Written by Aaron Choi
In order to compete in this landscape, food industry competitors are now prioritizing increased foot traffic in their establishments, creating value deals to lure customers who are looking for a quick bite.
Competition for customers has been a long-standing issue in the food industry. More specifically, the fast food industry is facing an intense battle to win over customers, who are more educated than previous generations and therefore, more health-conscious. Restaurants are also facing stringent regulatory requirements, such as the enforcement of high-sodium warnings on certain foods in 2016. In order to compete in this landscape, food industry competitors are now prioritizing increased foot traffic in their establishments, creating value deals to lure customers who are looking for a quick bite. McDonald’s, Burger King, Popeyes, KFC, and Subway have all created unique, catchy names for their deals. “Fast casual” restaurants have also caught on to the trend, featuring their own entrée and appetizer combos as headlines in their commercials. But which chains are the most effective in increasing sales, and which restaurants are left in the dust?
In April 2016, Wendy’s started its “4-for-$4” menu that included a burger, fries, chicken nuggets, and a soft drink. The new menu boosted Q1 2016 sales by 5.4% in U.S. locations—catching the eye of many of Wendy’s competitors. Moving away from McDonald’s pioneering Dollar Menu, fast food chains have pushed towards deals for $6 or less, such as Burger King’s 2 Whoppers for $6, Popeyes’ $5 Bonafide® box), KFC’s $5 Fill-p boxes, and Taco Bell’s $5 Double Chalupa. This stems from an industry-wide push to bring back sales and foot traffic from the increasingly health-conscious consumer. According to a Nielsen Company survey, 60% of respondents who said they were changing their diets to lose weight said that they were doing so by eating more natural, fresh foods. This is bad news to fast food chains, but it seems as though they remain unaffected. For example, in late October, McDonald’s beat earnings and same-store sales growth expectations. This better-than-expected result came from promotions such as the $1 soft drink and “McPick 2”. As fast food restaurants like McDonald’s and Wendy’s continue to show strong earnings growth from their new menus, we can expect to see other chains create even more competitive deals to attract customers away from their competitors.
Fast casual restaurants are very much different than their fast-food counterparts. For one, fast casual restaurants provide a more intimate setting, with menus on paper instead of LED-lit boards and conventional waiters taking patrons’ orders. However, the downsides of these restaurants include longer wait times, the need to tip, and more expensive meals. Fast casual restaurants like Applebee’s, TGI Friday’s, and Buffalo Wild Wings have relatively higher food prices than fast-food chains, and sales have decreased amid fast-food bundle deals. In response, Applebee’s and TGI Friday’s have both released appetizer deals to lure in customers. TGI Friday’s in the past has offered endless apps, and today it stands at $10, while Applebee’s has had many variations on its famous “two for $20” deal, which includes two entrees and an appetizer to share—designed to attract couples and families. To sweeten the deal, Applebee’s has added popular items to this promotion. The food industry is so heavily engaged in this widespread price war that TGI Friday’s has made its signature apps deal a permanent feature on its menu to stay competitive and “escape a dying industry,” as stated by Business Insider.
Getting customers through the door is half the battle, and fast casual restaurants now hope that customers spend a little more on drinks and other foods because that is one of their only mechanisms for increasing profitability.
In this day and age, fast food restaurants have overhauled their menus to appeal to a cost-conscious consumer. McDonald’s first pioneered this movement with its dollar menu, but as food costs rise, fast food chains remain pressed to find creative, yet competitive, ways to frame their deals. Catchy names and ad campaigns are just some of the ways that these chains have fought to market their new food deals and stay above the water. Fast casual restaurants have also tried to lure customers with their own bundle deals, albeit with little wiggle room for a price war. The fast food industry is expected to grow into the foreseeable future, and that just might nudge out fast casual dining in the race for profit.