As both spare time and 9-to-5 workdays become increasingly scarce, many Americans are hitting their favorite fast-food restaurants late at night or early in the morning.
In the past year, McDonald's, Burger King and others have stepped up efforts to extend their hours in an attempt to wring more profits from existing real estate in the saturated U.S. market. The moves follow a pattern set by Wendy's and Taco Bell, among the first to cash in on the trend in the mid-1990s.
Today, about 72 percent of fast-food meals are taken away from restaurants, according to research firm NPD Group. Many customers are grabbing those meals beyond the traditional 5 to 7 p.m. dinner hours, using the drive-through as a substitute for their own refrigerator.
"If I'm working on a project, I work very long hours," said Brad Turnbough, a 23-year-old computer analyst from suburban Chicago. "I might just stop in on my way home."
The chains don't disclose financial details about their late-night business, but consulting firm Bain & Co. estimates that through 2003, Taco Bell, a unit of Yum Brands Inc., gleaned 16 percent of sales during late-night hours, with Wendy's getting 11 percent and McDonald's 8 percent.
"The real lure of late night is that it's an opportunity for operators to increase their average restaurant sales, increase the profitability and the return on the assets they have in place," said Ritch Allison, a retail partner with Bain.
Incremental business
But analysts said late-night business is not likely to be a one-size-fits-all panacea to drive up sluggish sales. While fast-food outlets near airports, colleges and factories are a natural fit, extended hours at some rural areas and bedroom communities often won't work due to lack of demand.
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A major benefit of operating late, typically from 9 p.m. to midnight or beyond, is that it's fairly cheap, analysts said. Most chains limit access during late-night hours to their drive-through windows and can run with a skeleton crew of as few as three employees, with one taking orders and the others working in the kitchen.
"It's all incremental business," said Bob Goldin, an executive vice president with Technomic Inc., a Chicago restaurant consulting firm. He estimated that McDonald's Corp., whose sales have been on the upswing in the past year, has increased same-store sales growth by between one and three percentage points by extending its hours.
Oak Brook, Illinois-based McDonald's, which since 2003 has curbed expansion to improve operations and build traffic at existing stores, now has about 80 percent of its 13,000 U.S. restaurants on some form of extended hours, a spokesman said. At least 12 percent operate around the clock.
"You see every type of customer during the night," said Jan Fields, president of McDonald's central U.S. division. "It's hospital workers ... limousine drivers, people that are on sports teams who are traveling."
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Fields, who oversees 4,400 U.S. McDonald's, said menu preferences during off-hours are not that different from the rest of the day, with customers spending roughly the same amounts. Most stores that operate round the clock switch over to the breakfast menu around 4. a.m., she said.
Growth driver
McDonald's doesn't advertise its program nationally, but uses local market promotions, such as 25-cent cups of coffee, to boost traffic. In the New York metropolitan area, the company recently sponsored a series of parties at area nightclubs, offering discounts to club customers who provided McDonald's receipts. Promotional materials were tagged: "When you're up, we're up."
Wendy's International Inc. first introduced its late-night program in 1996 and rolled it out across the United States in 2000. The No. 3 burger chain supports the "Eat Great, Even Late!" campaign with national advertising.
Now more than 90 percent of Wendy's nearly 5,800 U.S. stores operate until midnight, with many open through 1 a.m., all offering a full menu, said company spokesman Bob Bertini.
"We've really opened up a new daypart for us," he said. "People's lifestyles have changed."
According to a company publication, late-night sales have been Wendy's top growth driver for seven of the past eight years.
Burger King Corp., the No. 2 U.S. burger chain, is testing 24-hour stores in Colorado. In an interview with Reuters, incoming Chief Executive Greg Brenneman said that extended hours are among "a lot of sensible things" the privately held company is considering on a permanent basis.
Said Crowell Weedon & Co. stock analyst Doug Christopher: "It's definitely a trend and certainly a good business to have. Fast-food with the drive-through lends itself to the 24-hour lifestyle in America."