Yahoo Finance As Food Prices Rise, Don’t Expect Fast Food Restaurants To Offer Discounts — Here’s Why
From the inception of the fast food restaurant until more recently, establishments like Domino’s and Wendy’s have been thought of as inexpensive dining options. While they certainly benefit high-income earners who want a quick meal, they provide a greater service to customers with lower incomes or more budget-minded spending habits.
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But food prices have generally increased by 20% between January 2021 and January 2024, per MSN, resulting in consumers being less quick on the draw. Companies with decreased performance include — but are not limited to — McDonald’s, KFC, Taco Bell and Pizza Hut, according to NBC. That being said, fast food restaurants aren’t jumping to give discounts in the traditional sense. While they will remain inexpensive relative to traditional restaurants, don’t expect them to return to how they incentivized customers several years ago.
These chains intend to convince consumers that their prices, as high as they are, accurately represent the value of their food and beverages, CNBC detailed. As quoted by MSN, the CEO of SignalFlare.ai, Mike Lukianoff, said the fast food industry has shifted its behavior from a decade ago, opting to prioritize profit over overall traffic.
“But now, chains may be less likely to chase customers as hard as they have in the past because even with a drop in traffic, sales have remained consistent supported by increased prices. Fast food companies aren’t in a hurry to take traffic over profit the way they were a decade ago,” Lukianoff said.
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Targeted Discounts May Be the Future of Fast Food
Discounts today are being offered in less overt methods, like Wendy’s limited-time $1 burger being only available through their mobile app. Wendy’s CFO, Gunther Plosch, stated that their low-income consumer traffic has dropped, yet their market share is the same. Other restaurant chains, like Domino’s, have been emphasizing their loyalty programs and adjusting them to be more attractive to consumers — without simply offering discounts across the board. McDonald’s CEO Chris Kempczinski believes that improving their value menu is the ideal route to maintain the flow of transactions. The company has been focused on their new spinoff restaurant, CosMc’s, and improving the taste of their burgers — another instance of updated strategizing over slashing prices.
Not everyone is convinced this is enough, however. Per a BTIG analyst, Peter Saleh, the act of improving food quality is simply par for the course and can’t alone counteract the negative impact of hiked prices and keep consumers invested in the products. Ultimately, the success of fast food chains depends on their ability to either outperform their rivals or perform comparably against them. Whether wide discounts, loyalty programs or other methods are the optimal path remains to be seen.
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This article originally appeared on GOBankingRates.com: As Food Prices Rise, Don’t Expect Fast Food Restaurants To Offer Discounts — Here’s Why
