FAST-FOOD INDUSTRY Chain eateries target the late-night crowd

The all-night diner is getting some competition.
CHICAGO TRIBUNE
CHICAGO -- As Jimmy Orbon, 18, and his friends prowled the North Side of Chicago for some 2 a.m. chow, they hardly expected to end up at the daytime bastion of Happy Meals and Disney toys.
They were looking for a freshly made burrito or for the ambience of a grubby diner. Perhaps even some doughnuts. Instead, Orbon and his friends hustled to get inside a McDonald's with a dozen or so other people eager to escape the cold. Orbon's order reflected his surroundings: cheeseburger, fries and a Coke.
"They're always closed around me," he said, referring to the McDonald's near his Northbrook, Ill., home. "But this works."
It works well enough, in fact, that fast food companies have stormed the late-night scene, hoping to snatch revenue from a market that once was left wholly to greasy spoons and all-night pancake joints.
Like Orbon and his buddies, this new generation of consumers sees no reason why their 1 a.m. culinary choices should be limited to leftovers, microwaved hot dogs and all-night diners. More and more, they are finding "supersizing" and "combo meals" on the list of available options.
Expecting more
Coddled by the immediacy of the Internet and weaned on unconventional working hours, many consumers simply expect to have more choices. And they expect them now -- whenever that happens to be.
"The consumer is in fact saying, 'I want what I want when I want it,"' said Dennis Lombardi, vice president of Technomic Inc., a Chicago-based food-service consulting firm.
The nation's fast-food giants are more than happy to comply. Under pressure from rapidly growing outfits such as Panera Bread Co. and Corner Bakery Cafe, they're rolling out expanded menus and late night hours to make up the difference.
Yum! Brands' Taco Bell, Wendy's International Inc. and White Castle Management Co. have been sparring over late-night revenues on a national level since 2000.
McDonald's, however, quietly made its move into the late-night fray earlier this year, after a dismal 2002 forced it to reexamine some of its business strategies.
Denny's takes notice
Their interest hasn't gone unnoticed. DFO Inc.'s Denny's and like restaurants have controlled the late-night market for decades. And the old guard has noticed the extensive invasion of its turf.
"Clearly, late night is a way for many brands to increase their sales," Denny's CEO Nelson Marchioli told analysts in a third quarter earnings conference call. Late night "market share is something that we have that others want, and some people have been successful in getting that."
Marchioli acknowledged Denny's will have to fight harder to maintain its presence in a market it once took for granted. Among other things, it's planning to bump up its advertising, he added.
The leader
Analysts say that of the fast-food operators, Taco Bell is one of the more established in catering to late-night crowds.
About 80 percent of its franchises operate to midnight or beyond and about 20 percent of its total sales come from burritos, nachos and tacos munched down after 11:00 p.m., said Greg Creed, chief marketing officer.
Taco Bell for years only stayed open late and advertised the fact during the summer. But starting about two years ago, "we realized that late night is a place we can grow 52 weeks of the year," Creed said.
Since then, the 7,000-restaurant chain has mounted a national advertising drive proclaiming its place in late-night culture. Taco Bell spends $200 million annually on advertising, a good chunk of which either features its late night dining opportunities or at least squeezes in a mention of them.
"We know what we have to do to be successful," he said. "That's us leveraging our strength as opposed to having to reinvent ourselves" like McDonald's.
Rising profits
Apparently, the new strategies are working. McDonald's profits rose a robust 12 percent for the third quarter ended Sept. 30. New menu items, such as salads, are a big reason for this, but some of that growth definitely can be attributed to late-night sales, Fields said. "If we're up double digits, there's a piece of that that is extended hours."
Wendy's went full throttle with their "eat great even late" campaign in 2000, spokesman Bob Bertini said. About 90 percent of the hamburger chain's restaurants are now open until midnight, and many are open until 1 a.m. or 2 a.m.
"Our internal research shows that we are far and away the most recognized chain for late-night availability," he said.
Most late-night visits to the roughly 6,000 Wendy's do not come from partying teens or roving college students, he said. The majority of people are just picking something up to take back home to eat alone or with a spouse, he added.
"It all has to do with changing lifestyles. People now eat when their schedule allows."