QSRs redefine value menusQSRs redefine value menus

Wendy’s recently replaced its value menu with the Right Price Right Size menu, featuring items like the Crispy Chicken Caesar Wrap.

Flexibility — in pricing strategies and offerings — is increasingly the name of the marketing game as quick-service operators rethink their value menus.

Looking for the sweet spot where value positioning and profit can coexist, several chains have recently moved away from dollar menus in favor of menus featuring more items at slightly higher prices. Among them, Wendy’s is offering a Right Price Right Size menu, Arby’s is testing its Snack ‘n Save menu, and Dairy Queen has the 5 Buck Lunch menu.

“As [commodity] costs increase, these lower-priced items are becoming less and less profitable,” said Darren Tristano, executive vice president at the Chicago-based restaurant industry research firm Technomic Inc.

With prices that range from $1.49 to $1.99, the new menus give operators flexibility to combat rising costs while still conveying a message of value to consumers, he said.

The biggest challenge, according to Tom Kelly, chairman and chief executive at consulting firm Revenue Management Solutions, is to make sure that value menu items fit into the menu mix where they boost sales the most.

Ideally, Kelly said, the value menu pulls up the amount of money consumers spend. Value items should be viewed as add-ons to higher-priced menu items. If there are too many premium items on the value menu, restaurateurs risk pulling higher-paying, more loyal customers down to lower price points.

The companies that succeed in the future will use the value menu to upsell their current offerings while also making consumers feel that they’re getting the most for their money, he said.

That’s where a rebrand can come in handy, Kelly said. If there’s no fixed price attached to the menu’s name — “dollar menu,” for example — restaurants have greater flexibility in what can go on it. It’s both a marketing and sales technique.

“The thing to remember about our industry, from QSR all the way to fine dining, … is that people come for the food,” he said. “We need to focus on the food part because that’s what drives it. We need to get away from the focus on the numeric [price].”

Gary Stibel, founder and CEO of Norwalk, Conn.-based New England Consulting Group, said he agrees.

“In quick serve, value menus have been dumbed down to price points so that, instead of creating value, most quick serve is reducing price,” he said, noting that the more QSRs lower prices, the more consumers are going to want lower prices. 

The key is marketing to customers that they’re getting a great product at a good price, he said.

Ending the addiction

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Operators are trying to do just that.

Wendy’s Right Price Right Size Menu allows customers to create an entire meal, said Denny Lynch, senior vice president of communications for Wendy’s International Inc., the Dublin, Ohio-based parent of the 6,500-unit chain. Introduced in January, consumers can supplement either 99-cent items or premium sandwiches with complementary items for $1.29 or $1.69.

“The broader approach we’re taking is to show customers we have up to 18 menu items at attractive prices,” Lynch said.

Ultimately, the value menu is shifting toward snacking and off-peak occasions, Tristano of Technomic said.

That was the intent at Arby’s with the Snack ‘n Save menu currently being tested in 13 markets. The menu is engineered to increase visits and boost the number of purchases each visitor makes, said Bob Kraut, senior vice president of brand marketing and advertising for Arby’s Restaurant Group Inc. Arby’s is owned by Atlanta-based private equity firm Roark Capital Group and has more than 3,400 locations.

Arby’s is currently testing a Snack ‘n Save menu that includes items like Jalapeño Bites.

“There was an intersection between the snack occasion and the need for value or savings,” Kraut said. “We came up with a menu to solve that consumer problem by combining snacks … with our former value menu.”

At Arby’s menu engineers have recognized a key difference in how we eat today, Tristano said. Not everybody eats three square meals, he said. Rather, modern consumers graze throughout the day.

“As consumers move toward lower-calorie meals, there’s a need for snack offerings,” he said. “Especially the younger generation is grazing more.”

Some consumers define a snack as broadly as a 6-inch sub or a cheeseburger, he said. It’s something they might purchase during nonpeak hours as a means of tiding over their appetites between meals.

“As consumers use value menus to snack more frequently, operators are trying to leverage that into a snacking menu,” Tristano said.

Changing the perception

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Jeffrey Davis, president at food industry research firm Sandelman & Associates, said the evolution of value menus, and particularly the evolution of their names, is as much a marketing tactic as it is a menu development scheme. A value menu’s name and structure can serve as competitive differentiators in the marketplace.

“A dollar menu is something you find a lot of places; it’s not very different,” Davis said. “This is a way to sculpt their offer into something unique for consumers.”

Davis said he doesn’t see quick-service chains moving away from value as a concept, even if some chains may shift away from “value” as a term.

“Value can be translated in lots of different ways,” he said. “It’s just a way of communicating what, specifically, their value proposition is.”

At Dairy Queen that message is consistency, according to Barry Westrum, executive vice president of marketing for the Minneapolis-based brand.
The chain introduced a 5 Buck Lunch value menu in March. The menu offers guests a choice between a Chili Cheese Dog, 3-Pc. Chicken Strip or 1/4 lb. GrillBurger lunch, served with a medium order of fries, a medium soft drink and a soft-serve sundae.

“We needed everyday value the consumer could rely on so we could steal share from our competitors, who constantly bewilder consumers with inconsistent value offers,” Westrum said.

Minneapolis-based Dairy Queen has about 4,600 North American units and is a division of Berkshire Hathaway Inc.

Meanwhile, Taco Bell is taking a different tack and dropping its prices even further. The Irvine, Calif.-based quick-service chain announced in early May that it may expand its $1 Cravings Menu to all 5,800 of its units.

The move — providing ultra-cheap items alongside the chain’s higher-end Cantina Bell line — is one that executives at the Yum! Brands Inc. subsidiary said will help Taco Bell cater to a broader array of consumers.

The $1 Cravings Menu would replace the company’s existing Why Pay More! menu, which has different price tiers. The highest prices on the menu are currently $1.99 — nearly $1 higher than when the menu was first introduced in 2008.

Taco Bell is looking to gain traction with these less-expensive items, and its low per-item food cost is enabling the chain to price its offerings fairly low despite the fact that prices industrywide are trending up, Tristano said. He noted that 5,800-unit Taco Bell has traditionally had lower-priced items on its menu than some of its peers.

“They’re trying to take advantage of the fact that what was a dollar menu or value menu is evolving,” he said.

Contact Erin Dostal at [email protected].
Follow her on Twitter: @erindostal.