Dive Brief:

• McDonald’s U.S. morning daypart continued to struggle with sales declines during Q2 2020 due to the impact of the novel coronavirus pandemic as there have been fewer morning commuters on the road, CFO Kevin Ozan said during a Tuesday earnings call with investors. 
• Dinner is contributing to comp growth in June and July and has been positive while lunch has been in between that and the morning dayparts in terms of performance, Ozan said. 
• The company limited its menu, including cutting its all-day breakfast menu, at the start of the pandemic, which helped make restaurants easier to operate, especially as staffing levels fluctuated. It also helped improve productivity and margins, CEO Chris Kempczinski said during the call.

Dive Insight:

Breakfast has been the most challenging daypart across QSRs since the start of the pandemic, but for McDonald’s the segment has struggled for several years. Prior to the pandemic, the daypart was the only area of growth for the restaurant industry, so there were a lot of competitors flooding into the morning meal, which added additional pressure, Kempczinski said. The company also wasn't as focused on the daypart and was investing more time in other areas of the business like its Hot off the Grill menu items, he said. 

Coming out of the pandemic, the fast food chain plans to put more marketing and investment on the daypart, Kempczinski said. Even though breakfast in general has been struggling, Kempczinki said that McDonald’s is gaining share in the segment. 

"I think, our ability through the drive-thrus right now to be fast at breakfast is certainly an advantage that we’re looking for going forward," Kempczinski said. "And then we will have innovation in breakfast as well."

The chain has limited its menu overall to core items, and while there was no indication of when items would return to the menu, Kempczinski said it will add options back over time. It’s unlikely, however, that the menu will be the same as it was at the start of the pandemic.

The evolution of the menu will vary market to market in the U.S., and the company plans to add new products later in the year, he said. The mindset going forward on adding items previously cut is making sure each one earns its way back, he said. 

McDonald's new products will likely be ones that help drive traffic back to the breakfast daypart, which it attempted to do with its Chicken McGriddles and McChicken Biscuits in January. These items allowed it to better compete with Chick-fil-A’s popular breakfast offering and Wendy’s, which launched a similar item as part of its new breakfast menu in March. This kind of ongoing menu innovation will likely be needed for McDonald's to regain its momentum in the daypart, especially as commuters start to return back to their normal routines.