Why Taco Bell and Popeyes Want to Serve You Breakfast

Waffle Taco
Taco Bell

Even by Taco Bell's (YUM) wacky standards, its latest product is a head-scratcher: The "Mexican-inspired" fast-food chain is currently in the midst of testing a waffle taco.

The waffle taco -- which is exactly what it sounds like -- is part of Taco Bell's recent test of breakfast offerings, which for now is restricted to locations on the West Coast. But Taco Bell is not the only chain trying to challenge McDonald's (MCD) in the fast-food breakfast game. A number of other quick-serve chains have dipped their toes in the water in recent years: Now Subway, Wendy's and even Popeyes are aiming to be your first stop of the day.

So why are chains best known for tacos and fried chicken trying so hard to serve you breakfast? In short, it's because breakfast represents a mostly untapped growth opportunity.

"It's the last unoccupied territory," says Scott Hume of BurgerBusiness.com, which tracks the fast-food industry. "Its not just breakfast -- it's the same reason you see chains extending hours. You go anywhere that there's potential customer traffic and sales."

That was basically the rationale that Taco Bell CEO Greg Creed gave for the push into breakfast, telling a restaurant industry conference that selling food during more of the day would help drive sales. Taco Bell has already had success moving into new "dayparts" with its late-night "fourthmeal" push; if it can likewise come up with new menu offerings that will allow it to sell food in the morning, it would be crazy not to try.

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Sales figures vindicate this strategy. Hume says that while industry sales growth has remained largely stagnant of late, breakfast has been the sole exception; according to the NPD Group, breakfast accounts for 92% of traffic growth in the industry over the last five years.

But just because it's a traffic opportunity doesn't mean that it's easy to pull off -- Wendy's, for instance, has repeatedly failed to make inroads in the breakfast market. Hume says that whether a chain succeeds at breakfast depends a lot on well-positioned drive-through locations and menu offerings that can be consumed on the go -- like breakfast burritos, for instance.

One way or another, we'll see whether any of these newcomers can crack the Egg McMuffin's grip on mornings. Because right now, for the fast-food industry, breakfast is the most important meal of the day.

Matt Brownell is the consumer and retail reporter for DailyFinance. You can reach him at Matt.Brownell@teamaol.com, and follow him on Twitter at @Brownellorama.