Fast-food chains are increasingly focusing on pricier meals with higher margins, according to Reuters.
Some, such as McDonald’s, are cutting back on value meals and dollar menus in favor of larger family-sized bundles.
Others are rolling out higher-end burgers and other dishes, such as Wendy’s “Made to Crave” menu.
Fast-food giants cut back on promotions, discounts, and cheap meals during the pandemic as demand for pizzas, burgers, and chicken soared, according to a report by Reuters.
Big chains have scaled back value meals, which typically contain a menu item with fries and a drink on the side for $5 or less, and are instead pushing larger combo meals and more expensive menu items, Reuters reported.
“Value menu items are not really profit drivers,” BTIG analyst Peter Saleh told Reuters. “They’re designed to drive traffic.”
But the trend of cutting cheaper meals, which often have thin margins, and driving customers to more profitable menu items is nothing new. Dollar menus have been disappearing in recent years, Insider’s Kate Taylor reported, and McDonald’s killed its iconic Dollar Menu in 2013.
But this has accelerated during the pandemic as ingredient costs rose and some restaurants struggled to get enough staff to make their full menus.
McDonald’s, for example, slashed some less profitable menu items during the pandemic, including its Little Mac and the Double Big Mac, chicken tenders, and salads. It’s also scaled back its cheaper $1 $2 $3 Dollar menu by slashing a third of its lineup since 2018, Reuters reported, and has been collaborating with celebrities to promote more expensive combo deals instead, including the $6 Travis Scott meal and the BTS meal, which costs around $10 dependent on location.
McDonald’s told Insider that it had evolved its $1 $2 $3 Dollar to give more choice to franchisees based on local market demand, and regularly reviews and changes other national deals. It added that local markets have their own value and deal programs, meaning that offers vary across the US, and said that its Famous Orders were designed to introduce its food to a new audience.
Other chains have scaled back discounts. Domino’s said at its earnings call in April that it was shunning some of its more aggressive promotions, like its Boost Week, which sells half-price pizzas online, because sales were already so strong.
And Reuters reported that KFC stopped marketing its “$5 Fill Up” meal in 2020, instead promoting family meal deals that can cost up to $30.
Wendy’s said that more customers were buying from its higher-end lineups, like the Made to Crave menu, which includes a $5.69 Bourbon Bacon Cheeseburger and a $6.19 Pretzel Bacon Pub Cheeseburger, both with single patties. Both cost more than twice as much as its pared-down Jr. Bacon Cheeseburger, and appear at the top of the list on Wendy’s online ordering website. The cheaper burgers are at the bottom.
“We’re trading folks up into our best, highest-quality food items,” CEO Todd Penegor said during the chain’s earnings call in May.
He said this was “quite healthy for the business.”
“I know everybody will be out there fighting for traffic as folks get back into more normal patterns,” Penegor said. “But we feel like we’ve got a lot of compelling value already across our menu.”
Wendy’s told Reuters that it pioneered the value menu in 1989 with its dedicated list of 99-cent items.
Brands aren’t completely scrapping their value menus, however. Taco Bell reintroduced its $5 Grande Stacker Box in late 2020, while Burger King launched a dollar menu, called the $1 Your Way menu, in late December.
Read the original article on Business Insider