Big ideas in small packages help fast feeders

Big ideas in small packages help fast feeders

It’s snack attack time in quick service.

As cash-strapped customers grow more skittish about spending money in the face of escalating mortgage foreclosures, gas and grocery prices, and job layoffs, fast feeders are working to keep patrons coming in their doors with an arsenal of new smaller-size menu items at value prices.

From the $1.49 Chicken Snack Wrap at McDonald’s [3] to Sonic [4]’s 99-cent Regular Chili Cheese Coney to Taco Bell [5]’s new “79-89-99 Why Pay More” 10-item value menu, the rush is on to introduce items that appeal to a price-sensitive, on-the-go customer base without compromising brand image.

At the same time, however, operators need to be careful not to cheapen their overall image, cannibalize their premium menu items or launch poor-quality products as they walk the fine line between offering both value and quality, observers caution.

“The bottom line is that most chains need some kind of value items just to be competitive,” says Bob Sandelman, head of Sandelman & Associates, a consumer research firm based in San Clemente, Calif.

The advantages to the chain outweigh any risks, he adds.

The wake-up call sounding the need for more value-oriented menu items came in March when segment leader McDonald’s reported that same-store sales for the month were down 0.8 percent, the company’s first negative same-store sales comparison in five years. When same-store sales bounced up 2 percent in April, executives at the Oak Brook, Ill.-based chain touted the brand’s “compelling” value and newer products, such as the $1.49 Chicken Snack Wrap, as among the main reasons for being back in the black. Skeptics, however, are monitoring McDonald’s performance closely throughout the rest of the spring and summer.

Other quick-service sandwich chains also experienced economy-related same-store sales dips for their most recent quarters. Same-store sales fell 1.6 percent at Wendy’s [6] domestic company units and 0.1 percent at franchised ones. They also were down 1.6 percent at Arby’s [7] company stores, 0.8 percent at Hardee’s [8] corporate units and 0.1 percent at corporate Jack in the Box [9] outlets, proving that the quick-service segment was not as resistant to the economic slowdown as once believed.

Burger King [10]’s chief executive John Chidsey credited the chain’s third-quarter same-store sales gain of 5.4 percent for the United States and Canada to its promotions of both bargain-priced and higher-ticket items, positioning that he termed the Miami-based company’s “barbell menu strategy.”

In light of skyrocketing commodity costs, operators that introduce low-priced items must be even more careful than usual not to price the product too low to be profitable.

McDonald’s, for instance, recently has deleted its popular double cheeseburger from some of its “Dollar Menu” boards since food costs have risen. However, customers who ask still will be served the item for $1, at least in Chicago. Meanwhile, McDonald’s units in Augusta, Ga., reportedly are selling the double cheeseburger for $1.09, according to the Wall Street Journal.

In analyzing value-priced products, Len Kornblau, a New Jersey-based marketing consultant, says the profusion of items could have consequences.

“My biggest concern is does it increase visits or trade visits?” he says. “The overall impact could be negative with lower checks.”

Kornblau also warns that a brand’s quality image could suffer if a new product doesn’t measure up to customer expectations. However, he notes, the lower the price, the lower the expectation.

“Some customers don’t care so much about quality,” he says. “They’re more forgiving when it comes to a snack item for $1.39.”

Operators must be sure they don’t degrade their core brand when adding value items, says Darren Tristano, executive vice president of Technomic, a Chicago-based restaurant consulting firm. He warns that few quick-service chains are able to copy McDonald’s and Burger King’s successful three-tier strategy of offering all things to all people, including premium, signature and value items.

Several major players recently have used the age-old method of free sampling as a way of gaining trial without sullying the brand’s image, a risk incurred by couponing and discounting. Among the free trials were McDonald’s one-day giveaway of its Southern-style Chicken Biscuit and Sandwich, following an earlier two-day giveaway of its McSkillet Burrito, and Dunkin’ Donuts [11]’ Free Iced Coffee Day.

Hardee’s is running a giveaway variation through the end of June called the Chicken Biscuit Challenge. Claiming to be the first quick-service chain to offer buttermilk biscuits in 1972 and one of the first to sell a Chicken Fillet Biscuit in the South [12], Hardee’s operators are pledging to refund the $2.99 purchase price of a Chicken Fillet Biscuit to any customer who says they prefer a competitor’s version.

The cost of offering giveaways, although it can be substantial, is generally seen as a worthwhile business investment that pays off in subsequent higher sales.

Furthermore, while making snacks available along with mealtime main courses is not a new strategy, it is on the rise, partially as a way to meet the demands of a changing workforce that may not work a traditional 9-to-5 schedule. In addition, offering more value-priced items could help to prevent a drop-off in visits by lower-income, heavy quick-service users who are pinching pennies.

Operators who’ve recently introduced new snack or small-portion items say many customers are eating them during regular mealtimes as well as between meals. Ideally, they supplement a snack item with a beverage and side dish to make up their own combo meal, some spokesmen say.

Taco Bell’s new “79-89-99 Why Pay More” campaign has resulted in add-on sales in test markets, says David Ovens, the Irvine, Calif.-based brand’s chief marketing officer.

The new value menu features 10 items for either 79 cents, 89 cents or 99 cents, including classic Taco Bell items, such as the 89-cent Crunchy Beef Tacos, soft tacos and bean burritos, as well as four new offerings.

Among the new items are the Cheesy Double Beef Burrito, a flour tortilla filled with double portions of seasoned beef, Mexican rice and melted nacho cheese sauce, for 89 cents; Triple Layer Nachos, tortilla chips topped with red sauce, beans and cheese sauce, for 79 cents; Melted Three-Cheese Roll-Up, a flour tortilla topped with melted cheese and rolled up for portability, for 79 cents; and the Big Taste [13] Taco, a flour tortilla filled with seasoned beef, crisp lettuce, crunchy tortilla strips, cheese and creamy jalapeño sauce, for 99 cents.

