De­spite re­bound­ing econ­omy, $1 menus mak­ing a come­back

Mc­Don­ald’s, Taco Bell beef up op­tions

USA TODAY International Edition - - MONEY - Zlati Meyer

Mc­Don­ald’s, Taco Bell and the rest of the fast-food world know they’ll find plenty of luck when it comes to charg­ing just a buck.

Af­ter fall­ing by the way­side, the dol­lar menus are com­ing on strong.

This week alone, Mc­Don­ald’s brought back its Dol­lar Menu — and even up­sells it with $2 and $3 items. And Taco Bell fol­lowed up by an­nounc­ing it will add 20 more items to its $1 Menu next year.

Those sin­gle bucks add up quick, even for the bil­lion-dol­lar fast-food pur­vey­ors.

Sure the econ­omy is strong, but “peo­ple are look­ing for value,” said Brian Yar­brough, a con­sumer dis­cre­tionary and con­sumer sta­ples an­a­lyst at bro­ker­age firm Ed­ward Jones.

Mc­Don­ald’s, which deep-sixed its last Dol­lar Menu in 2012, now has its new $1-$2-$3 menu. For $1, din­ers can get items such as a cheese­burger. For $2, there’s the Ba­con McDou­ble, and at $3, the Clas­sic Chicken Sand­wich, for ex­am­ple.

Taco Bell will vastly boost the list of items to its $1 menu that is al­ready stocked with choices such as the Spicy Tostada and Triple Layer Na­chos.

By ex­pand­ing their value menus, fast-food restau­rants put re­newed pres­sure on other quick-ser­vice eater­ies as they all fight for the same din­ing dollars. Vis­its to quick-ser­vice restau­rants — de­fined as fast food, fast-ca­sual such as Chipo­tle Mex­i­can Grill and Pan­era Bread and pizza chains — were flat in the 12 months end­ing in Au­gust, ac­cord­ing to the re­search firm NPD Group.

The strat­egy for a suc­cess­ful dol­lar menu is to hope peo­ple order more items, and hope­fully more ex­pen­sive items, so that the res­tau­rant ends up with a profit in the deal.

“It could be a sit­u­a­tion where some­one goes in think­ing about buy­ing one thing and then gets think­ing, ‘This is pretty rea­son­able,’ and go­ing to add on a few things,” said R.J. Hot­tovy, a res­tau­rant an­a­lyst at the in­vest­ment re­search firm Morn­ingstar.

Just about all fast-food chains are in the value game — even if it isn’t at the $1 level. Burger King has a Value Menu. Wendy’s has the Right Price Right Size Menu. Dairy Queen, KFC and Carl’s Jr./ Hardee’s all have $5 meal deals.

A re­bound­ing econ­omy doesn’t nix the need for value op­tions on menu boards. Low- and mid­dle-in­come con­sumers con­tinue to feel the pres­sures of stag­nant wage growth and higher rents and health care costs. They’ll grav­i­tate to the $1 menus as a re­sult.

Though the amount of money Amer­i­cans spent on food away from home rose 4.9% from 2015 to 2016, ac­cord­ing to the U.S. Bureau of La­bor Statis­tics’ most re­cent data, the jump was smaller than the 7.9% be­tween 2014 and 2015.

The slightly more up­scale fast-ca­sual chains don’t go the deep-dis­count route; they fo­cus more on taste and talk about clean in­gre­di­ents, healthy food op­tions and menu sourc­ing. But fast food is all about the price point.

“We’ve al­ways known cus­tomers love the idea of value at Mc­Don­ald’s . ... What’s evolved is they want more choice, but with the fa­mil­iar­ity of the orig­i­nal Dol­lar Menu,” Mc­Don­ald’s U.S. Pres­i­dent Chris Kem­pczin­ski said.

Low- and mid­dle-in­come con­sumers con­tinue to feel the pres­sures of stag­nant wage growth.

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