What's driving fast-food meal deals?
In the past few weeks, a number of big fast food companies have launched new combo meal deals, such as Burger King’s “5 for $4” promotion, McDonald’s “McPick Two” menu or Pizza Hut's first-ever “$5 Flavor Menu.” The deals allow customers to try a combination of items for only a few bucks.
The idea of the combo deal isn't new. But why are deals proliferating right now?
“As soon as one guy does it, many of the other feel forced to follow,” said Bob Goldin with the food industry research firm Technomic.
But it's also the case that the fast food industry as a whole is coming off of a pretty lackluster year and is trying to get more people in the door.
“For 2015, you had traffic that was flat to maybe slightly positive,” said Morningstar restaurant analyst R.J. Hottovy.
Hottovy said part of the problem for fast food joints is that fast casual restaurants like Panera are stealing market share, as some customers trade up to food purveyors they perceive as higher in quality.
Restaurant consultant Aaron Allen said customers have also turned away from fast food restaurants because menus have grown overly complex. He said many restaurants now offer more than 100 items.
“So the more these menus become complex, the more it slows down the operation, confuses the consumer, and ultimately leads to a bad experience,” he said.
Allen said the combo deals make the choices simpler for consumers. That seems to be a goal behind Pizza Hut's new deal, which allows customers to get items like a one-topping, medium pizza or boneless chicken wings for $5, if they buy two or more items from the combo menu.
“It's really just a way to give them a really easy to understand, easy to use, easy to access menu option from us,” said Doug Terfehr, Senior Director of Public Relations at Pizza Hut.
Analysts said fast food companies can afford to discount their food so steeply with these combo meals right now because some of their costs, like commodities, are lower.
But restaurant industry analyst Bonnie Riggs at the NPD Group said she wonders how long that cushion will last, especially if labor costs spike.
“I do think that many restaurant operators are going to have to take price on other menu items to cover the costs of some other things that are happening in the marketplace,” she said.