Despite rebounding economy, $1 menus making a comeback
McDonald’s, Taco Bell beef up options
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.