Taco Bell's Plan for Winning Breakfast Fast Food Wars

Taco Bell has generated big buzz for its new breakfast menu by taking aim at McDonalds.
5:15 | 04/12/14

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Transcript for Taco Bell's Plan for Winning Breakfast Fast Food Wars
It's been said that breakfast is the most important meal of the day. And for fast food businesses it may just turn out to be the most lucrative. Americans spending more money in the morning than ever. And everyone wants a piece of the bacon. Now, McDonald's and taco bell locked in a bit bitter battle for your morning meal. I love taco bell's new breakfast. Reporter: Yes, you are hearing correctly. I'm Ron McDonald. Reporter: This is Ronald McDonald, endorsing taco bell. Delicious new breakfast everyone can love. Even Ronald McDonald. Reporter: Welcome to the ]. Fast wars. In this corner, the breakfast, McDonald's. In that corner, taco bell, a little chihuahua nipping at McDonald's heels for the first time for breakfast two weeks ago. Taco bell's latest cheeky sell though, this ad. Featuring a guy who has been eating egg mcmuffin's since 1984. ♪ When I saw taco bell ♪ Reporter: After trying taco bell's breakfast menu heap gets with the times, trimming his hair and getting a smartphone. ♪ Now I'm eating waffle tacos ♪ Why aim directly at fast food breakfast goliath. $32 billion, that's why. It is what Americans spend on fast food breakfasts every year. Worth having a slice of. McDonald's gets about 20% of its sales from breakfast. It made $10 billion last year from that one meal alone. Dwarfing taco bell's $7.6 billion in total sales for all meals. So, David decided to take on goliath. In terms of whether they can chip away at McDonald's market share I think they can and I think McDonald's is worried about that. Reporter: Taco bell working on its morning men up for over seven years it is not about to flinch. The big message is we are here to stay in breakfast. Reporter: The chain inviting "Nightline" to the innovation kitchen in California. And explaining how it came up with the waffle taco. The am crunch wrap, and cinnabuns. We tried to make sure we have the right thing. True to taco bell. Innovation. The whole reason we are doing this, we just thought breakfast was really boring. We wanted to Barack up the boring, shake up the routine. They have a new coffee line and make sure all breakfast sandwiches can be held in one hand. The A.M. Crunch wrap. One-handed to. Go with the new menu. A new ad campaign by erol Morris. The first commercial unleashing these 25 men named Ronald McDonald. Each of them professing their love for its new breakfast items. I love taco bell's new breakfast. The commercial generating so much buzz, the golden arches rounding up its troops and firing off an immediate response. Barking back on social media with this image of the crown in red and yellow kneeling down to pet the taco bell chihuahua. Imitation is the sincerest form of flattery. At an attempt at a knockout blow, offering three cups of mccoif fay coffee to customers during breakfast hours for two weeks. McDonald's said back off my territory. We are the breakfast king. They started the marketing blitz. Then they also put on a con ser -- concert in times square. A flash mob in Chicago to get the buzz growing in major cities over mccafe coffee line. McDonald's. The in disputed king, with sandwiches like egg mcmuffin and it will fierce LEM defend that position. But it is frefti ingfretting about the chihuahua because in the last few years Breck fa has become more important than ever to its bottom line. One of the wholesome ways to start. Traffic during breakfast hours has been steadily increasing. While traffic during lunch and dinner hours has been steadily decreasing year over year. Why breakfast? The cheapest meal you can get outside of a snack. Consumers are still tight with money after the recession. Everyone is after of a piece of the growing pie. Just weeks ago, Duncan donuts, unveiling eggs Benedict sandwiches. Last month. Starbuck's revealing the egg and cheddar sandwich and new and improved reduced breakfast sandwich healthy options too. But really taco bell. An A.M. Crunch wrap with 700 calories. Everybody does like to go to fast food for their greasyburgers and delicious fries and tacos as well. At taco bell. So I mean there is definitely a huge market for -- for that, you know I am going to splurge today. Once a week kind of stop by and get fast food. A huge market that has the got fast food chains duke it out. For "Nightline." I

This transcript has been automatically generated and may not be 100% accurate.

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