More food for less money as fast food chains chase cash-strapped consumers - East Valley Tribune: Business

More food for less money as fast food chains chase cash-strapped consumers

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Posted: Wednesday, February 13, 2008 2:09 am | Updated: 10:41 pm, Fri Oct 7, 2011.

NEW YORK - If you want to stretch your dollar without shrinking your appetite, you're in luck. Fast-food companies, looking for a way to attract budget-conscious customers and keep them spending, are increasingly offering more food for less money.

Jeffrey Davis, president of restaurant research firm Sandelman & Associates, said adding bigger, higher-quality sandwiches to dollar menus allows fast food restaurants to give people the premium sandwiches they want at a price they can afford.

But with commodity prices rising, lowering the prices of fast food sandwiches could squeeze margins, especially if it doesn't lead to better traffic and sales. The chains say the drawbacks don't outweigh the benefit of offering more value to customers dealing with rising prices and a weak economy.

Perhaps the most noticeable example of the more-food-for-less strategy is the appearance on more dollar menus of the double cheeseburger, long a staple of the regular menu and combination meals.

Unlike the value- and dollar-menu regulars, like a small order of fries or "junior" version of a larger burger, the double cheeseburger is a more marquee - and more expensive - choice at most fast food chains.

McDonald's Corp., ahead of the curve on the value menu front, is the exception. Its double cheeseburger has been on the dollar menu since its introduction in 2003 and is one of the chain's biggest sellers. McDonald's touted the "everyday appeal" of the dollar menu in its most recent sales report.

Now a version of the double cheeseburger is appearing on value and dollar menus at the chain's biggest competitors - Burger King Corp. and Wendy's International Inc.

"People are looking for premium items but there's also a push for value," Davis said. "They're giving you a little bit more for what you pay."

That's good news for diners like Shekia Scott, a Boston resident who was visiting New York recently. While lunching with friends at a Burger King near Penn Station in Manhattan, Scott said higher prices for food and gas were hurting her budget. But, she added, "the dollar menu's been a help."

Teenagers - big eaters long loyal to fast food - could also benefit from an expanded value menu, said Deutsche Bank economist Joe Lavorgna.

"Teenagers are very sensitive to changes in gasoline prices," he said. "Typically what they have left over to spend, they will spend on fast food."

Burger King is now studying whether its new dollar double cheeseburger can bring that leftover change into the coffers. The chain is testing the sandwich in a few undisclosed markets. It usually sells for more than $2.

The chains contend they aren't interested in a low-price battle similar to the one waged in the 1990s. But current ad campaigns and promotions suggest the competition for cash-strapped customers will be heated.

"We wanted to better understand the power competitive advertising would mean to us in terms of traffic generation," said Russ Klein, president of global marketing, strategy and innovation at Burger King.

Klein said McDonald's success with its dollar double cheeseburger is a reason Burger King put one on its dollar menu. He noted, however, that the Burger King double cheeseburger is 30 percent bigger than the one at McDonald's. The comparison has been a central theme of the company's marketing campaign so far.

"We know we have a superiority claim," he said.

Wendy's International Inc. introduced a 99-cent double cheeseburger last month called the Stack Attack coinciding with a national advertising campaign.

The push toward offering more quantity for less money is extending beyond the burger chains. Yum Brands Inc.'s Mexican-style restaurant chain Taco Bell is promoting its Gordita Supreme product - one of the largest menu items - for 99 cents this month. It usually sells for more than $1.50.

And the privately held Quiznos sandwich chain launched a line of $2 small flatbread sandwiches called Sammies in November. The chain also offers a combo meal that comes with two Sammies, a medium drink and either chips, a side salad or a bowl of soup for $6.

Steve Provost, Quiznos' chief marketing officer, said the company was originally planning to launch the Sammies line this spring, but decided instead to debut them in November.

"We accelerated it primarily because of what we saw coming ahead with the economy," he said.

The Sammies are one of the few value choices that are lower calorie - all are under 300 calories. Although the other chains have introduced healthier menu items in the past few years, those rarely are part of the value or dollar menu.

CKE Restaurants Inc., which operates Carl's Jr. and Hardee's, isn't offering any 99-cent products. The company takes the opposite strategy with its pricing, counting on its big, premium sandwiches for "young hungry guys" to expand sales.

Chief Executive Andrew Puzder said value menus can result in a lowering of quality - something he's not willing to sacrifice.

"What can you sell for 99 cents? The bun?" he said.

Certainly, quality can suffer when prices drop. The last burger price cuts led to lower sales and quality and the chains say they learned their lesson. But with commodity costs rising, making lower-priced sandwiches without affecting quality isn't easy.

"The double cheeseburger for us is 4.4 ounces of beef," said Burger King's Klein, adding the Whopper Jr. - a mainstay of the chain's current value menu - has half that amount of meat. "So from a sheer cost of goods basis, it's pretty evident it would have a less attractive cost to goods proposition."

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