. Breakfast Sandwich

2. Breakfast Platter

3. Pancakes

4. Omelette

5. French Toast

6. Breakfast Burrito

7. Breakfast Wrap

8. Breakfast Taco

9. Oatmeal

10. Hash Browns

All Restaurants, Q1 2007

Emerging Trends The increasing demand to deliver portable meal solutions is also affecting the way restaurants look at breakfast. There have been sharp increases at QSRs in menu items like breakfast wraps, breakfast burritos, breakfast sandwiches, and French toast sticks. This trend is likely to continue to expand and we will see new forms of packaging to facilitate portability.

The use of Southwestern and/or spicy is showing up in breakfast and in other parts of the menu. From QSRs to casual dining many restau-rants are capitalizing on this trend. In fact Mexican and Southwest-ern/Tex Mex inspired dishes have grown 20% and 24% respectively since the same quarter a year ago.

QSR premiumization is not just a fad. It is a direction for QSRs to follow in order to remain competitive within the restaurant industry. Premiumization on the breakfast menu is evident through alterations to sandwiches and other cuisine variations. Premium breads includ-ing croissants, pancakes, sourdough bread, bagels and ciabatta decorate popular breakfast sandwich fi llings. These variations on menu allow for a variety of premium ingredients and new fl avors to be introduced to consumers’ taste buds in the morning. Highly popular Mexican infl uences such as the breakfast burrito, wraps and quesadillas offer consumers premium portability with an ethnic spin.

Breakfast has seen a real resurrection in recent years. With hectic schedules and time squeezed parents, our demand for breakfast food seems to be holding strong.

The real opportunity is for restaurants is to offer variety and quality, while delivering on speed. Fast casual restaurants are poised to make a dent on this segment; they have the quality, speed, and can offer variety. Their weakness is that most do not have drive-thrus which is what makes it convenient to consumers.

Over the next two to three years, we will likely see the industry transform breakfast with new innovation and selection. QSRs will duke it out to stay on top of this market and try to appeal to everyone from morning commuter to the construction crew. New more portable menu items are

sure to pop at a restaurant near you.

Quick Service RestaurantsSome quick service restaurants (QSRs) have long been associated with breakfast, but now it seems that the rest of the pack want to be sure they are getting their piece of the pie. Jack in the Box intro-duced an all-day breakfast service, McDonald’s has been testing the same, and Wendy’s plans to add breakfast at several hundred stores this year, despite a failed breakfast attempt in the past.

The top fi ve breakfast ingredients menued at QSRs account for 50% of all the ingredients men-tioned on QSR breakfast menus and all showed double digit growth from the same quarter a year ago. In order to keep cost down many restaurants try to reuse the same ingredients throughout their dishes – at the same time this leads to a lack of variety. This poses an opportunity to develop new breakfast items using new ingredients, or at least new fl avors to reinvigorate breakfast.

Family/MidscaleOne would expect to fi nd a hearty breakfast menu at a family/midscale restaurant, but even though they account for 45% of the breakfast menu items it has not had the same new product activity that QSRs have demonstrated.

Largely driven by pancakes and biscuits, buttermilk and blueberry were the leading fl avors among family/midscale restaurants, but declined 10% and 40% respectively. Raisins and carrots increased 29% and 28% respectively while cinnamon, apple and nuts declined 49%, 56% and 52% respectively.

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Source Menu Insights

Other fl avors also growing in popularity

Applewood-Smoked

Rye

Maple

Honey

Chipotle Pepper

Jalapeno Pepper

Pumpkin