Lane Cardwell

Make Me an Offer

As the economy continues to remain in its depressed state, leaving countless customers in a depressed state, restaurants are responding with lower and lower priced offers to try to stimulate and hold customer traffic. Whether they are lunch offers, dinner offers, or both, restaurants are working overtime trying to find the silver bullet that will translate into profitable sales. Strike that last thought. It now looks like many restaurants will be satisfied with sales, profitable or not.

Naturally, many restaurants that offer “10 entrees for under $6.95”, or “10 items for $1 each”, are hoping that once the customer is in the restaurant, or in the drive-thru, that the power of the brand will cause the customer to forget about the low price offers, and order what they often order. After all, it works in retailing. Advertise the sale, but sell the full priced merchandise.

Wendy’s has announced today that it is offering a “trio of 99-cents signature value sandwiches”. Notice the psychology in the price offer. They are not being sold for $.99. They are being sold for 99-cents. Get that offensive $ sign out of the picture. Value offerings for $1 or less are not news these days. What is news in this offer is that while many of its competitors are questioning whether they can afford to hold the $1 price line on their value menu, Wendy’s has upped the ante by keeping the price under $1, and adding three popular sandwiches to the mix: Double Stack Cheeseburger, Junior Bacon Cheeseburger, and a Crispy Chicken Sandwich.

Burger King is apparently toying with the idea of reducing the size of the Whopper Jr. patties from 2.2-ounces to 2.0-ounces in order to maintain the $1 price point on its value menu. Additionally, it has just added two new items to its value menu: a Cheesy Bacon BK Wrapper and a Spicy Chicken BK Wrapper, both for $1.39.

McDonald’s has announced that it is looking at a new pricing tier for its value menu. Cost pressures on beef and chicken have left them questioning their ability to cling to the $1 mark for items like a double cheeseburger. Their franchisees are feeling the pain of offering high cost items for $1.

Boston Market has decided that $5 is the magic price point for them to move the needle. They lowered the prices of 5 items in July to $5 from about $7, and then in August added 6 more items to the $5 menu.

Another special that caught my eye recently was from Outback. They are offering a 6 oz. sirloin for $9.99. It includes your choice of two sides. It is not on the menu, but is a “traffic builder” special. Chili’s has added a Bottomless Express Lunch to their lunch menu for $6.49. It includes soup, salad, and chips and salsa. Unlimited refills.

At the same time that all of these low price offers are being advertised, menu prices for the industry have gone up about 4% vs. last year. Commodity pressures, while not as obscene as a couple of months ago, are still putting pressure on the cost of sales line. Consequently, the existing menu item prices have gone up at a much quicker pace than in prior years. Bring them in on the sale prices, but sell them the full priced merchandise. We have definitely crossed over into the world of retailing. I am still waiting to see the inevitable ad for “Make Me an Offer.”

Posted by Lane Cardwell on August 29, 2008 | Comments (0)