NEW YORK — Value is the new buzzword at fast-food chains across the country.
After price hikes put off customers, restaurants recently responded by unveiling budget-friendly menus.
Fast food restaurants are in the midst of a price war, offering promotions to attract customers to their restaurants despite inflation concerns.
For example, McDonald’s offers a $5 meal, which includes a McDouble cheeseburger or McChicken sandwich, plus small fries, 4 chicken nuggets, and a small soft drink.
At Taco Bell, you can now order two different types of tacos, a five-layer burrito, chips with nacho cheese dips, and a medium drink for $7. That’s 55% cheaper than ordering the items individually.
Like McDonald’s, Burger King offers a $5 meal deal where customers can select one of three types of burgers to pair with chicken nuggets and a drink.
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Last month, McDonald’s entered the increasingly fierce fast-food menu wars with a $5 meal deal.
Lucia Buricelli/Bloomberg/Getty Images via CNN Newsource
But what is the real value of these types of “budget” meals?
Actually, not as much as you might think, because the prices of many key ingredients used in cheap meals are dropping. In other words: you’re paying the list price (or more).
The fast food chain will launch a “$5 meal” in the United States starting June 25, CNN reports. “We heard our fans: They’ve come to expect even better value, and that’s exactly what they’re getting this summer,” Joe Erlinger, president of McDonald’s USA, said in a press release.
Cheese, potatoes and tomatoes are getting cheaper
Many recently announced cheap meals contain cheese, potatoes and tomatoes. Compared with last June, cheese prices are down 2.1 percent, tomatoes are down 1.1 percent and potatoes are down 3.9 percent, according to the latest consumer price index report from the Bureau of Labor Statistics released Thursday.
On a monthly basis, cheese prices were unchanged in June. Tomato and potato prices decreased by 0.3% and 3.3%, respectively, after seasonal adjustment.
Meat eaters are the ones who benefit the most from the cheap meal wars
If you eat meat, you are more likely to benefit from some cheap meals. In fact, meat prices have increased by 3.5% over the year. From May to June, however, meat prices decreased by 0.3%.
Beef prices saw one of the largest increases of any meat category tracked by the CPI. For example, roast beef prices increased by 10% and ground beef prices increased by 4.5% compared to last June.
If there’s one thing Americans love, it’s cheap meat. So business is booming at Texas Roadhouse and LongHorn Steakhouse, even as Americans pull back from other restaurants.
Pork prices also rose 3.8% from a year ago. But they are slightly lower than last month. Chicken prices have increased more modestly over the year, up just 0.5%. On a monthly basis, they fell 0.2% in June.
Given that meat prices are rising faster than most food prices, it’s no wonder that most fast food chains are only offering value menus for a limited time. In fact, they retain the ability to raise prices in the future.
But for now, Joe Erlinger, president of McDonald’s USA, said the value meals are not a loss leader for the company and that “we’re totally comfortable with their profitability.”
“It’s a way to really bring value and affordability to our customers at a time when the consumer is really strapped for resources,” he said at a Wall Street Journal conference last month.
Eating out remains a luxury for many
Another consideration: it is much more expensive to eat out than to cook at home.
Rather than competing with steep discounts, Olive Garden plans to attract customers by highlighting its usual offerings. One example? Soup or salad refills and breadsticks.
This should come as no surprise, as dining out involves significantly more costs (one of the biggest being labor) than eating at home.
But you’ll probably get more of a financial shock eating out than shopping at grocery stores.
Last month, food prices increased by 0.2% overall compared to May. Over the year as a whole, food prices increased by 2.2%.
Food prices in stores increased by 1.1% compared to the previous year and these prices increased by 0.1% on a monthly basis. Menu prices in restaurants and cafes increased by 4.1% annually and by 0.4% from May to June.
The arrival of McDonald’s meal plan comes at a time when the company is battling the perception that it has become too expensive.
It’s the summer of the fast-food meal deal wars, and Taco Bell isn’t resting on its laurels with one of its biggest deals yet: the “Luxe Cravings Box.”
The coffee chain has launched a new “Menu Pairings,” which combines a drink and a breakfast dish at a discounted price.
Subway’s biscuits were so popular that they sold out. The chain is now hoping to replicate that success with new savoury companions.
The chain concluded that when people go to McDonald’s, they mainly want a hamburger and fries.
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