After several shaky months in the restaurant industry, things are starting to look up for struggling businesses.
In the last two years, high inflation has prompted an increase in prices across almost every sector, leading people to become more conscious of their spending habits.
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Now, consumers prioritize value when choosing their next meal, opting for options that will give them the most bang for their buck.
This change in customer spending encouraged restaurants, especially those in the fast-food business, to devise creative ways to offer great deals to their customers while still generating positive profit growth.
According to an industry study from Black Box Intelligence, dismal comparable restaurant sales numbers are reversing and expected to turn positive in Q4.
In August, same-store sales decreased by 0.4% year over year, marking the third consecutive month with negative growth, yet they increased by 2% compared to the month prior.
Same-store traffic reported a 3.6% decline from last year, the second-worst since January. However, traffic increased by 1.1% month over month.
Although fine dining had the best performance overall, restaurants in the fast-casual sector also reported positive growth.
Ronald McDonald’ sits on a restaurant bench outside of McDonald’s
McDonald’s devises win-win value-centered deals
Various fast-food chains are listening to customers’ requests by incorporating more value-minded deals into their menus, which has resulted in positive responses.
During McDonald’s Q2 earnings call for 2024, McDonald’s CEO Christopher Kempczinski said that due to inflation, McDonald’s is looking to broaden value offerings that will be more beneficial in the long run rather than push one-time or limited-time deals.
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Recently, McDonald’s (MCD) extended its $5 value meal deal, which was originally only supposed to last for a few weeks in the summer, through the end of the year.
Additionally, McDonald’s currently offers free large fries with a minimum $1 purchase when downloading its mobile app and Free Fries Friday with a minimum $1 purchase when online ordering.
According to McDonald’s latest earnings report, global comparable sales decreased by 1%, and net revenues remained flat compared to the year prior.
However, despite reporting declining numbers, the $5 Meal Deal is proving to be a successful promotion by increasing traffic and boosting sales due to its popularity among lower-income customers.
“We’ve seen a lot of enthusiasm, and the number of $5 meal deals sold are above expectations. Trial rates of the deal are highest amongst lower-income consumers, and sentiment towards the brand around value and affordability has begun to shift positively,” said McDonald’s President Joseph Erlinger in an earnings call.
McDonald’s proves to be one step ahead of the game
McDonald’s’ focus on its menu and staffing could potentially get the fast-food chain back on track.
According to the same study, restaurants that are fully staffed in back-of-house positions, which refers to kitchen and storage staff, reported a 3.6% traffic increase.
Those fully staffed in front-of-house positions — which refers to customer-facing employees like servers — saw an even bigger growth in sales of 4.6%.
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Last month, McDonald’s announced it would add cash kiosks to its restaurants in addition to its original cash-less kiosks.
The company also said this addition would not result in workforce cuts; it would simply be a way to improve efficiency.
Although McDonald’s has missed analysts’ EPS expectations for the last two quarters, the company’s stock is up 2.18% YTD as of Tuesday’s market close.
McDonald’s is set to publish its Q3 earnings report on Oct. 29.
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