August 10/Boston/Business Wire -- Oatmeal at McDonald's. Eggs at Quiznos. Breakfast sausage at Taco Bell. Why are quick service restaurants (QSRs) clamoring to create breakfast menus or enhancing their existing breakfast selections?

A new study by Intellaprice sheds light on the recent popularity of the breakfast daypart among QSRs. "A lot of brands are adding breakfast menus, and price is one key reason. It's the most affordable meal to eat away from home, so this attracts consumers who are nervous about high-priced restaurant meals. Operators who want a piece of the action expand their offerings, knowing it's an opportunity to increase profit, especially with the right product mix," according to Leslie Kerr, president and founder of the restaurant pricing advisory firm.

"There's so much focus on this daypart because there's so much growth potential. Most recently, Subway and Quiznos joined the party, as has Taco Bell -- they want a piece of the pie. Plus, the old standbys are stepping up innovation so they can maintain their stronghold," Kerr explained. "That's why we see healthy options like egg white flatbreads at Dunkin' Donuts, brunch at Burger King, and frappés at McDonald's."

While one might intuitively expect QSRs to avoid the risks of building a new daypart or adding menu items in a down economy, there is actually a snowball effect that will fuel breakfast growth, says Kerr. It is a perfect storm of a slow economy; customers looking for low-cost meal options; the copy-cat effect of competitors stepping into a new category or adding items; and a flood of new advertising driving traffic.

Even so, according to Kerr, succeeding at breakfast has its challenges. "While some may perceive it as easy-to-execute, this is not always the case. Wendy's tests and retests breakfast without rolling it out for that reason," she said. "And we don't see many casual dining brands dipping their toes in the water. This is partly because casual dining spots often locate based on traffic patterns that may not work for breakfast. They also serve meals that are more leisurely, whereas breakfast is often a quick, on-the-go experience for consumers."

"Not all QSRs will win," says Kerr. "If customers can't make the leap that their favorite late night venue should become their new breakfast spot, operators will struggle for enough share."

One more ingredient of the perfect storm: pricing for existing breakfast food items has, for the most part, been resistant to inflation.

Intellaprice's 2010 breakfast study finds that quick service prices are up 1.3% vs. 2009, or $.03. By comparing prices of items on current menus as well as on last year's menus, Intellaprice found that breakfast offerings average $2.84 this year, up from $2.81 a year ago. "The increase is modest, and reflects an effort by operators to be conservative and retain customers," Kerr said.

The study, conducted annually, showed that in 2009, prices were up 3% compared to 2008 levels. "This is consistent with what was happening economically," Kerr explained. "In early 2009, the recession was in its infancy, so operators were more aggressive in price increases. As the situation worsened, operators responded accordingly."

Intellaprice surveyed nearly 2,300 quick service and convenience store locations for its 2010 breakfast study of national and regional brands that offer breakfast items, coffee and espresso beverages.

"It's important to note that not all markets are created equal," Kerr said. "While the overall figures are important, every market consists of different breakfast players, each of which has its own pricing methodology. Each market also has a unique economic and demographic makeup. So while the 1.3% statistic is very telling, it's important to examine what factors into it." Intellaprice found that some markets showed price decreases of .4%, and others showed increases of 3%, more than double the overall increase in the study. "Many operators know that pricing is not a one-size-fits-all phenomenon, and neither are price increases."

Other findings of the study include:
* Beverage items increased 2.1% vs. 2009 levels, while food items were flat.
* Value/combo offerings were up .6%, or $.03, and averaged $5.07 in 2010.
* Healthy breakfast offerings, averaging $1.61, decreased $.02, or 1.1% vs. 2009. These items often include snacks and value menu items, thus the lower price point.

From the August 16, 2010, Prepared Foods E-dition