Fast food restaurants need to dish out value in 2024; but traffic may not inevitably follow
Fast food, long known as one of the cheapest ways to eat, no longer feels affordable to many diners. Even value deals are getting more expensive. The positive aspect of all this is that, it is one more reason to visit the drive-thru window less often – the other reason been the long-held belief that fast food isn’t the best option when safe guarding one’s health.
2023 saw a wide range of price hikes across the board - including fast food chains and outlets, who all increased prices to compensate for rising operational costs. Over the past couple of years, chains such as McDonald’s, KFC, Pizza Hut and Taco Bell to name but a few, have raised menu prices. Not to be left out, even standalones…from the good and not so good have joined the melee.
Now I get it that most of us sometimes simply see only rising prices, and, in some cases there may well be a method to the madness. But what I cannot fathom is how price increases in limited service restaurants have sky-rocketed - well above that of prices at full-service restaurants.
For instance, an all - you - can - eat dinner buffet at a Colombo 5-star hotel, which used to cost around Rs.5,000 in 2021, is now priced between Rs.6,500 to 7,500. I.e. up between 30% - 50%. In contrast, fast-food prices, particularly in Sri Lanka, are currently up over 100%, when compared with 2021 prices.
Perhaps more to the point: For example, Popeye’s regular Classic Chicken Sandwich Combo which was Rs.900 three years ago is now priced at Rs. 1,980. For a simple bun ( sometimes over a day old), an emaciated fillet of fried chicken, thin spread of mayo and around 10 to 12 differently sized fries, heaped on top of each other like a jenga tower – that’s a lot to pay for! Even beverage such as a fizzy Virgin Mojito, which was selling at Rs.220 then, is now a dizzy Rs. 600.
Will value offerings drive enough frequency to bolster margins?
Having increased prices at a faster-pace than full service restaurants, fast food outlets are beginning to observe a slip in low-income traffic. As evidence of this, beginning January 2024, there now appears to be a blitzkrieg of promotional offers to push seemingly discounted offerings aimed at getting more customers in the door.
As to whether these campaigns will be successful is not guaranteed. For one reason, they still cost an arm and a leg for a family of four. Another reason is that food chains (especially those in Sri Lanka) do not regularly change their menu offerings and promotional strategies. Overtime, the sameness of the offerings leads to increased resistance.
I for one, avoid those ‘buy one –get one free’ offers, after a KFC outlet in the suburbs of Colombo was temporarily closed by Public Health Inspectors, following complaints that it sold spoiled chicken.
Once chains boost menu prices, they never lower prices
Reputed fast food chains are mostly owned by publicly traded companies which exist to make money for their shareholders. Such companies usually grow by naturally expanding, opening new restaurants, selling more food, etc. This is called organic growth. But one cannot organically grow forever, because eventually and especially in a crowded market there's nowhere else to grow into. That’s when they begin cutting costs and raising prices…and over time everything gets worse and more expensive.
Ilzaf Keefahs is a freelance writer who enjoys focusing on hospitality related matters that he is passionate about, and likes to share his views with hoteliers and customers alike. He delves into the heart of hospitality to figure out both customer service and consumer trends that impact the industry
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