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CNN
—
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.
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.
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).
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.
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.
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.
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.
