Runaway commodity costs and sluggish customer traffic have forced most restaurant chains to boost menu prices this year. But while executives concede that they have little choice but to increase tariffs, many are giving customers ways to “opt out” of paying more by offering attractive bundled meals and combos.


Casual-dining chains, which initially sought to stimulate flagging dinner traffic with specially priced bundled meals, now are beginning to target other dayparts with packages featuring smaller portions priced around the $10 mark, or by offering extras that can be added to combos for only a few dollars more.


Chains like Applebee’s, Chili’s and T.G.I. Friday’s are placing more emphasis on lunch offers in an effort to complement dinnertime traffic drivers like “two for $20” deals. Meanwhile, Red Lobster is promoting its $15 Seafood Feast, which is set at a lower price than its Lobsterfest and $29.99 Seafood Dinner for Two. 


And other chains with established bundles, like P.F. Chang’s China Bistro, are devising ways for customers to upgrade existing fixed-price deals.


As more restaurants contemplate strategies that soften the blow of across-the-board menu price hikes, some are finding that deals tied to fixed price points allow them to maintain value perceptions.


At P.F. Chang’s, sales of the four-course Chang’s for Two bundle, priced at $39.95, have grown over the past nine months, said president Lane Cardwell. Chang’s for Two has been in place since 2008 as a way to open up the 372-unit chain’s menu to recession-strapped customers, Cardwell said. P.F. Chang’s took a 2-percent price increase in May and 1 percent in November 2010, but the Chang’s for Two price has remained flat.


“It wasn’t a defensive move for us; it was offensive,” Cardwell said. “We viewed it as a convenience to our guests to be able to choose from a multicourse menu but know what the price would be. If you order Chang’s for Two, you’re actually getting to opt out of our last two price increases.”


One marketing expert, however, cautioned that a deal for the customer does not always benefit the restaurant.


“I’m going to take a price increase, but let you opt out?” said Mark Laux, chief executive of Oshkosh, Wis.-based HotOperator, a menu consultancy. “What did I do then? I didn’t get my price increase.”


Laux suggested advertising discounted appetizers or desserts as add-ons to a full-price entrée.


“I’m huge on anything incremental,” Laux said. “I’m sure guests will get a sandwich or entrée, but I don’t know if they’ll get appetizers or other add-ons. [The restaurant operator doesn’t] have to pay the overhead because it’s covered in the cost of the entrée, and it’s pure profit aside from the food cost.”


Lynn Hinderaker, an Omaha, Neb.-based consultant who helped Taco Bell develop one of the first value menus in the late 1980s, said restaurants can add value without touching prices.


“Incremental is all well and good, but you should still maintain the price point you had, and have more selections that are premium versions of value,” he said.


There’s room to maintain prices while tweaking portion sizes at lunch, he added.


“Why can’t we just cut back portions and maintain the price point to keep food cost below 30 percent?” he said. “Now that we have the healthy trend, now’s the time.”


But, he cautioned, “Don’t do it at dinner; people don’t want to diet at dinner.”


Operators can improve evening bundles by raising interest in the deal, especially by focusing on families, Hinderaker said. He suggested a bundle for three or four people instead of just two, or raising the price slightly on a two-person bundle but adding a kids-eat-free component.



Daylight savings


As brands take package deals to new dayparts, price points have changed to drive traffic at breakfast and dinner. Chili’s is supplementing its $20 Dinner for Two with new lunch combos, available for $6, $7 or $8. Warren, Mich.-based family-dining chain Big Boy has not raised prices this year, but it is preparing to roll out a new menu in which higher prices will be supported by value bundles as part of a barbell strategy.


“We’ve tried bundling different items like an entrée, side and beverage, or a lot of pies and desserts, and it’s hit and miss,” said Big Boy’s chief executive Keith Sirois. “When you get around the $5 price point, you can get anybody to come in, but you can’t make any money.”


Big Boy’s new menu lets guests build their own omelets and burgers or bundle a growing number of breakfast items. Sirois is expecting a 3-percent lift in average check from the new menu.


When Applebee’s started running its popular 2 for $20 bundle at dinner in 2008, it was to maintain traffic, and it continues to accomplish that, said Zane Tankel, chairman of Apple Metro Inc., a 35-unit franchisee in Harrison, N.Y.


“I thought 2 for $20 was brilliant back then, and it still is,” Tankel said. “I always felt discounting is a point of no return. If we give people $5 off something, and then we take it away, as far as somebody’s concerned, we just took price.”


Apple Metro took a 1-percent increase in late 2010 and is considering another 1-percent hike at the end of the summer, Tankel said, adding that Applebee’s new Pick ’N Pair Lunch Combo for $6.99 is an evolution of the winning bundling strategy and should drive traffic at lunch.



Bumping up the bundle


There’s also room to tweak established dinner deals for slightly higher prices, Tankel said, as Apple Metro has done with its 2 for $26 bundle variant.


“For $3 more a person, it’s the same offering but with larger portions,” Tankel said. “It’s been very well received.”


P.F. Chang’s recently amended Chang’s for Two to include several seafood entrées, available on the menu for up-charges that range between $1.95 and $8.95. In addition, guests can split a large dessert for between $1.95 and $3.95 rather than selecting two miniature desserts.


Those changes “put us in a position to say ‘yes’ instead of ‘no,’” Cardwell said, and the same kind of value engineering could help the brand raise the price of Chang’s for Two.


“At some point we’ll have to break the $39.95 barrier, but we’ll make sure the value is clear,” Cardwell said. “Maybe there are even more items we could include in a $42.95 offer. [That would help] recapture some price increases that weren’t included in the current bundle.”


Cardwell said Chang’s for Two continues to drive “significant” business because customers understand the value proposition.


“The beauty of it is its simplicity,” Cardwell said. “They look at our à la carte [menu] and realize that just by shifting over to the package they get soup or dessert for free.” 


Contact Mark Brandau at mark.brandau@penton.com.