Providing value for money is the latest strategy for fast food chains attempting to attract price-sensitive customers. Executives across multiple chains have noted that the restaurant industry has become a fiercely competitive battleground, a "value war” of sorts, according to Elizabeth Williams of El Pollo Loco.
One of the most significant tactics in this value war is the offer of attractive $5 meals. Several restaurants, including El Pollo Loco, McDonald’s, Kentucky Fried Chicken, Popeyes, and Burger King, have recently been promoting their $5 meal deals. El Pollo Loco has introduced a $5 Tuesday taco special, McDonald's extended its $5 Meal Deal into December, while other brands have also highlighted their own $5 promotions.
These $5 meal deals might seem like a bargain to the consumer, but their success lies mainly in their psychological appeal. As Melina Palmer, a behavioral economist, explains, the $5 price point is attractive because it creates an impression that the brand is affordable and accessible.
Deepening the impact of these $5 meal offering are early signs of improved on-site traffic to restaurants. Despite this, many chains continue to bemoan their most recent patronage figures. According to data from Placer.ai, visits to U.S. quick-service restaurants only saw a marginal 0.2% year-over-year (YOY) increase and a 0.1% rise from the second quarter.
Yet, some chains have seen positive impact from these deals. McDonald’s, for example, attributed its $5 meals to helping make headway with low-income households. KFC expanded its $5 offerings to boost slowing sales. Similarly, El Pollo Loco has launched its own promotions in an effort to counter falling same-store sales.
In an industry where staying competitive is paramount, fast food restaurants are using psychologically-appealing strategies like the $5 meal deal to lure in value-conscious customers and boost dwindling patronage rates.