Some McDonald's are now accepting Taco Bell receipts as payment

Some McDonald's restaurants are allowing customers to exchange Taco Bell breakfast receipts for a free Egg McMuffin. 

The promotion, which appears to be limited to McDonald's locations in Northeast Pennsylvania, is a sign that the burger chain is worried about its breakfast competition, according to Janney Capital Markets analyst Mark Kalinowski.

"Clearly, at least some McDonald's folks are concerned about the potential competition at breakfast that Taco Bell could provide over time — and maybe is providing right now," Kalinowski wrote in a research note.

Taco Bell has been ramping up its attacks against McDonald's since launching its first breakfast menu last year. In its latest ad campaign, Taco Bell compares McDonald's to a communist dictatorship where everyone is forced to eat Egg McMuffins.

McDonald's has long been the leader in fast food breakfast. The chain commanded a 19% share of the morning market in 2013, according to Nielsen Co. data cited by Reuters. The next closest rivals, Starbucks and Dunkin' Donuts, each had a 7% market share that year, by comparison.

But McDonald's sales are sliding, so it has to play offense.

The company is rolling out a more upscale menu, making its burgers customizable, and removing hard-to-pronounce ingredients from its chicken. It has also slimmed down its menu to help speed up customer service.

And while Taco Bell has throwing direct punches at McDonald's in its advertising, McDonald's has taken a different approach with light-hearted ads touting "lovin'" over "hatin.'"

As part of a recent promotion, for example, McDonald's started accepting selfies, hugs, and other forms of so-called "lovin'" as payment. 

SEE ALSO: Why Chipotle doesn't serve breakfast burritos

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