Meals at $5 or less drive fast-food ads

In the fast-food industry, five has become a magic number. Faced with increasingly frugal customers, a host of chains have launched deals for $5 or less per person.

Arby’s, part of the Atlanta-based Wendy’s/Arby’s Group, is launching this month a set of $5.01 combos that include a sandwich, fries and drink. The extra cent is part of a marketing campaign that will be accompanied by the tag line “Worth Every Penny.”

Shane’s Rib Shack, owned by Atlanta-based Petrus Brands, is offering a family meal deal that feeds four for $20. It also has a $5 chicken tender meal.

Many chains have attracted guests by going lower than $5. Church’s Chicken, based in Atlanta, introduced a 99-cent value menu early this year that has helped spur sales.

Popeyes, owned by Atlanta-based AFC Enterprises, said it increased sales in the second quarter thanks largely to value meals that included $1.99 and $2.99 individual combos and $7.99 for nine pieces of chicken.

Even independent restaurants are adding low-priced value meals. Michael’s Deli in downtown Atlanta has a sign in its window promoting $5 footlong subs, matching the offer of a Subway two doors down. The deli also promotes a host of value meals — a chicken salad sub, BBQ sandwich, garden burger, gyro, fish sandwich and grilled chicken — for less than $6.

The best-seller is the $5.50 gyro combo, said owner Mohammed Khan. He lowered the price by a dollar a few months ago. Profits on each sale have gone down, but the lower prices have attracted more guests, he said.

“This area is very competitive,” said Khan, whose store is located on a street packed with eateries. “And this year, business is very tough.”

These value meals are being introduced in the most difficult market for restaurants in decades. Guest traffic at U.S restaurants declined 2.6 percent in the second quarter, the sharpest drop since 1981, according to NPD Group, a consumer research firm.

While they need to attract customers, restaurants have to be careful about how they use low-priced value meals, said Ken Bernhardt, professor of marketing at Georgia State University’s Robinson College of Business.

“It’s a two-edged sword,” Bernhardt said. “It does generate some immediate traffic, which many of the fast-food chains need today. But at the same time, it creates a price that is almost a ceiling going forward.”

After watching other chains offer $5 promos, Arby’s is turning to a set of $5.01 value meals to encourage guests to visit more frequently, said Davis, head of marketing for the chain. The combos include a beverage, fries and choice of a French dip and swiss, roast beef gyro, roast beef patty melt, roast chicken or regular roast beef sandwich.

Arby’s also is rolling out a “friends and family” offer that provides five regular roast beef sandwiches for $5 with the ability to add fries or a drink for $1 each.

Arby’s felt it had better quality than competitors but was hitting a “price barrier,” Davis said. The combos are designed to be a good value for customers and also profitable for the franchisees, so they can be kept on the menu long-term, he said.

Consumers will remain price-sensitive even as the economy shows some signs of recovery, Davis said. “This, too, shall pass,” he said. “But I think we’re in a reset. We’re going to be in a tough environment for a while.”

Shane’s Rib Shack restarted in May a $20 family meal deal promotion that it had run off and on for several years. It provides two sides, a gallon of tea, four desserts and a pound of pork or chicken with buns and sauce.

The family meal deal has increased takeout traffic, according to Shane’s executives. The chain also has found success with a $5 chicken tender meal.

Shane’s, though, has been careful not to cut portion sizes on its core barbecue plates, which cost $8 or $11 with a drink, just to come down to the $5 price point, said founder and president Shane Thompson. It wants customers to leave satisfied, he said.

“Even though you’re fighting for that dollar and a lot of places have gone to a lower dollar on the ticket, the value is not always just because you spent a little less money,” Thompson said.