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Four Reasons McDonald's All-Day Breakfast Is A Headache for Franchisees

All those McMuffins and hash browns come at a cost.

McDonald’s has finally started selling breakfast foods at all hours, something customers had long wanted and the company had steadfastly resisted. While the chain has sold Egg McMuffins for four decades, it hasn’t made breakfast items available beyond the 10:30 a.m. cutoff on a national scale before. There's a lot at stake: Wall Street is hoping breakfast will help boost flagging sales, drawing customers from competitors with newer interiors and big discounts, including Wendy’s new 4-for-$4 deal.

McDonald's has touted the early results as a success, citing the "highest brand score in two years, according to YouGov BrandIndex," said spokeswoman Lisa McComb. For some of the company's already-restive franchisees, however, the always-breakfast policy has made life harder with higher costs, a confusing rollout, and the loss of some menu items. Here's a look at the biggest reasons franchisees have a breakfast hangover.

1. It's hard to make hash browns and fries at the same time with the same number of vats

There’s only so much grill space and only so many vats to cook French fries and hash browns. Some McDonald’s franchisees are investing up to $5,000 for new equipment to keep up with the demands of serving eggs beyond the morning hours. Restaurants in some cases have to choose between selling fries and hash browns later in the day. Nearly 90 percent of locations are selling hash browns all day now, said McComb.

2. After years of waiting, all-day breakfast arrived very fast

The introduction was too fast, some franchisees said in a survey published last week by Nomura analyst Mark Kalinowski. "This was rushed," says one respondent. "We would be doing a better job if we had not rushed into it," says another. The quick introduction didn't give restaurants and staff a chance to work out the kinks, such as where to put extra equipment and how to keep kitchens humming along smoothly.

3. Egg sandwiches sell for less than burgers

Breakfast sandwiches are cheaper than many of McDonald’s other burgers and chicken sandwiches, so by offering full-time breakfasts, McDonald's has essentially created a new lower-priced alternative to its lunch and dinner fare. In Chicago, for instance, an Egg McMuffin is $3.29, a Big Mac is $4.39, and a grilled chicken sandwich is $4.79. Hash browns also sell for 19¢ less than a small order of fries. If customers decide they want eggs for lunch instead of a burger, total sales figures will drop. "We are trading customers down from regular menu to lower-priced breakfast items," said a franchisee in the Nomura survey.

4. Hello breakfast, goodbye to some McWraps

The all-day breakfast offerings are pushing out other items on the menu, and this may cause confusion and frustration among some diners whose favorite item is no longer available. About half of restaurants recently axed large McWraps—a slower-selling item that’s also complicated to make—to free up space for pancakes and eggs. McDonald's has decreed that different regions can decide what items need to be removed based on local tastes. The popular Egg McMuffin also isn't available all day at every location; about 20 percent of McDonald's locations have chosen biscuit-based breakfast sandwiches.

McDonald’s will likely give an update on all-day breakfast when it reports third-quarter earnings on Thursday.

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