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Has the Breakfast Bubble Popped?


Fast-food outlets blame the unemployed for slowing biscuit sales.

When the economy was booming, fast-food breakfast was a $57 billion business and everyone wanted in.

(MCD) had dominated the industry for years, with the familiar Egg McMuffin and its compatriots, the Sausage Biscuit and the McGriddle.

One analyst recently estimated that breakfast sales at McDonald's were responsible for 25% of the company's revenue and constituted 35% of its profit.

Competitors rushed to follow the chain's lead, trying to grab a slice of the lucrative morning market for themselves.

In 2006, Burger King (BKC), which attributed about 15% of its sales to breakfast at that time, took a shot across McDonald's bow with the introduction of its value breakfast -- also challenging Wendy's (WEN), which was testing the breakfast waters for the first time.

The following year, Starbucks (SBUX) threw its hat into the ring with breakfast items featuring "premium and upscale ingredients" and "bold and layered flavors," the company's director for food research and development, Kathleen Kennedy, told the New York Times.

And in 2008, Denny's (DENN) jumped into the fray full-bore, with an attempt at swiping market share from others, not with a new range of products, but with new packaging.

"We know that Americans love breakfast," said Mark Chmiel, Denny's chief marketing and innovation officer. And, with the introduction of the "Denny's Dome" container, consumers wouldn't have to "settle for fast food in clamshells or wrappers anymore."

All the while, McDonald's held on to its commanding grip over breakfast. College student Paul Roeder told a reporter that the McGriddle was the "perfect food, with all the major food groups except for hash browns."

However, it seems that the fast-food industry was in the throes of a breakfast bubble. As unemployment has gone up, breakfast sales have dropped.

"Typically, if you're unemployed, you're not getting up at six and not going through the drive-thru," said Jeffrey Bernstein, an analyst at Barclays Capital. "There is a direct correlation between unemployment and breakfast sales."
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