Fast-Food Chains Promote Value as Restaurant Prices Climb

Value has become the watchword for fast-food brands these days.

As CNBC reported Sunday (Aug. 11), restaurant CEOs keep pointing to value when explaining to investors why sales have cooled, while also offering up their plans to boost traffic.

“Value” came up nearly 80 times when McDonald’s held its earnings call in July, the report said, while executives at companies like Papa John’s and Pizza Hut/Taco Bell owner Yum Brands also mentioned value dozens of times on their calls.

“The word ‘value’ has received a lot of airtime in the past few months,” Josh Kobza, the CEO of Burger King parent company Restaurant Brands International, said last week.

The report noted that there’s a reason fast-food brands are focusing on value: prices at restaurants have risen 27.2% since June 2019, according to Bureau of Labor Statistics data. And that’s led to a drop in restaurant traffic and sales as consumers spend less on dining out.

To reverse this trend, chains like McDonald’s, Burger King and Taco Bell have begun offering promotions like their $5 meal deals.

“In this current economic cycle, consumers have become more deliberate in managing their overall ticket and are showing a preference for brands that are offering compelling value,” Papa John’s CFO Ravi Thanawala said during the company’s call on Thursday.

Yum Brands, meanwhile, released earnings last week showing a slight decline in sales, prompting the company to roll out initiatives to appeal to cost-conscious diners.

“Ensuring we provide consumer’s affordable options has been an area of greater focus for us since last year, with all of our brands having offered disruptive deals and introduced or reintroduced the track of everyday value,” said CEO David Gibbs.

“Our brands experienced improving trends relative to the first quarter in the U.S. market, and we continue to refine our offerings in international markets to recapture similar momentum.”

The slowdown in consumer spending applies to more than just the nation’s fast-food restaurants, PYMNTS wrote last week.

“Consumers are thinking twice before pulling the trigger to buy even everyday items — a hesitation to spend that’s evidencing itself in slowdowns and headwinds for all manner of firms across all avenues of commerce,” that report said.

These cuts come in areas such as home furnishings, with Wayfair reporting a quarterly sales dip, and travel, with Disney seeing what it called a “moderation” in visits to its parks.