A fast food race is fully under way… A race to the bottom. Who can come the closest to practically giving the food away? The victor will come out smiling, while everyone else huffs and puffs for second place. Meanwhile, the economy is good, unemployment is down, tax breaks for businesses and people are encouraging. Why are we racing to the bottom?
I just read that Jack in the Box is switching from gourmet LTOs to value offerings. In just a few short months, it has gone from the Ribeye Burger to promoting several low-price bundles… something it plans to continue throughout 2018.
Is that a response to McDonald’s earlier hype over its $1, $2 and $3 menu items? Or Wendy’s “4 for $4” combo meals? Or Taco Bell’s $1 Cravings Menu? Or Subway’s Footlongs for $4.99? You see, if one starts racing, all others feel like they have no choice but to put on their track shoes.
This paltry pricing was common during the Great Recession. Operators must have poor memories. We all saw the glaring problem with cheap pricing. You almost can’t get out of the race to the bottom. It’s a customer-expectation free-fall that will end in a crash when the cheaps are over.
Maybe operators are using their tax breaks to afford the cheap menus, hoping to draw value-seeking customers. But I think a better use of those tax break dollars would be to invest in employees, a great loyalty program, a new or better mobile ordering app, delivery vehicles and/or menu innovation. Read some surveys of what customers really want, besides low prices. You’ll find that it’s freshness, quality, innovation, and sustainability in all of its forms.
Ask another hard question: Do customers want cheap, or do they want flavor?
You’ll tell me not to be so naïve. Price is pretty much everything. OK, let’s talk price. When you offer these $1 and $2 meals, you’re setting the value of the food. But guess what, your customers would set a higher value than that. Do you know that studies show that men are willing to pay more for their food than women? Those studies also show that iGens and Millennials are also willing to pay more than the other generations for their food. If the food has perceivably premium ingredients, many will be willing to pay even more.
I’m asking, what was wrong with the menu innovation strategy we were just in? Was it not working?
I do wonder what the economics are when an operator offers some bottom-dollar meals and some premium menu items. I can almost guess. They promote the cheap food (to the exclusion of the better stuff)—and that brings in the gold diggers who wouldn’t even look at a premium item.
Let’s aim higher. We were in that race. Don’t stop now!
Tell me what you think.
Jody
