Deal-driven dining on the rise
Oct. 29, 2013
by Monica Watrous
CHICAGO – Consumers are getting hungrier for value.
Deal- and discount-driven restaurant visits in the United States have increased in 2013 after declining during 2012, according to the NPD Group, a Chicago-based market research firm.
Bargain-based dining was up 2% in the year ended August 2013 compared to the prior-year period, when value visits decreased 1%.
“In my view the industry tried to move away from heavy discounting last year but found it was just not feasible with consumers still closely watching their spending,” says Bonnie Riggs, restaurant industry analyst for NPD. “It is deal-related traffic that is keeping the industry from registering traffic losses.”
At the height of the recession, special offers drove restaurant visits, with deal-based traffic up 5% in 2008 and non-deal visits down 1%. In 2009, deal traffic increased 3% and non-deal visits were down 4%, NPD said. But in 2012, deal visits declined by 3% and non-deal traffic climbed 2%, after many promotions introduced during the recession had existed for a few years. The trend may be reversing, however, according to NPD’s CREST research, which tracks how consumers use restaurants.
As cautious consumer spending continues, several fast-food chains are reformulating their value platforms. McDonald’s recently rolled out a revised dollar menu, dubbed the Dollar Menu & More, which features products at $1, $2 and $5 price points.
“The Dollar Menu definitely, particularly in times like these where you see consumers stretched a little more from a discretionary spending perspective, and you see a bit of a bifurcation relative to the economic strata in the U.S., it's very important to have that affordability platform and the value, the Dollar Menu that we have,” said Don Thompson, president and chief executive officer, during an Oct. 21 earnings call.
The Wendy’s Co. made a similar move earlier this year with the launch of its Right Price, Right Size value menu, which features sandwiches and snack-size items at 99c, $1.19 and $1.99 price points. Additionally, Einstein Noah Restaurant Group, Inc. this year transitioned to a more value-oriented strategy, adding more meal combos as well as an increase in discounts and coupons, and Taco Bell tested its $1 Cravings Menu in select markets.
Casual-dining chains, including Applebee’s, Olive Garden and Chili’s, also have increased promotions and discounts, from pick-two combos to dinner-for-two deals. However, the segment may not be benefitting from the bargain boom like its quick-service counterparts.
“Casual dining has really ramped up with its deals,” Ms. Riggs said, “but, unfortunately, it hasn’t stopped traffic declines, which may mean that its deal offers aren’t resonating with cost conscious consumers.”