When too much investment chases a market without enough demand, what happens?  Well, at first there’s a lot of excitement in the industry and in the media.  More and more players chase the market. 

Then, the reality sets in.  Prices drop.  Losers shake out.  Ask you real estate agent or mortgage broker.  In the end, the winners get stronger (ask Google about the 2001 dot-com crash), but there’s a lot of pain along the way.

So we think it will go, on a much smaller scale, with QSR breakfast.  Yet more players are chasing the market everyday, in overlapping ways.  See the news this week.  McDonald’s successfully knocked off a chunk of Starbucks’ coffee business, so why not oatmeal.  Taco Bell plans a national breakfast push aligned to their “Why Pay More?” value menu.  The media is certainly excited.

With the down economy, the breakfast market has actually been shrinking not growing.  To be sure, some will be winners.  If we had to venture a guess, we’d start with the player who has the most consumer credibility and the corporate DNA to eek out penny profit: McDonald’s.  But the flurry of breakfast investment activity is bound to fail for many… like all bubbles, it will burst.