Fast food chains are embracing value deals this summer to combat rising prices and boost foot traffic. Will these strategies be enough to revive their lagging stocks?
To counteract increasing costs, fast-food restaurants are trying to attract more consumers by offering value packages this summer. Due to rising expenses, restaurant brand sales are slowing down; nonetheless, Taco Bell, McDonald's, KFC, and Burger King are introducing tempting value meals. However, Will these tactics be sufficient to boost their underperforming stocks?
Quick-service restaurants have faced challenges as prices increased over the past few years. To address this, they’re now offering limited-time value deals. The intention is to boost foot traffic and encourage customers to spend more during their visits. Many will watch closely throughout July, which Evercore ISI analyst David Palmer called a "pivotal month for the fast food industry," to prove that the "$5 meal bundle is enough to accelerate industry sales."
The limited-time value deal comes down to a simple proposition: When value strategies work, it's because increased foot traffic offsets lower margins to bring in more dollars, Morningstar analyst Sean Dunlop said. Consumers also find adding more items to their checks helpful. The footfall is critical for any business to survive and thrive.
Major fast-food chains' shares have taken a hit in 2024. McDonald’s, Wendy’s, and Restaurant Brands International (parent company of Burger King) are down, while Starbucks struggles to maintain investor confidence. In contrast, the S&P 500 index has seen significant gains. Some of the brands have also been affected by political boycotts, making life even more difficult for them.
Here’s a rundown of some value meals hitting the market:
Taco Bell’s Luxe Box: A $7 bundle includes a Chalupa Supreme taco, beefy five-layer burrito, double-stacked taco, chips, nacho cheese sauce, and a medium drink. It offers a 55% discount compared to buying items separately. "What we found is an opportunity to give consumers an ... abundant meal at a price that everybody can afford, at $7,” Taco Bell chief marketing officer Taylor Montgomery told Yahoo Finance at Taco Bell's headquarters. Montgomery hinted that other chains' value offerings may not be as hearty.
McDonald’s $5 Value Menu: Includes a McDouble burger or McChicken sandwich, chicken McNuggets, small fries, and a small soft drink.
KFC’s $4.99 Meal: Features two pieces of chicken, mashed potatoes, gravy, and a biscuit.
Burger King’s $5 Your Way Meal: Choose a Chicken Jr., Whopper Jr., or bacon cheeseburger paired with fries, nuggets, and a drink.
While value deals may boost foot traffic, they also impact profit margins. A value war among competitors could leave no clear winner. Fast food chains need to find a careful balance to succeed. However, staying relevant with cheaper options may be one way to go about this task.
