For restaurant operators to compete effectively in today’s marketplace, a value proposition is warranted to drive frequency and to attract value seeking customers,” says Bonnie Riggs, NPD restaurant industry analyst.
Chicago, IL (PRWEB) May 23, 2016
Since last fall it has been a game of thrones among the top three quick service burger chains, Burger King, McDonald’s, and Wendy’s, as one after another launched their version of a combo value meal and battled for visitors and quick service dollars, reports The NPD Group, a leading global information company. Though the value wars still rage on, it turns out that each chain’s value-oriented combo meal is victorious in its own right, whether driving visit frequency and more foot traffic or increasing check size, according to NPD’s receipt mining service, Checkout Tracking.
Historically, quick service restaurants (QSRs) have grown their business by offering lower priced eats in the form of combo meals and value menus. Over the past few years, instead of value meals and menus the focus was more on quality and higher priced menu offerings, partially due to menu inflation that was eroding profit margins. With high food inflation lessening, the time was right to revisit value offerings.
Wendy’s threw down the first gauntlet with the launch of its 4 for $4 meal in mid-October 2015. McDonald’s joined the battle in early January with its McPick 2 for $2 offering, then changed the offer to 2 for $5, and will unveil this week a program that enables its restaurant operators to customize the McPick 2 menu to include items popular with its local customers. Burger King launched its 5 for $4 deal in January. Following these offers a number of other chains have added a value proposition of one kind or another to their menu. Most recently, the full service chain, TGI Friday’s, introduced a strong value proposition of their own – Dine & Drink Menu featuring an entrée and an alcoholic or non-alcoholic beverage just for $12. Last week Starbucks, new to the combo meal game, entered the value wars with a limited-time $8 Power Lunch deal.
The average deal rate (percent of visits where an item was purchased on a deal) for QSRs is 26 percent. The average deal rate for the burger chains offering the combo meal value deals is 35 percent. This demonstrates that price/value is important to QSR consumers. While the buzz in the foodservice industry has focused on quality and fresh, these new value offerings show that consumers are drawn to low price offerings. NPD’s Checkout Tracking, which analyzes real receipts from actual consumers and can follow the same consumer’s purchasing behavior over time, found that many of those who took advantage of the combo meal deals were value seekers and visited multiple chains to take advantage of all of the deals.
“For restaurant operators to compete effectively in today’s marketplace, a value proposition is warranted to drive frequency and to attract value seeking customers,” says Bonnie Riggs, NPD restaurant industry analyst and author of the recently released report, Value Wars: A New Twist on Combo Meal Deals. “Understanding the impact and effectiveness of these promotions will help determine whether non-participants need to enter the fray to stay competitive.”
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