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Fast-Food Chains Make Time for Breakfast

The most important meal of the day becomes an important revenue stream for more chains.

Breakfast was the big item on

Wendy's

(WEN) - Get Wendy's Company Report

menu Monday, as the fast-food company unveiled plans to expand its morning meal service.

CEO Kerrii Anderson told analysts that the Dublin, Ohio-based company will be offering breakfast at between 20% and 30% of its roughly 6,000 restaurants this year and at 50% by 2008. Wendy's is currently offering breakfast in 160 of its outlets. Anderson said breakfast will be break-even for the company in 2007.

Breakfast takes on a new importance for Wendy's after Friday's revelation that fourth-quarter income

plummeted 90%.

"I don't think there's any question relative to our competition that we have not been in the breakfast business," Anderson told analysts during the conference call.

This is the company's second attempt at a breakfast menu, following a less-than-successful try in the '80s. Ian Rowden, Wendy's chief marketing officer, promised that the company would have a strong and interesting menu this time around, along with quality coffee that will be served all day. In addition to being fresh and filling, Rowden said, nearly every item on Wendy's breakfast menu is portable and easy to eat.

A Meal of Growing Importance

The fast-food restaurant breakfast isn't a new concept, but the kitchen is getting crowded as more chains wake up and smell the potential profits.

An increasing number of time-strapped consumers are pulling into drive-throughs or dashing into restaurants to pick up meals they can eat with one hand or conveniently take to their office.

Maria Caranfa, director of Mintel Menu Insights, a market research firm in Chicago, says the fast-food industry reported $30.6 billion in breakfast sales in 2005, up 22% since 2001.

"It's a great opportunity to expand their revenues," Caranfa says.

McDonald's

(MCD) - Get McDonald's Corporation (MCD) Report

, the reigning champion of the morning meal, has been serving breakfast for more than 30 years. The hamburger giant does not break out its breakfast numbers as a percentage of overall sales, however.

Bob Sandelman, CEO of Sandelman & Associates, a San Clemente, Calif.-based market research firm, says McDonald's breakfast menu gets higher customer ratings scores than the company's other items.

"Part of that is the convenience factor," he says. "There are so many of them around."

Rival

Burger King

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(BKC)

launched a salvo in the breakfast wars by announcing plans to offer a value breakfast meal this month with 10 offerings starting at $1 each.

Hardees, a division of

CKE Restaurants

(CKR)

recently unveiled its Monster Biscuit, consisting of three half-strips of bacon, a sausage patty, four slices of shaved ham, a folded egg and two slices of cheese, all on a biscuit.

But the competition is not limited to hamburger restaurants. The non-burger outfits, such as

Dunkin' Donuts

,

Starbucks

(SBUX) - Get Starbucks Corporation Report

and

Panera Bread

(PNRA)

, are all joining the breakfast club.

"It has to do with one-stop shopping," Caranfa says. "Dunkin' Donuts is very popular, so why not offer something more substantial than a donut or a pastry on the menu?"

Sandelman says coffee dealers pushed the major fast-food chains into improving the quality of their coffee, so the coffee retailers responded by introducing breakfast menus.

"It's kind of an interesting phenomenon going on," he says.

The increased competition between the fast-food and coffee chains has upped the ante.

Consumer Reports

last week published some interesting data: McDonald's coffee beat Starbucks' in a taste test. Seattle-based Starbucks also trailed Burger King and Dunkin' Donuts in the coffee category.