Whether it’s the Dollar Menu at McDonald’s or the Why Pay More Menu at Taco Bell, fast-food chains often spotlight their cheapest items to attract customers.
They usually cost a buck or so and are a deal. But there’s a reason why companies dangle the offers; customers often end up buying other items once they’re in restaurants. Think $3 coffee frappes and fruit smoothies.
“Every restaurant has an opportunity to get customers to trade up to more expensive, higher-priced options including main entrees, sides, beverages and desserts,” said Darren Tristano, an analyst at research firm Technomic.
Also, value menus aren’t as filling as they were a few years ago because restaurants swap out items that become too expensive to offer at such low prices. Earlier this year, small fries and small soft drinks disappeared from McDonald’s Dollar Menu.
That doesn’t mean that you should stay away from value menus. After all, you get deals on certain items because restaurants make money on others. But as a consumer, it’s worth knowing how fast-food chains rely on value offerings – and the role they play in how much you ultimately spend.
Filling the tray
For restaurants, the profit margins for value menu items are often razor-thin. But they make money by selling the items in huge volumes.
Taco Bell, for example, is known for its affordable prices even in the fast-food industry; its “Why Pay More” menu offers 89-cent nachos and 99-cent tacos. But chances are that you’ll buy more than one taco. Not including a drink, customers order an average of three items, says Brian Niccol, the chain’s chief marketing officer.
Better yet, customers might opt for pricier items, such as a grilled stuffed burrito, which is around $3. Or they might “trade up” to the taco that comes in a Doritos-flavored shell, which costs 30 cents more than a regular taco. The idea is that people will fill up their trays with more profitable foods.
The same philosophy applies to other chains, including Subway. The sandwich shop doesn’t have a value menu, but its $5 foot-long deal has become a staple of its marketing. Subway Chief Marketing Officer Tony Pace said the offer has been a “game changer” in terms of bringing in customers.
And as customers wait for their sandwiches, they might be tempted by the chips (about $1 a bag) that line the counter or the cookies (three for $1.39) by the register.
Are you thirsty?
Whether you choose to order a drink with your meal makes a big difference to fast-food chains. That’s because fountain drinks have high profit margins.
“The more often you can sell a drink, the better you feel
about providing discounts on other items,” Niccol said.
In the past year, however, customers have kept spending in check by ordering only food or requesting water, according to a study by The NPD Group. As sales of sodas have slipped, restaurants have responded by aggressively marketing other drinks, such as specialty coffees and smoothies.
It has been a big part of McDonald’s success in recent years; the chain introduced premium coffee drinks in 2009 and fruit smoothies in 2010. It’s no surprise that Burger King followed suit with its own coffees and smoothies as part of its revamp this year. Wendy’s is testing specialty coffees in select markets.
“There’s definitely a consumer trend of splurging on drinks,” says Niccol.
In fact, “beverage only” trips to fast-food restaurants are increasing, according to The NPD Group.
Value menus aren’t as meaty as they once were, either. When McDonald’s introduced its Dollar Menu a decade ago, for example, the flagship offering was the Big ’N Tasty, made with a quarter-pound beef patty. But as fast-food chains pay more for beef, cheese and other ingredients, what customers can buy for just a buck isn’t quite as filling.
The Big ’N Tasty lasted for about a year. McDonald’s then added the Double Cheeseburger, which has smaller patties, to the lineup instead. About three years ago, McDonald’s replaced it with the McDouble, which has one slice of cheese instead of two.
In March, McDonald’s introduced its Extra Value Menu, where items cost closer to $2. That’s where the Double Cheeseburger is found.
“What it boiled down to was our ability to offer our customers options that make sense for them, but also make sense for us,” says Danya Proud, a spokeswoman for McDonald’s.