Fast Food Discounts and the Food Service Environment
Recently there has been a trend among quick service (fast food) establishments to offer bundled discounts not part of their normal value or combination meals. Hardees and Carl’s Jr. offer a 4-for $4 deal, Burger King has started offering a 5-for $4 deal, McDonalds is offering a 2 for $2 meal and Wendy’s is offering a 4 for $4 deal as well.
With all of these quick service chains being caught up in the discounting game, it may be fair to speculate that the discounts are working for their competitors. If they were not seeing a loss in sales, it would be odd for all of these chains to offer similar discounts outside of the usual promotional material.
What may not be immediately apparent when looking at the discounts that are hitting the market is that these discounts are actually replacing or covering up the rise in prices of other items on fast food menus.
McDonalds, for example, rolled out their McPick 2 menu, which allows the customer to pick two of any combination of a McDouble, a McChicken, small fries, and mozzarella sticks for $2, just as they abandoned their dollar menu. In July of last year, CEO Steve Easterbrook is quoted to have said that ‘As we moved away from the Dollar Menu, we didn’t replace it with offers of an equivalent form of value. And customers have voted with their feet,’.
Similar to McDonalds, earlier last year other quick service food franchises have tried to back away from their discounting strategies. Burger King started adding items greater than $1 to their value menu a while ago and just last year Wendy’s began to phase out their dollar menu in favor of their new 4 for $4 meal.
Time Money attempts to explain this trend towards $1 or less per item meals in an article written by Brad Tuttle. Tuttle explains that these types of deals are designed to get a customer to spend more than $1 every time they visit a location. Whereas, with a traditional dollar menu the customer could purchase a sandwich and fries for a dollar each, this type of deal encourages a customer to buy more and save more. While it has yet to be proven, this type of discounting could help to increase the average check while still driving in customers with discounts.
While it seems like these fast food giants are all battling for each other’s customers, they may actually have an opportunity to steal away customers from traditional restaurants and fast casual restaurants. According to research from the NPD Group, summarized by the Washington Post, Americans are opting for take-out meals more often than sit down lunches and dinners. In 2014, the average American only ate at a restaurant 74 times per year versus roughly 117 times per year ordering food to go. Since the mid 1980’s there has been a slow decline in the number of meals Americans ate at restaurants per year and an increase in the number of meals they took out per year. However, ultimately the number of meals sourced outside the home has fallen overall.
Due to change in consumer preference in general, fast food companies are not just battling with each other, but trying to attract customers from other industry segments like traditional restaurants and fast casual restaurants like Chipotle, which may not be as hard as before due to recent scandals.
While many of the other fast food establishments are trying to draw in those customers with price alone, McDonalds is not only offering discount deals, but is also trying to change their image to look more like a fast casual restaurant. They have changed their advertising and marketing to look more premium and also started offering some customizable features that are synonymous with fast casual dining. The create your taste campaign allows customers to build their own burger from a variety of premium ingredients.
Create your own taste campaign source: https://www.huffingtonpost.com/burgerbusiness/mcdonalds-adds-chicken-to_b_6289458.html
It is too early to see if this will make much impact on McDonald’s sales, or if focusing on discounted food and premium customizable food will work out. Their quick service competitors are, for the most part, focusing on the food they already have and discounting to attract new customers instead of creating new ways to order or making parts of their business more like a fast casual restaurant. This type of marketing could either end up making it easier for a fast casual or restaurant customer to switch to McDonalds, or make a potential customer think that McDonalds is trying to be something that they are not. Only time will tell if discounting is enough for quick service restaurants to gain customers, or if these restaurants need to change how they operate as well.