LOS ANGELES —January is typically a month filled with meal deals and discount promotions, but pricing experts are predicting that operators in all segments will be focused on value at least through the first half of 2008.
Given the challenging macro-economic climate, it’s not surprising that quick-service leaders McDonald’s, Wendy’s and Burger King are battling with $1 double cheeseburgers, many say. But the value message increasingly is creeping into the marketing campaigns of fast-casual and casual-dining operators as they seek to turn around slowing guest traffic trends—and it’s likely to stay there. —January is typically a month filled with meal deals and discount promotions, but pricing experts are predicting that operators in all segments will be focused on value at least through the first half of 2008.
Operators at all levels say they are getting a positive response with meal deals, indicating that consumers are looking for ways to trim dining expenses. —January is typically a month filled with meal deals and discount promotions, but pricing experts are predicting that operators in all segments will be focused on value at least through the first half of 2008.
Still, experts warn that, at any level, value pricing does not come without risks. Consumers can develop a habit of trading down to lower-priced options or waiting for the discount promotion, consultants contend. —January is typically a month filled with meal deals and discount promotions, but pricing experts are predicting that operators in all segments will be focused on value at least through the first half of 2008.
“When everyone does it, everyone loses,” said Stuart Morris, president of QSR Consulting Group Inc., in Coronado, Calif. —January is typically a month filled with meal deals and discount promotions, but pricing experts are predicting that operators in all segments will be focused on value at least through the first half of 2008.
In January, several prominent operators launched value-price promotions. Concord, Calif.-based Round Table Pizza, for example, brought back its extra-large, $12.99 Big Vinnie pizza. —January is typically a month filled with meal deals and discount promotions, but pricing experts are predicting that operators in all segments will be focused on value at least through the first half of 2008.
Dallas-based Pizza Hut’s Pizza Mia program offers three medium pies for $5 each or one for $6.99 for “families feeling the financial pinch today,” the company said. —January is typically a month filled with meal deals and discount promotions, but pricing experts are predicting that operators in all segments will be focused on value at least through the first half of 2008.
San Diego-based Jack in the Box Inc. introduced a combination meal at its namesake restaurants called the Big Deal, including the choice of a chicken sandwich or cheeseburger, plus two tacos and a 20-ounce soft drink for $2.69. —January is typically a month filled with meal deals and discount promotions, but pricing experts are predicting that operators in all segments will be focused on value at least through the first half of 2008.
Checkers Drive-In Restaurants rolled out a Double Value Menu featuring 10 items starting at $1, as well as a line of double burgers, chicken and fish sandwiches available in two-for-$3-to-$5 deals. Once used as limited-time offers, the “two-for” deals are now part of the chain’s permanent menu. —January is typically a month filled with meal deals and discount promotions, but pricing experts are predicting that operators in all segments will be focused on value at least through the first half of 2008.
While the quick-service segment is expected to see an increase in permanent value-menu options, fast-casual and casual-dining operators also are likely to build more value options into their permanent menus, industry observers say. —January is typically a month filled with meal deals and discount promotions, but pricing experts are predicting that operators in all segments will be focused on value at least through the first half of 2008.
Last fall, Culver City, Calif.-based Sizzler USA ran a limited-time offer called “Steakhouse Favorites,” featuring an 8-ounce steak with a baked potato and a Caesar salad for $8.99 throughout the chain’s 223 domestic units. —January is typically a month filled with meal deals and discount promotions, but pricing experts are predicting that operators in all segments will be focused on value at least through the first half of 2008.
“It was huge,” said Ken Cole, Sizzler president and chief executive, noting that the promotion accounted for about 8 percent to 10 percent of sales while it was available. The promotion increased guest traffic and brought sales up from negative to flat, especially after television ads for the promotion ran in key markets. —January is typically a month filled with meal deals and discount promotions, but pricing experts are predicting that operators in all segments will be focused on value at least through the first half of 2008.
Now company officials are testing a similar value program to add to the menu permanently, offering a combination meal in the $9.99 range, though they haven’t decided yet what the options will be or whether the deal might be available only on certain nights of the week. —January is typically a month filled with meal deals and discount promotions, but pricing experts are predicting that operators in all segments will be focused on value at least through the first half of 2008.
In addition, limited-offer promotions also will continue, Cole said, with a mixed seafood grill in line to launch at the end of January. —January is typically a month filled with meal deals and discount promotions, but pricing experts are predicting that operators in all segments will be focused on value at least through the first half of 2008.
“We may even look at running it at a different price in Northern California, where the economy is stronger, than in Southern California,” which would help offset the price drop in more economically vulnerable regions, he said. “We feel that value is a strong focus here right now for everyone.” —January is typically a month filled with meal deals and discount promotions, but pricing experts are predicting that operators in all segments will be focused on value at least through the first half of 2008.
Indeed, Goldman Sachs Group Inc. in December released a survey predicting that consumers would continue to reduce their discretionary spending through the first half of the year. While the quick-service segment is better positioned to weather such storms, the survey indicated, results showed that even higher-end consumers also are likely to cut back, putting higher-price-point operators at risk. —January is typically a month filled with meal deals and discount promotions, but pricing experts are predicting that operators in all segments will be focused on value at least through the first half of 2008.
