Fast-food value menus beefed up

As leaner times slim down wallets, chains offering more for less

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Associated Press / February 13, 2008

NEW YORK - If you want to stretch your dollar without shrinking your appetite, you're in luck.

Fast-food companies, looking to keep budget-conscious customers spending, are increasingly offering more food for less money.

Jeffrey Davis, president of restaurant research firm Sandelman & Associates, said adding bigger sandwiches to dollar menus allows fast-food restaurants to give people what they want at a price they can afford.

But as commodity prices rise, lowering prices could squeeze margins, especially if it doesn't lead to better sales. The chains say the drawbacks don't outweigh the benefit of offering more value to customers in a weak economy.

Perhaps the most noticeable example of such a strategy is the appearance on more dollar menus of the double cheeseburger, long a staple of the regular menu and combination meals.

Unlike the value- and dollar-menu regulars - like a small order of fries or a "junior" version of a larger burger - the double cheeseburger is a usually a more marquee choice.

McDonald's Corp., ahead of the curve on the value-menu front, is the exception. Its double cheeseburger has been on the dollar menu since its introduction in 2003 and is one of the chain's biggest sellers. McDonald's touted the "everyday appeal" of the dollar menu in its most recent sales report.

Now a version of the double cheeseburger is appearing on value and dollar menus at the chain's biggest competitors - Burger King Corp. and Wendy's International Inc.

That's good news for diners like Shekia Scott, a Boston resident visiting New York recently. While eating at a Burger King near Penn Station, Scott said higher prices for food and gas were hurting her budget. But, she added, "the dollar menu's been a help."

Teenagers - long loyal to fast food - could also benefit from an expanded value menu, said Deutsche Bank economist Joe Lavorgna.

"Teenagers are very sensitive to changes in gasoline prices," he said. "Typically what they have left over to spend, they will spend on fast food."

Burger King is now studying whether its dollar double cheeseburger can bring that leftover change into the coffers. The chain is testing the sandwich in a few undisclosed markets. It usually sells for more than $2.

The chains contend they aren't interested in a low-price battle like the one waged in the 1990s, but current promotions suggest the competition for cash-strapped customers will be heated.

And it extends beyond the burger chains. Yum Brands Inc.'s Taco Bell is promoting its Gordita Supreme product - one of the largest menu items - for 99 cents this month.

The last burger price cuts led to lower sales and quality, and the chains say they learned their lesson. But as commodities rise, making lower-priced sandwiches without affecting quality isn't easy.

"The double cheeseburger for us is 4.4 ounces of beef," said Burger King's Klein, adding the Whopper Jr. - a mainstay of the chain's current value menu - has half that amount of meat. "So from a sheer cost of goods basis, it's pretty evident it would have a less attractive cost to goods proposition."

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