It’s lunchtime at the Eaton Center mall in downtown Toronto and every corner of the food court is hungry for customers.
Bourbon St. Grill is trying to lure them with a pair of Jamaican beef or chicken patties for $5 and a “value” meal for students for $10.99.
Nearby New York Fries is hoping a $7.49 hot dog and pop combo designed for “lunch, lupper or snack” will do the trick, and at Sansotei Ramen, it’s a offer $2 off tonkotsu or spicy tan.
This wave of promotions took shape at almost every fast-food restaurant in the country, and the phenomenon intensified into what industry observers have called a “war for values.”
They predict that the battle for your money isn’t going away anytime soon and could even reach new heights next year.
“It’s going to last at least the first six months of 2025, when we’re going to see high promotions, but it’s probably going to last all of 2025,” said Danilo Gargiulo, senior analyst at investment research firm Bernstein, which specializes in in restaurants.
The war of values did not happen overnight. Spending habits changed in the years following COVID-19 lockdowns, when government supports and a lack of opportunities to go out boosted savings.
When health measures were lifted, people spent what money they had, but when prices, interest rates and inflation soared, consumers backed away.
For fast food chains, this meant diners ditching sides, opting for snacks instead of larger meals, or even avoiding quick service restaurants altogether.
The decline in customers has persisted even as inflation has eased, leaving the fast food industry facing a big question: How to get customers back into restaurants and spending again?
So far, the answer has been promotions.
McDonald’s Canada has added several items to its McValue menu for $4 or less and reduced the cost of a small coffee to $1.
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Not wanting to be outdone by the Golden Arches, Wendy’s announced a breakfast menu for two for $4 and offered a Pineapple Under the Sea Frosty burger and Krabby Patty a la SpongeBob SquarePants.
Even Tim Hortons couldn’t help but join in. In recent months, the company has discounted breakfast sandwiches to $3 for customers buying coffee and has also offered promotions where coffee buyers can get a donut for $1.
“All of these collaborations and limited-time offers are really trying to put consumers back into the store with the idea that once you’re there, you can really experience how nice it is, how good the experience is and maybe you will come back. ” Gargiulo said.
“If consumers aren’t in the store, you can’t upsell them, you can’t get them to expand their menu or maybe try new items that are a little higher priced.”
Realizing customers needed an incentive to come, Taco Bell Canada tested a Cravings Value Menu in November 2022, making it permanent in May 2023.
The double tacos and beefy five-decker burritos that made up the menu were all priced at $3.50 or less “because customers expect more bang for their buck,” said Meera Patel, head of marketing for the Canadian branch of the company.
More than a year later, that wait hasn’t subsided, so Taco Bell expanded the menu by adding an ’80s Caramel Apple Empanada and a ’90s Meximelt in late November.
Although competition is still strong, Patel predicts another surge in the new year.
“I’ve been monitoring competitor offers for four years and I’m seeing trends now… In January and February, you’re really banking on strategic value,” Patel said, predicting that offers priced at two for $5, 6 $ or $7 will be popular. .
“In February you will probably introduce something new because the portfolios are more strengthened then.”
Many brands won’t resist the idea of outperforming their rivals.
“If one brand drops their nuggets to $3 for 10, another brand will do the same thing,” she said.
Staying away from the fast food wars can be dangerous — a lesson Popeyes Louisiana Kitchen learned when its systemwide sales fell 0.8 percent and its comparable sales fell nearly 4 percent. percent in the last quarter.
Joshua Kobza, CEO of Popeyes parent company Restaurant Brands International, blamed the performance on “a more value-sensitive environment this quarter” and the chain “missing some of the offerings consumers were looking for.”
During RBI’s November earnings call, he said Popeyes began working to reverse the trend with three pieces of chicken for $5 in mid-September. This was followed in October with a $6 big box. Both boosted traffic and sales.
Éric Lefebvre, CEO of MTY Group, Quebec owner of dozens of restaurant brands, including Thai Express, Mr. Sub and Timothy’s, notes that promotions come in waves and appear in certain niches but not in others.
Pizzerias are “very aggressive on pricing,” in part because there are so many places to get a pie, he said.
Chains offering ethnic food, however, are “a little less value driven (because) they’re probably a little harder to replace or replicate at home.” Stores specializing in snacks like ice cream and pretzels also miss out on some of the competition because they sell “impulse buys”: customers often only think about buying after seeing or smelling them.
When promotions surface, choosing which to counter and how is “an art more than a science,” Lefebvre said.
The decision reflects the cost of food, the evolution of the minimum wage, the state of the job market, the expectations of franchisees and even advertising budgets.
McDonald’s, for example, is known for having the richest marketing coffers.
“Sometimes they do stuff and we’re like, ‘Well, we can’t play this game or we don’t want to play this game, we’ll wait.’ This is going to end at some point,’” Lefebvre said.
“But sometimes you have to step in and try to come up with a competitive offer.”
When McDonald’s makes a move like $1 coffee, he said some brands “can’t necessarily play on price,” so they experiment with selling $1 coffee, but only in combination with other items.
The goal of any transaction is to reinforce the perception of value, but to ensure that customers are not conditioned to come just for a promotion.
“Remember the 5 foot long ones at Subway?” said Lefebvre. “It was very successful while it lasted, but it took them a long time to get rid of it afterward, so you don’t want to create this expectation that your product is supposed to be at X price and you just can’t do it. money with that. »
Despite the pitfalls of promotions, Lefebvre predicts that the current wave “is likely to last a very long time”, so the industry and customers “need to view the current environment as probably more normal than the one we went through last year . »
Gargiulo predicts some nuances will arrive next year, however.
“You’re going to see more concepts – instead of stopping traffic leakage – thinking more holistically and more organically about what value means to their consumers.”