“It’s definitely at the forefront of the minds of those in management,” said Dennis Lombardi, executive vice president of food-service strategies for WD Partners in Columbus, Ohio. “Since the beginning of 2007, I’ve been suggesting to clients in casual dining that they would need to have some value-positioned limited-time offers ready to pull off the shelf in case the economy goes soft, and that appears to be happening. The reaction all along [from operators] has been either that it’s a great idea or that they were already doing that.” —January is typically a month filled with meal deals and discount promotions, but pricing experts are predicting that operators in all segments will be focused on value at least through the first half of 2008.
T.G.I. Friday’s, which is owned by Carlson Restaurants Worldwide Inc., took the value-pricing route in February 2007 with the introduction of a three-course menu priced between $12.99 and $16.99. A second program, dubbed “Right Portion, Right Price,” offers meals priced between $6.99 and $8.99 with smaller portions, offering the promise of both value and healthful dining. —January is typically a month filled with meal deals and discount promotions, but pricing experts are predicting that operators in all segments will be focused on value at least through the first half of 2008.
To succeed, however, such efforts generally require the need to “drive a tremendous amount in traffic,” notes restaurant consultant Aaron Noveshen, owner of The Culinary Edge in San Francisco. —January is typically a month filled with meal deals and discount promotions, but pricing experts are predicting that operators in all segments will be focused on value at least through the first half of 2008.
Other chains, such as Ruby Tuesday, have seen a loss in traffic that some blame on a move away from value positioning. —January is typically a month filled with meal deals and discount promotions, but pricing experts are predicting that operators in all segments will be focused on value at least through the first half of 2008.
Since 2005, Maryville, Tenn.-based Ruby Tuesday has been working to improve service and food quality as well as upgrade facilities in a brand repositioning to appeal to more upscale guests. But analysts say the resulting loss of lower-tier customers hasn’t yet been offset by an increase in higher-income diners. —January is typically a month filled with meal deals and discount promotions, but pricing experts are predicting that operators in all segments will be focused on value at least through the first half of 2008.
In December, company officials indicated that future marketing efforts would attempt to build brand awareness with a compelling value focus. —January is typically a month filled with meal deals and discount promotions, but pricing experts are predicting that operators in all segments will be focused on value at least through the first half of 2008.
If the economy continues to slow, traffic will continue to deteriorate, Lombardi added. Margin pressures will force operators to raise prices, which will increase the need for value-oriented alternatives on the menu. —January is typically a month filled with meal deals and discount promotions, but pricing experts are predicting that operators in all segments will be focused on value at least through the first half of 2008.
Get-more-for-your-money bundling strategies, such as that used by Jack in the Box in its latest promotion, offer profit potential by including a beverage, which is typically a high-margin item. —January is typically a month filled with meal deals and discount promotions, but pricing experts are predicting that operators in all segments will be focused on value at least through the first half of 2008.
“If you can command a drink sale, you can do pretty well from a profitability standpoint,” said Morris of QSR Consulting. “Drinks are always the first thing to go when the economy gets tight. People can get water or bring a soda from home.” —January is typically a month filled with meal deals and discount promotions, but pricing experts are predicting that operators in all segments will be focused on value at least through the first half of 2008.
Bundling, however, is also risky, he noted. —January is typically a month filled with meal deals and discount promotions, but pricing experts are predicting that operators in all segments will be focused on value at least through the first half of 2008.
“It’s almost impossible to offset the trade down,” he said. —January is typically a month filled with meal deals and discount promotions, but pricing experts are predicting that operators in all segments will be focused on value at least through the first half of 2008.
Morris points to alternative strategies that appear to be building transactions for operators without discounting or lower pricing. —January is typically a month filled with meal deals and discount promotions, but pricing experts are predicting that operators in all segments will be focused on value at least through the first half of 2008.
Quiznos last year introduced a new flat-bread sandwich product called Sammies for $2, which could serve as a snack or meal. —January is typically a month filled with meal deals and discount promotions, but pricing experts are predicting that operators in all segments will be focused on value at least through the first half of 2008.
“It opens a whole new category for them,” Morris said. “Quiznos was notoriously known to be expensive,” but Sammies are perceived as being a better value. —January is typically a month filled with meal deals and discount promotions, but pricing experts are predicting that operators in all segments will be focused on value at least through the first half of 2008.
Another example is Golden, Colo.-based Good Times Restaurants Inc., which has reported 16 consecutive quarters of same-store sales increases. In the latter half of 2007, company officials attributed the success in part to sales of their new “bambinos,” 75-cent mini burgers offered three for $2.25 and five for $3.75. —January is typically a month filled with meal deals and discount promotions, but pricing experts are predicting that operators in all segments will be focused on value at least through the first half of 2008.
After reporting same-store sales increases of 12.8 percent in October and 10.6 percent in November 2007, Boyd Hoback, Good Times president and chief executive, said, “We have been fairly aggressive in taking price increases over the past five months, but we are still growing our customer transactions, and improving our overall value proposition appears to be resonating with our customers.” —January is typically a month filled with meal deals and discount promotions, but pricing experts are predicting that operators in all segments will be focused on value at least through the first half of 2008.
