Checkers, Rally’s boost beverage sales via $1 offerings

Checkers Drive-In Restaurants Inc. has boosted beverage orders and sales by 2 percent at company restaurants by offering alternative $1 beverages and a soft-serve cone option at the pay window, according to officials.

The Tampa, Fla.-based operator and franchisor of about 488 Checkers and 290 Rally’s Hamburgers drive-thru restaurants began tests in April during which it offered 16.9-ounce bottles of water, 32-ounce cups of iced tea and cones filled with its new “Cold Creations” soft-serve ice cream for $1.

Carbonated and still fountain beverages typically sell for from $1 for a 16-ounce “value” offering to $2.19 for a 42-ounce serving at company operated locations, but may be priced differently at franchised locations.

Based on consumer response to the test, the company rolled out the alternative $1 products to all company Checkers and Rally’s locations, which now total 301, in May. Approximately 70 percent of franchised restaurants also joined in on the offering, according to Jennifer Durham, vice president of franchise development for the system.

“We had seen beverage incidences decline for some time before we implemented this [offer] and initially thought it was a temporary blip and that we’d see things return if the economy improved,” Durham explained. “But as the economy continued to be stressful for folks and value continued to be a part of our competitors’ and our own strategy to drive traffic, we finally said, ‘This theme of just hoping for things to return is not a strategy,’ and so we decided to attack it.”

Durham said that there are rivals for drink sales everywhere, from giant competitors such as McDonald’s offering $1 sweet teas to convenience stores with self-serve fountains and 40-plus-ounce drinks for 69 cents, in some cases.

“Our challenge was, ‘How do you beat that [competitive pricing] and get those visits that typically we’re not getting?’ Or, ‘How do we change the trend of people coming through the drive-thru and not ordering a drink, or ordering tap water?’”

After looking at the regular Checkers and Rally’s beverage lines and determining that the system could not offer them for $1 “without compromising our margins too significantly,” Durham said the chains decided “to layer in different beverages” and couple that with a soft-serve value offering.

“The placement of the point-of-purchase [signage] was important. We didn’t place it at the menu board, we put it at the drive-thru window where you picked up your food, so it became more of an add-on item, as opposed to a trade-off,” Durham said. “If they were going to buy a beverage on the back lot [when placing their order], we didn’t want to discourage them from doing that, but what we wanted to do was offer it up as another deal. It is similar to what you would see with an apple-pie add-on [strategy].”

The proposal not only struck the fancy of some value-oriented customers, she indicated, but appealed to other types as well.

“There were people who bought a combo, with a carbonated beverage, that decided to add a water on because once they were done with their meal they could have something portable to take with them back to the office or have with them for the rest of the day,” noted Durham, who reported that the bottled water has been the most popular of the new items.

The franchise development executive said the Checkers and Rally’s system is “really excited” about the results of the value beverage strategy because it saw a 2-percent increase in overall beverage incidences and sales at company restaurants. "I would expect a similar increase in franchise locations," she said, adding that the overall profit margin for beverages declined “only slightly,” but that the higher volume of business was more than enough to offset that reduction and yield higher net profits.

Durham added that Checkers and Rally’s will continue to look for ways to add value and build sales from its beverage and treat lines. For example, she said, her group is currently testing soft drink and ice cream floats.

Durham said that systemwide sales have risen more than 5 percent, year to date, in 2012, at for the company, which generates nearly 85 percent of its transactions through its drive-thrus.

Contact Alan J. Liddle at [email protected].
Follow him on Twitter: @AJ_NRN