McDonald’s vs Taco Bell: Who’s winning the breakfast wars?

Two weeks ago, McDonald’s launched All-Day Breakfast. After seeing ads for it everywhere, a few of us at Foursquare started talking and wondered… are people really excited about this? Would we detect millions of extra smartphones heading into McDonald’s locations? Were we going to see Swarm check-ins and Foursquare tips suddenly fly through the roof?

This was a question for our Place Insights tool. A couple weeks ago, we showed how our data (or, as we refer to it, the world’s largest foot traffic panel) could be used to predict how many iPhones Apple would sell during the first weekend of the iPhone 6s launch, based on visits to Apple stores globally. Our 13M+ phones prediction was verified as on target just a couple days later.

Compared to that, looking at McDonald’s traffic trends over the past few weeks would be a walk in the park. This was a much simpler question, though on a larger scale, considering over 100 million people visit McDonald’s every month in the United States alone.

McDonald’s All-Day Breakfast — people are lovin’ it

To get a baseline, our team looked at weekly traffic to US McDonald’s starting a couple of weeks before the all-day menu launched on October 6. We then looked at foot traffic data through this past weekend (October 18th). Compared to the baseline, we are seeing a definite increase in traffic, with about 9% more daily visits overall.

Simple question, simple answer. Are people going to McDonald’s more? Yes! About 9% more. McDonald’s should be pretty pleased with this.

When we divide the visits by daypart, it looks like there is an even increase throughout the day. This seems to make sense — All-Day Breakfast is served all day, and attracts visitors relatively evenly all day, too. Since the increased traffic is also occurring during the normal breakfast rush, it suggests McDonald’s is more top-of-mind for ‘regular’ breakfast thanks to all the buzz and advertising.

Since that answer was so straightforward, we decided to have a bit more fun with it. What else could we compare this to? Was a 9% increase in traffic remarkable? Was it sustainable?

We decided to look for clues from competitor Taco Bell since it too had launched a serious breakfast campaign not too long ago.

A Look Back at the May 2014 Launch of Taco Bell Breakfast

When Taco Bell first launched its breakfast menu for the first time almost 18 months ago, it also had an immediate bump in visits. But this increase was much more pronounced, with about 20–25% more daily foot traffic. This made McDonald’s 9% look less game changing. This makes sense: Taco Bell was really adding a new daypart, whereas McDonald’s already had relevant offerings in all dayparts. McDonald’s has less room to grow into new categories.

Moreover, the impact of Taco Bell’s breakfast launch was real, but faded over time as novelty wore off. For Taco Bell, the effect of the shiny new promotion faded a bit over its first three weeks, then leveled off within a couple months to a sustained increase of just 5–10% more visits overall.

That gain has held up and been material. For Yum Brands, Taco Bell has been their bright spot, thanks to those breakfast burritos, waffle tacos and more. In Q2 of 2015, Taco Bell indicated that breakfast added about 7% of their sales, in line with our foot traffic index gains.

So who wins the showdown — sausage waffle tacos or egg McMuffins?

Honestly, it’s hard to pick a clearcut winner between McDonald’s and Taco Bell.

Taco Bell wins on the percentage increase in visits, likely both in the short-term (20–25%) and the long-term (5–10%).

Percentage-wise, McDonald’s saw a much smaller immediate lift (9%). If it follows the pattern of Taco Bell and other typical promotional campaigns, we could expect that number to fall to less than 2% within the next couple of months, unless McDonald’s can somehow build something new into their campaign.

Still, because of the sheer magnitude of the McDonald’s franchise, in raw numbers, this could reflect a comparable number of total new visits to what Taco Bell saw.

Burning Questions

• How do these visits translate into revenue?
  We don’t know how foot traffic relates to sales. Will consumers opting for breakfast menu items take down the average order size, or shift margins? Our visits data cannot speak to those questions. We will have to wait for McDonald’s Q4 earnings report to know for sure. For Taco Bell, the breakfast menu items drive 7% of their revenue, since they added a whole new category. For McDonald’s, if the impact fades to a 1-2% visits bump, the company’s sheer scale makes this a tremendously large number. But if the average purchase size comes down, there may not be a net lift in revenue.
• Was it worth it for McDonald’s?
  McDonald’s made this move to please its most loyal and vocal customers. According to YouGov’s Brand Index, the brand perception of McDonald’s is now at an all-time high. Customers are happy, but operators are mixed.

An Aside

• In other Taco Bell-related news, the first location to offer alcohol, the Taco Bell Cantina in Chicago, has been attracting enough visitors to make it onto Foursquare’s Trending This Week. That means it’s one of the most notable new restaurants in town.

Stepping beyond Fast Food Breakfast

The McDonald’s vs Taco Bell ‘Breakfast Wars’ have been captivating media outlets for the last 18 months — and we had a lot of fun putting our Foursquare spin on it. But this is just the tip of the iceberg on what Place Insights can do. With a more sophisticated look at our data, of the kind that Place Insights customers can access, we start answering the really tough questions for McDonald’s and Taco Bell, such as:

• In the long term, will McDonald’s all-day breakfast net them incremental customers, or just shift visits to later times of day?
• How far are customers traveling from home or work to McDonald’s or Taco Bell locations and how does that affect the success of breakfast as a day part?
• Who did McDonald’s or Taco Bell really attract with its promotions? New customers, lapsed customers or true brand loyalists?

We can also expand this out to other companies and other industries. Coca-Cola vs. Pepsi? Does foot traffic to chain restaurants increase when a restaurant shifts its beverage offerings? What about when a burger chain lets a chicken determine who gets Chicken Fries? What is the true impact of the Nordstrom Half Yearly Sale? Stay tuned fans of Big Data as we try to put out more of these analytics stories in the months to come.

Notes on Methodology

We performed this analysis using Foursquare’s proprietary foot traffic panel of millions of anonymized smartphones. We looked at indexed ‘visits’ to Taco Bell and McDonald’s locations before, during and after the respective promotions to understand the impact on overall traffic as well as in daypart specific chunks (e.g., ‘morning’, ‘lunch’, ‘evening’ and ‘late night’). Our ability to develop these insights comes from our Pilgrim technology, built with our unique dataset of 7 billion check-ins at over 65 million places. Using background location awareness, we’re able to accurately “snap-to-place” phones that stop for five minutes or more at one of these 65 million places, using WiFi signatures, GPS shapes, Bluetooth beacons, and more. Visits thus combine explicit check-ins by users and background location identification.

Connect

To learn more about our insights or to get in touch with the Foursquare Place Insights team, connect with us here or email partners@foursquare.com.