Taco Bell to Cook up Breakfast Burritos

by Jeff Reeves | January 26, 2012 10:47 am

Taco Bell is largely responsible for the late-night snacking push across the fast-food world as one of the first major chains to stay open into the wee hours — as late as 4 a.m. at most locations with its Fourthmeal menu.

Now the Mexican-style restaurant is looking to stay open so late that it’ll actually open early. Taco Bell is introducing a breakfast menu at almost 800 restaurants.

The signature item? What else — a breakfast burrito.

According to top marketers at Yum Brands (NYSE:YUM[1]) — the corporate parent of Taco Bell, Pizza Hut, KFC and other fast-food brands — the chain hopes breakfast burritos will be cooking up nationwide by the start of 2014. But the first offerings are actually cooking up this morning, mostly in about a dozen Western states. Those lucky Firstmeal menu states include California, Arizona and Colorado. Breakfast hours start at 8 or 9 a.m., depending on location, and wind down at 11 a.m.

What’s being served? Actually, some very impressive brands fill out the menu, including Johnsonville sausage, Tropicana orange juice, Cinnabon sweets and Starbucks (NASDAQ:SBUX[2]) Seattle’s Best coffee.

Diners can order a 99-cent sausage or bacon-and-egg burrito or a $2.79 Grande Skillet Burrito with all the works. Or make them a combo with hash browns.

The move into breakfast shouldn’t surprise anyone. McDonald’s (NYSE:MCD[3]) has long been the standard bearer of fast-food breakfast, with some estimates pegging as much as 25% of sales for the Golden Arches coming from Egg McMuffins and morning coffees.

That makes it a big breakfast target. In 2010, Burger King completely revamped its menu to get into the a.m. action, with the new BK breakfast menu boasting an upscale cibatta sandwich. And Subway has been doing its darnedest to establish a breakfast following.

Taco Bell’s push may spark curiosity, but its very late entry makes it questionable whether sales will find traction. It’s harder to lose money on breakfast, since eggs are much cheaper than beef and veggies these days, but that doesn’t mean Taco Bell has found a cash cow.

It’s also worth noting that Taco Bell has been revamping much more than just breakfast. The company actually just launched items for its standard menu that are meant to appeal to fast-food consumers focused on fresh options.

Yum Brands will offer its next regular profit report on Feb. 6, so we’ll see whether developments like these have helped the company keep up its streak of increasing sales. Yum has posted seven straight quarters of year-over-year growth.

Will the roll-out of Taco Bell breakfast help keep sales momentum strong? Maybe, maybe not. But it’s certainly a reasonable strategy to grow Taco Bell’s customer base.

Much more reasonable, say, than a recent harebrained scheme at Burger King to launch home burger delivery.

Jeff Reeves is the editor of InvestorPlace.com. Write him at editor@investorplace??.com, follow him on Twitter via @JeffReevesIP and become a fan of InvestorPlace on Facebook. Jeff Reeves holds a position in Alcoa, but no other publicly traded stocks.

  1. YUM: http://studio-5.financialcontent.com/investplace/quote?Symbol=YUM
  2. SBUX: http://studio-5.financialcontent.com/investplace/quote?Symbol=SBUX
  3. MCD: http://studio-5.financialcontent.com/investplace/quote?Symbol=MCD

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