Subway latest entry on fast-food breakfast menu

The fast-food breakfast wars are heating up again, with Subway joining the fray.

It may take some convincing for fast-food patrons to think of Subway as anything but the place with the $5 foot-long sandwiches, as its advertising reminds. But the privately held chain of 25,000 restaurants in the U.S. and Canada is stepping even more directly into the fast-food slugfest, where established foes such as McDonald’s, Dunkin’ Donuts and Starbucks compete for breakfast business.

This may not be an ideal time to launch an ambitious effort in pursuit of more consumer dollars, given the recession’s bite. Last year, breakfast sales at restaurants dropped 2.8% to $25.3 billion, with full-service restaurants taking the biggest hit, falling 6.7%, according to Mintel Foodservice, which provides restaurant industry analysis. Fast-food sales were up slightly, about 0.5%.

The key is a longer-term shift in eating habits. Last year, more than 55% of breakfast restaurant sales were at fast-food chains, Mintel said. Sales apparently crossed the 50% threshold around 2004, meaning that for the last six years the majority of people craving bacon and eggs who didn’t want to cook went to someplace such as McDonald’s.

So why not to Subway?

“If we can get our core customers to make just one extra visit per week for breakfast, then we’re in a good place,” said Tim Ryan, owner of a Subway in Illinois.

Ryan said it wouldn’t take much traffic to make breakfast offerings profitable. The restaurants open at 7 a.m. instead of around 10, but employees were often there that early anyway baking bread and preparing for lunch.

“All you really have is a little bit more labor and some food costs,” said Phil Mesi, who oversees development for more than 360 Subway franchises. “Everything else is paid for, so you don’t really need much traffic to make this really work.”

Subway, a unit of Doctor’s Associates Inc., hopes some people will eat breakfast and order lunch at the same time, since the regular menu also will be available in the morning. Based on test market results, a few may even start their days with meatball marinara subs and other lunchtime items, company officials said.

“It’s an extension of what we’ve been doing all along, which is providing sandwiches,” company spokesman Les Winograd said. “The breakfast day part is one of the areas where we felt we could do a better job.”

Subway, with U.S. annual sales of about $10 billion, said restaurants that tested the breakfast menu added about 6% to sales.

Breakfast diners can order a custom sandwich, like at lunch, and choose ingredients — perhaps a wheat muffin and some fresh veggies.

The “Subway experience” of a custom order is something company officials think will be attractive to core customers. Stressing some healthful options such as egg-white sandwiches is also crucial.

Unlike McDonald’s Corp. and Burger King Corp., Subway isn’t making egg dishes from scratch. Subway’s omelets come to the stores ready-made and frozen. Once defrosted and assembled with a choice of ingredients, sandwiches are heated in a giant toaster oven.

“Sandwiches have become part of breakfast; omelet-style sandwiches are pretty standard fare now,” said Eric Giandelone, director of research for Mintel. “With its sandwich positioning, Subway can kind of build on that.”

Of course, Subway isn’t alone in the market. McDonald’s has been serving breakfast since 1975 and recently introduced a breakfast dollar menu.

Burger King has its own dollar breakfast menu and a marketing campaign aimed squarely at McDonald’s. Other longstanding breakfast club members include Dunkin’ Donuts, Hardee’s and Starbucks.

There’s plenty of other competition out there.

Jamba Juice is serving oatmeal, and Wendy’s is test-marketing a new breakfast sandwich. Even Taco Bell may enter the fray, company officials said.

This month Denny’s Corp., which has more than 1,500 full-service restaurants, rolled out a new value menu starting at $2.

Channick writes for the Chicago Tribune.