Fast Food Keeps Pushing Value Envelope
By Tom Ryan
Taking the value menu down yet one more rung, Taco Bell has introduced
a $2.00 combo meal featuring a taco or burrito, medium soft drink and a bag
of Doritos. The move is seen as a direct strike at popular dollar menus at
McDonald’s and other hamburger chains, where three items cost $3.
that began running Sunday even poke fun at the dollar menu. Taco Bell workers
and customers are seen pondering how the chain can sell three items for $2,
and assume one of the items must be "free." The actors then
argue about which item the freebie is.
"If we just tossed a pebble into the
pond, the ripple wouldn’t find its way to shore," said Greg Creed, president
of Taco Bell, to USA Today. "We’re
throwing a boulder into the pond. This will be a disrupter in the marketplace."
also cited the need for a strong value message amid still high unemployment
rates. Taco Bell will continue to offer its 79-cent, 89-cent and 99-cent value
menu. "This is a way to reframe another point of value," Mr. Creed
Speaking to Walletpop.com, Scott Testa, professor of business administration
at Cabrini College, said fast food chains are using these deals as loss leaders
and hoping consumers stock up on fuller-margin items.
"They get you in with the $2 promotion and while people are there they
hope they will spend money on other areas such as some extra guacamole and
up-sell them on those products," he said.
Other restaurants have followed
fast-food joints in offering steep bargains to drive traffic. Pizza Hut is
offering pizzas for $10. T.G.I. Friday’s briefly offered $5 sandwiches
last year. Denny’s recently rolled out $4 all-you-can eat pancakes. Subway’s
$5.00 foot-long deals were quickly matched by Quiznos and Blimpie.
One group not happy
about the extent of the value-deals is Burger King franchisees, who twice voted
against selling the $1 double cheeseburger sandwich. After Burger King executives
overrode their wishes and made the double cheeseburger a mandatory menu item,
the franchisees filed a class action lawsuit.
Franchisee Dan Fitzpatrick
told Minyanville.com that combining the ingredients
(estimated at 55 cents each), plus rent, labor, and royalties paid to the parent
company, each burger "conservatively" costs $1.10 to $1.15.
to dismiss the franchisees’ suit, however, Burger King’s attorney argued last
week in a court hearing, "We’re responding to the competition.
Everyone is out there with $1 products."
Discussion Questions: Are value deals a positive or negative for fast food
chains? Will chains be able to wean consumers off dollar menus and the like once
the economy rebounds or are they here to stay?
- Taco Bell’s new $2 Meal Deals set new standard for fast food – USA
- Burger King franchisees fight to have it their way – Miami
- Taco Bell to debut $2 combo meal – walletpop.com
- Burger King’s $1 Double Cheeseburger Fight Continues – Minyanville.com