Burger King to offer $5 meal deal: Fast food's value hack

As consumers tighten their purse strings in the face of inflation, Burger King has become the latest fast food chain to prioritize value offerings strategically to attract cost-conscious diners. The company confirmed a new $5 meal deal aimed at catering to customers seeking affordable options.

Yahoo Finance's Brad Smith and Seana Smith break down the details, shedding light on the factors driving restaurants toward value-oriented strategies to boost profits.

For more expert insight and the latest market action, click here to watch this full episode of Morning Brief.

This post was written by Angel Smith

Video transcript

Burger King is reportedly launching a new $5 meal.

Then they're not the only ones, a slew of fast food chains like mcdonald's and Wendy's launching value offerings of their own.

After seeing consumers pull back on spending this week, we spoke to salad and go Ceo Charlie Morrison on the sustainability of these offerings.

Take a listen.

Chains are taking lots and lots of price when they feel like they can and then when the consumer starts to push back, we go right back into the cycle of value orientation.

What doesn't seem to be working is the idea of sustaining an everyday low price and a price that consumers can afford.

And so as we're watching, even more of these value offerings emerge, it typically does come at a time where many of the consumers are trying to look for value hacks.

And so these value menu deals where even if you look back towards the great recession or the GFC, a lot of the promotions were centered around for mcdonald's and the Golden Arches.

It was, hey, here's the $1 menu and, and you start to see some of these things sunset over time as they then kind of move and mirror with the economic cycle and try to promote other higher value menu items that they can perhaps take a little bit more price on.

Yeah, but this just comes as consumers are under pressure, a lot of these companies are trying doing, trying to do everything they can to boost their profits, especially on the heels of what we've seen from an, a number of their competitors.

We take a look at what mcdonald's is doing.

When you take a look at what Wendy's is doing, Burger King, it seems like at least feeling the need to jump in on this value trend that we have seen and offer that to customers in order to try and boost their foot traffic.

And we take a look at exactly the pressure that these food companies have been under mcdonald's and their most recent report here, missing profit estimates for the first time in two years this past quarter.

And they said that they are seeing consumers starting to pull back.

So there really is this emphasis on value that has been one of the themes that we've been tracking really throughout the season.

And it's beyond a number of these fast food chains.

Even when you talk about some of the commentary that we've gotten out from Walmart from Target.

Even from some of these off price discount retailers, people are looking for value.

They're looking for cheaper options right now as they are being a little bit more discerning about what they're spending on and how they are spending.

So you would think a deal like this would at least boost foot traffic.

I think the question is, what kind of pressure could this ultimately maybe put on margins here, at least in the short term, depending on how long these deals are available for.

And in that margin equation too, if you're saying hello to value, you might be saying goodbye in the near term to menu innovation to the extent that companies talk about that and the amount of money that they put into spending on new creative products that they're able to list on the menu drive even more of the foot traffic.

Now it's ok. Let's stick to what works.

See how we can re bundle it or repackage it in the same great burger or sandwich that you've tried before, whether it be spicy chicken or whether it be a triple quarter pounder whopper, whatever you're naming it here, it could just be variation in what they're calling the burgers or calling the different menu items at this juncture and how it's being marketed.

And in the franchisee mindset, they're going to be looking for even more of that directive to come down from some of these companies, whether it be mcdonald's, whether it be restaurant brands and how they're working with their franchisees to make sure more of the marketing elements are continuing to engage with more customers who are looking for those deals.