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As we said in our recent MCD Black Book, 3Q15 will be a critical inflection point for the company.  It now looks like there is a major initiative underway that could be announced in late 2015 or early 2016 – ALL DAY BREAKFAST.  The trends MCD reported in 2Q15 now support the thesis that 3Q15 will be a key inflection point in the company’s turnaround.    

With clear visibility on an improved cost structure, fixing sales trends are a critical next step.  One way to get there is to serve some key breakfast items all day.  I would go so far as to say that if McDonald’s has figured a way to serve ALL DAY BREAKFAST it will be a game changer for the company and it will have significant industry implications. 

From the research we have done and the conversations we have had with people close to McDonald’s suggest that All Day Breakfast could be that silver bullet McDonald’s is looking for!

Early in his tenure as CEO, this initiative by Steve Easterbrook could define his legacy at MCD.  Does Mr. Easterbrook want to be the CEO who just couldn't make ALL DAY BREAKFAST happen, or will he be the CEO who made ALL DAY BREAKFAST work for the first time in McDonald's history. 

Currently, ADB is in a small test in Southern California.  I understand that the costs for changes to the kitchen will range from $10,000 - $20,000 and involve adding an egg-cooker.  As always, the cost will vary by restaurant depending on what other equipment they already have on hand.  I believe that if the costs exceed $20,000, it will be very difficult to sell it to franchisees.

I also believe that if McDonald’s does add some breakfast items to the menu it should be a part of a broader reduction in other menu items.  The question remains do they have the discipline to do it?  A complex menu is a complex menu whether it's beef, chicken, or breakfast egg products.  There is the possibility, that adding breakfast to the all-day menu might make ordering more confusing for the customer.

We went out and conducted a survey to gauge consumer interest in ADB and the outcome was pretty positive. When we asked 2,000 people whether they would go to MCD more often if they could get breakfast for lunch, 33.3% of people said yes. We weren’t expecting to see a number over 50%, we consider 33.3% to be a significant number. Not surprisingly, lower income people said yes more often as well, further confirming the need for MCD to deliver value to customers.