Before the recession, Andrew Puzder, who heads the Carl’s Jr. and Hardee’s burger chains, liked to joke that sharp-priced competitors were “giving food away.”
As the recession deepened and the number of 79-cent taco and 99-cent hamburger offers exploded, Puzder realized it was “no longer a joke; they are giving food away.” Literally.
Last week, KFC gave away a free piece of its new grilled chicken just for the asking.
Welcome to the fast-food value war, a battleground where $3, $4 or $5 will buy a hungry consumer a double burger, fries and drink combo, or entrees such as a pesto turkey sub, a grilled chicken burrito and more tacos than anyone but a teen boy could consume in one sitting.
“The marketplace is contracting, and all the brands are using value to get sales,” said David Ovens, chief marketing officer of Taco Bell. The nation’s largest Mexican fast-food company is a full participant, touting its “Why Pay More” menu of 79- to 99-cent items such as the Cheesy Double Beef Burrito and Triple Layer Nachos.
Quiznos and its competitors are responding to customers who are eating at home more often, waiting for some attractive promotion or coupon before heading to the drive-through — and skipping sodas and shakes.
Yet going after budget-conscious consumers is a risky proposition.
Restaurants must adjust their menus to attract stingy consumers in a manner that doesn’t erode their business, said Darren Tristano, a restaurant-industry analyst at Technomic Inc.
“You have to manage a shift from high margin to high volume,” Tristano said.
Puzder knows he must respond and is bringing back a hamburger that will sell for 99 cents to $1.29 at Carl’s Jr., depending on the location, as well as Carl’s chili dogs and Hardee’s double cheeseburgers priced at two for $3. This isn’t the way Puzder, chief executive of CKE Restaurants Inc. in Carpinteria, Calif., likes to do business.
“I refuse to lock us into some low price point and then make food I won’t eat,” Puzder said. Based on his experience sampling the value fare at several competitors, he considers much of the low-priced food in the marketplace “inedible.”
“You can do value and quality — you just can’t do 99 cents and quality,” Puzder said.
Quiznos knew it needed a value entree but didn’t attempt the $1-or-less level, said Rick Schaden, CEO of the Denver-based sandwich chain.
The company’s marketing research found that “there is kind of a big cliff above $4 right now” and set that as its target. It gave a team of chefs, accountants and marketers the task of coming up with a product.
In March, Quiznos launched the $4 Toasty Torpedo sub sandwich, which comes in five varieties, including the Italian, containing pepperoni, spicy capicola and ham, and the Turkey Club, containing oven-roasted turkey and bacon. A month later, the sandwich accounts for about 25 percent of the chain’s sales, Schaden said.
