Are Dollar Menus Actually Worth It For Restaurants?
Dollar menus may be a common sight at fast food restaurants. Wendy's, Taco Bell, Burger King and others have separate low-priced menus, which may make you wonder how food can actually be so cheap. According to Business Insider, McDonald's pulled their dollar menu in 2014 after having declining sales and fewer customers ordering from the discounted options, only to rebrand in 2018 and offering a menu with a range of prices from $1-$3. Sometimes, fast food chains charge more than a dollar bill, but still offer you a "deal" that you feel good about and, more importantly, you are willing to order from.
If you've ever wondered if these companies are actually making money from these dollar menus — from fries to hamburgers to fish sandwiches — you're not alone. In fact, fast food chains dedicate time and money to study and figure out consumer profiles of who orders from these low priced menus (via Skift Table). They look at who purchases the items — are they new or repeat customers? — and whether they only purchase from the dollar menu, or if they choose these cheap menu items in addition to their combo or meal (via Skift Table). Knowing all this information helps food companies make better decisions on what will and won't work, and why.
Value menus help increase sales
Offering cheap menu items is beneficial for the bottom line for many fast food restaurant chains. Companies like McDonald's, Wendy's and Taco Bell keep offering their low priced menus because customers order from them. According to Skift Table, "McDonald's reported higher order averages across the board thanks to value menu add-ons."
A SunTrust research analyst, Jake Bartlett, said in an interview with Skift Table, "The hope is always that the value menu is going to be used in a number of ways. One is to attract that consumer who can't afford much more, but another is to boost the sales with others who just want to use it as an add-on." The beauty of these cheaper menus is that they give customers more options and choices, and many regulars enjoy combining items from both menus.
However, value menus don't typically bring in new customers. The NPD group conducted a market study and "found that value menus drove higher average consumer spending per order, but they weren't as effective at bringing new customers into the restaurants" (via Skift Table). Dollar menus help increase sales and lead to higher revenue with regular customers because most order from both menus.