Subway's $5 Footlong, McDonald's Dollar Menu and Outback's $9.99 "Steak the way you crave it" are among the deals that are keeping the restaurant industry in the black, per a new report from the NPD Group.
Total restaurant industry traffic is up 1% for the quarter ended Aug. 2008, per NPD, Chicago. The modest gain is being drive entirely by meal deals, per the report.
"More so than we've seen in many years, consumers are looking for savings and ways to stretch their dollar," said Bonnie Riggs, restaurant industry analyst at NPD. Nearly a quarter (23%) of all restaurant visits were prompted by price discounts. This was up from 9% the year prior. Non-deal restaurant traffic was down 1%.
Subway's $5 Footlong, launched in March, has helped spur significant growth in sales and traffic for the world's largest restaurant franchise. "Our research shows that consumers' expectations of what is an affordable price have shifted as first gas prices skyrocketed and then the economy moved toward recession which caused consumer confidence to plummet to all time low levels," said Jeff Moody, CEO Subway Franchisee Advertising Fund Trust. "Consumers are looking, more than ever, for high quality food at reasonable prices and our freshly made in front of you $5 Footlongs are fulfill that need perfectly."
While Subway and McDonald's continue to do well in lean economic times, others are suffering mightily. In fact, Ron Paul, president of the food-service consultancy Technomic, thinks the NPD findings may be a bit too rosy. "I'm not sure restaurants are in the black," Paul said. "Public companies are reporting negative same store sales almost universally. I have no reason to think the independents are faring any better."
Regardless, value menus help stop the hemorrhaging, Paul said. "Absolutely we've seen this work in the past. That's no surprise. In past recessions, combo meals have always become important. Whether it's given them a lift to offset these other forces, I'm skeptical."
Either way, price discounts have become "the cost of doing business," said Arjun Sen, president, Restaurant Marketing Group, Centennial, Colo. "In the short-term it helps brand. You want make sure traffic continues because it may be more expensive to get them back later on."