2016 is well underway and thanks to an improved economy fast food chains are poised to have a strong year. To compete for those consumer dollars, we suggest watching for the following fast food trends this year:
- More descriptive menu item names
- Erosion of the middle pricing tier
Let's explore each trend in more detail:
1. More Descriptive Menu Item Names
Expect fast food chains to continue moving away from non-descriptive food names in favor of lengthy ones that remove ambiguity about what you're getting. Some recent examples: Arby's Crispy Fish Flatbread, the Del Taco Epic Grilled Chicken Avocado Burrito, Wendy's Asian Cashew Chicken Salad, and Burger King's Grilled Dogs.
Del Taco Explicitly Named Burrito from their website
A notable exception to the trend is the king of the made-up names, Taco Bell. What's a Gordita? Well, now you might as well also ask about the Doritos Cheesy Gortida Crunch. Taco Bell has even gone as far as to combine names as they combine ingredients. Behold the Quesalupa, which is a Chalupa with cheese in the shell.
On the bubble points go to Jack in the Box for their Double Jack, combining the descriptive implication that you're getting a double burger with the expectation that consumers know what a Jack is. And who doesn't know Jack?
2. Erosion of the Middle Pricing Tier
Fast food restaurants are stuck in a pricing pickle. On one hand, their costs rarely go down. On the other, consumers expect (if not demand) that fast food comes at a "fast food" price. Since perception is reality when it comes to prices, fast food chains have dealt with this by rolling out a stream of premium menu items while offsetting those with value/budget/dollar offerings. The trend, which really picked up steam over the last couple of years, has squeezed the middle of the menu, leaving very little in between the two extremes. For the sake of this discussion, let's call any base menu item (excluding sides and drinks) a value item if it's under $2 and a premium item if it's over $4. Remember, this is a single item price, no combos.
- Arbys has six items on their Sliders and Snacks menus under $2 (excluding fries and drinks). They have 17 over the $4 mark, with the highest topping out at $5.99. That leaves some side items, kids meals and the original Roast Beef sandwich alone in the middle.
- Wendy's has 10 items on their Right Price Right Size menu (again, excluding fries and drinks) and 14 over $4 with pretty much only sides and kids meals in between. Their menu tops out at $6.49 for one of their premium salads. It is also worth mentioning that six of the Right Price Right Size menu items are priced at $1.99, pushing the limit on the lower tier (if we agree $2 is a reasonable limit for a value item.)
Wendy's Right Price Right Size menu
- Burger King actually breaks the $2 barrier on their King Deals with the Bacon Double Cheeseburger priced at $2.29. Excluding this harbinger of doom, BK has nine items under $2 (excluding fries and drinks) and a pretty decent selection of sandwiches (5) priced at $1. They have eight items over $4 on their regular menu (excluding promotional items) and $5.79 looks like the most you'll pay for one item, the Bacon & Cheese Tendercrisp Sandwich. Burger King seems to be a good case of a holdout for the middle tier, with seven items in the $2.99 to $3.99 range. However, six of those seven are poised to spill over from $3.99 into the higher tier on the next price increase.
- Stubbornly, mix-and-match stalwart Taco Bell is still a place where you can generally find menu items in each tier. They've got eight non-dessert items on their $Cravings Menu at a flat dollar. I sure miss the days of 39-cent tacos! If you add the other non fry, non drink, non dessert items that are under $2, the total comes out to 21 items. Nice. Their middle tier is robust, with 23 items between $2 and $4. But who ever thought we'd see the day when you'd pay $5.39 for a single menu item at Taco Bell? Well, that's the price for a Chicken Fiesta Taco Salad. Taco Bell is also experimenting with plussing smaller items by putting them into the topic of our next trend, bundling.
So how can a fast food chain increase perceived value without lowering prices or coming up with new menu items in the discount tier? The answer of late is what we here at FastFoodSource refer to as bundling. Taking a page from your cable company, your mobile phone company, and just about any other product or service you buy regularly, fast food chains have latched onto the idea of taking multiple individual menu items and putting them together for a fixed (usually round) dollar amount. Current examples include Wendy's 4 for $4, Burger King's 5 for $4, McDonald's McPick 2, and KFC's $5 Fill Ups. The trick is finding a way to combine multiple value items into some sort of bundle that appears more valuable than ordering the parts separately.
Interestingly, as I was doing research for this story I found that McDonald's is even using the word "bundle" in their menus, as shown below. Granted, this is for a big bundle, but the philosophy holds.
McDonald's Bundle on drive-thru menu
For me, the jury is still out on whether this will be a short- or long-term trend. Naturally, this is an easy way for fast food restaurants to add perceived value with zero new product investment. But I'm fuzzy as to the ultimate goal. Are chains looking to lure new price-sensitive diners with attractive sticker prices? Or are they hoping to nudge those already partial to the value menu into buying more, thus increasing their average revenue from these budget consumers? My guess is probably a little bit of both. In either case, this is a good way to combine high margin items, and if you include a drink in the bundle, the margin gets even higher. But where do we go from here? As price pressure continues, should we expect bigger, more expensive bundles? Remember, we recently called out a parallel trend in bundling for coupon discounts.
Carl's Jr Bundle Coupon
So as we go through 2016 we'll keep an eye out for these trends as well as any others that crop up. Happy eating!