Atlanta-based Arby’s has several value and special combo offers on tap for the summer, marking a departure from the brand’s historic limited-time offers of premium-priced products, such as the classic chicken salad sandwich, says Cheryl Barre, chief marketing officer. Scheduled for the month of July are two Beef ‘n Cheddar sandwiches for $4 to observe that signature sandwich’s 30th anniversary. In August, Arby’s will offer a “Pick 5 for $5.99” bundling deal, giving customers a choice of combining five items from much of the menu.

“Customers like making their own combo choices,” Barre says, adding that she has noticed an uptick in the redemption of coupons and an increase in off-meal snack occasions.

“We’re working on some new mini sandwiches and are considering bringing back the Southwest Mini Egg Rolls in December,” she says.

Culver’s Frozen Custard [14] has been selling a lot of its $2.99 “snack packs,” consisting of a regular-size burger, small fries and small drink.

“The snack pack does boost sales at slower times, but we sell more at lunch,” says Chris Contino, spokesman for the 376-unit chain based in Prairie du Sac, Wis.

“People are eating less food more often because they’re always on the go,” he says.

Fortunately, Culver’s dinner sales continue to be strong, as do midafternoon sales of its signature frozen custards, he adds.

The chain, long known for its ButterBurgers, also has been promoting heartier dinner items of late and launching its first network television campaign in its major markets.

Dairy Queen, another chain known for its sugary treats and between-meal snacks, is testing a Sweet Deals value menu in its Lexington, Ky., market that lets consumers choose from several proteins, sides and treats, says Michael Keller, chief brand officer of the Minneapolis-based chain. From a list of nine items, customers may choose two for $3, three for $4 or four for $5.

“It’s very customizable,” Keller says. “We’re testing it in 100 other stores in the system.”

He also reports incremental sales growth since the rollout last winter of a $1.39 chicken wrap, which he notes often results in a treat purchase as well.

Same-store sales at Dairy Queen rose 4 percent in 2007 over the prior year, spurred by last August’s promotion of two single cheeseburgers for $2.22 and two double cheeseburgers for $3.33, and Dairy Queen’s first national television campaign.

“That’s our price-value platform,” Keller says.

Mini sandwiches are a natural value-pricing fit for sub sandwich chains, and Blimpie is among those rolling out 3-inch versions of its regular 6-inch subs. Blimpie’s [15] Deli Sliders [16] initially are being offered at its nontraditional locations in Wal-Mart and convenience stores for $1.99, about half the price of its 6-inch sandwiches. Six varieties are offered: turkey and provolone; ham and Swiss; tuna salad; roast beef and cheddar; Italian; and bacon, lettuce and tomato.

Local print and point-of-purchase displays will promote the offer. If testing goes as planned, this value menu could roll out nationally, says Kate Unger, spokeswoman for the 1,200-unit Scottsdale, Ariz.-based chain.

Denver-based Quizno’s has extended its line of Sammies, its 200-calorie, flat-bread sandwiches for $2 that debuted last November.

The two new versions are the Cantina Chicken, with oven-roasted chicken breast, tomatoes, mushrooms, sautéed onions and honey-bourbon mustard, and the Roadhouse Steak, with thinly sliced Black Angus beef, mushrooms, sautéed onions and a sweet-and-spicy steak sauce.

The Sammies, which now come in six varieties, are aimed at people looking for a midafternoon snack or a value-meal option, says Zach Calkins, vice president of culinary development for Quiznos.

“They can design their own meals at an affordable price,” he says, noting that many customers bundle two Sammies, a side and a fountain drink for $5.99.

The new choices are being promoted only in-store, says spokes-woman Jessica Bessa, claiming that Sammies already have good recognition among regular customers of the 5,000-unit chain.

Mini sandwiches on a hot dog bun are a smaller-portion option at Nathan’s Famous [17], the 204-unit hot dog chain based in Westbury, N.Y. Spokesman Randy Watts compared them to Quiznos’ Sammies in positioning. Prices range from $1.99 to $2.49.

The four varieties of New Dogs, as Nathan’s calls them, are taco, shrimp, seafood salad and chicken supreme. Nathan’s is able to sell the shrimp and seafood choices at a value price because of volume pricing discounts it receives through its sister chain, Arthur Treacher’s Fish & Chips, Watts says.

“Having one type of bread really helps operations,” he adds.

He expects the best-selling New Dogs to become part of the permanent menu.

“We’re hoping we can drive more traffic to offset the lower-priced items and can build that snack occasion between 2 and 5 p.m.,” Watts says.

Sonic, known primarily for burgers and its drive-in format, offered a 99-cent Regular Chili Cheese Coney in May for the first time in four years. That limited-time offer followed an April special of five varieties of value-priced mini wraps.

Oklahoma City-based Sonic, with 3,400 drive-in units nationwide, serves half-price fountain drinks and slushes every day from 2 p.m. to 4 p.m., a daypart it terms “Happy Hour.”

High-margin beverages, ranging from specialty coffee to ice cream drinks, also are becoming more common from quick-service operators looking to bolster business in their midafternoon day-parts in particular. Taco Bell’s new Frutista Freeze, a 16-ounce frozen fruit-flavored drink topped with strawberries, was launched in mid-May, for $1.89.

At the same time, San Diego-based Jack in the Box launched its Kona Coffee Shake, an ice cream drink blended with Kona coffee. Priced at $2.49 for 16 ounces and $2.99 for 24 ounces, the shake is likely to appeal to customers taking a midafternoon break.