NEW YORK – Restaurant chains including McDonald's Corp and KFC are paring back $5-and-under "value" items in favor of more expensive $10-to-$30 combination meals, a strategy employed to lift sales and profits and offset rising food costs as the U.S. economy reopens.
"Value" meals – sandwich, soda and French fry combinations priced at $5 or less — have long been a staple of fast-food offerings. Chains used the deals to lure bargain-conscious customers, bringing traffic to stores. But deals priced at $5 and under have become less generous in the last 18 months.
During the pandemic, fast-food gained market share from other restaurants forced to close as customers motored through socially distant drive-throughs to pick up a sack of burgers. Now that the United States is reopening, those chains are selling new, pricier sandwiches and meals to customers – a move that some warn may alienate some hourly workers and other lower-income customers as government subsidies wane and mom-and-pop restaurants reopen.
MCDONALD’S EXPANDING LOYALTY PROGRAM NATIONWIDE NEXT MONTH
So far, the chains' trade-up tactic is working, helping lift comparable sales at limited-service restaurants by 11.5% this May compared to the same month in 2019, according to data from Black Box Intelligence. Profit margins are also up at several major chains.