Menu Pricing Matters in Fast-Food Segment

By Brian Harris

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It seems that if there’s one thing fast-food restaurants have learned in recent history, it’s to keep the menu simple and inexpensive—all while shouting your limited time offers (LTOs) and new products from the rooftop. Of course, fast-food innovation is often easier said than done and customer preferences change, as Burger King learned the hard way last year with the Halloween Whopper.You may also recall how Taco Bell went through 40 recipes before finalizing Doritos Locos Tacos. The hard work paid off in what became the most successful product launch in the brand’s history. Just as important as innovation (but sometimes not as fun to talk about) is pricing structure. The 2012 launch price of a Doritos Locos Taco was $1.29 for a regular and a $1.69 for a “Supreme.” These prices have since climbed 20 cents, respectively.

Now Taco Bell is poised to try a new item with another Millennial-favorite, cheese-covered snack: Cheetos Burrito or the “Bur-Cheeto.” The product is being introduced for $1 in an Ohio test market.

The “just-a-buck” offer has been successful in driving customers to stores. For instance, Arby’s sold 29 million sliders at the $1 price point last September. The brand began testing the sliders in April of last year in a select few markets and at a suggested retail price of $1.29, but also started offering them for just $1 during “Happy Hour” in participating markets.

Meanwhile, Del Taco has a two-tiered menu structure to drive average check growth. The menu that is based around the $1 price point also succeeds in driving traffic. Once customers are at Del Taco, they can decide whether they want to spend more on premium ingredients or LTOs. It’s a winning recipe. In the fiscal fourth quarter of 2015, Del Taco reported 6.1% growth from Q4 2014. Notably, company-owned comparable restaurant sales growth comprised check growth of 6.0%, including over 2% of menu growth, and approximately flat transactions.

So what about system-wide check growth? How did franchisees perform with menu and LTO promotion?

Perhaps you need to go beyond sales data for store-level insights—and it’s possible to do that with the right technology platform.

Digging in at the Store Level

When it comes to pricing, LTOs, and introduction of new menu items, you have the greatest control over your corporate-owned stores. You have to do some more legwork at the store level to ensure “participating locations” are not only participating, but also executing the marketing plan appropriately.

Marketing programs don’t exist in a vacuum. At an operational level, they are living, breathing and changing. Taco Bell will need to find out best practices for the “Bur-Cheeto” before rolling it out nationally. Even after an item is made available nationwide, the first few days of availability are crucial in driving sales and building awareness.

Is your restaurant network ready for the challenges of your next big promotion? Learn how Zenput provides real-time, actionable insights by clicking here.

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