“I don’t think companies would be playing limbo with the price stick if they didn’t see results,” says Rick Munarriz, a senior analyst at the Motley Fool, a Web site that provides stock investing advice. “When McDonald’s Dollar Menu came out, nobody thought it would last either.”
And for better or worse, this recession has forced Americans to think long and hard about how they spend their money. Even when the economy does recover, there’s a chance that prices won’t immediately leap up to their previous levels. If that is the case, quick-service could be rubbing elbows with casual dining for some time.
How to Fight Back
Either way, fast feeders should not turn their backs on casual-dining competitors.
“It’s no different than in normal economic times, chains always need to be on the offense,” Sandelman says.
To obviate trade up to casual dining in the face of the segment’s cheaper options, pricing expert Rafi Mohammed suggests a strategy that sounds counterintuitive.
“Rather than just lowering prices, I would actually suggest having a higher-end offering, too,” he says.
Some quick-serves have already done that: McDonald’s, with its upscaled coffee drinks; Burger King, with its ribs and thicker burgers; and Pizza Hut, with its The Natural premium pizzas.
Fast-casuals, on the other hand, should adopt a different strategy.
“For fast casuals, this is a direct shot in the bow,” Mohammed says. “They need to think about what their value offering is.”
Chains like Chipotle are already moving in that direction. The Denver-based Fresh-Mex chain began testing a Low Roller Menu, featuring smaller portions and lower-priced options and a kids menu at some stores this past April.
Another strategy might be to challenge the casual-dining experience.
“I think they need to focus on things like cleanliness, greeting customers, and the presentation of the food,” Tristano says. “They should be doing everything they can to upgrade.”
At the end of the day, though, it’s important to remember that their pricing strategy has casual dining trying to compete on limited service’s turf, not the other way around. It might be enough for fast feeders to simply stay the course and continue doing what they do best: offering good food fast at a low price point. Though casual dining is threatening the segment with options priced at the limited-service level, quick-serves and fast-casuals ultimately have more experience there.