After years of playing into the mass-affluence trend by trying to get their consumers to trade up to pricier, fancier fare, McDonald's, Wendy's and Burger King are all deploying the 99¢ price point as a key marketing tactic going into a year when middle-class budgets are expected to be stretched thin and gas prices are still climbing. But it's a ploy that has some franchisees worrying about value customers eating their profits.
McDonald's has gained momentum with the double cheeseburger that anchors its Dollar Menu, which takes some of the credit for the chain's resurgence in recent years. Wendy's introduced a "Stack Attack" sandwich for 99¢ before year's end, and Burger King confirmed to Ad Age that it is testing a double cheeseburger for a dollar in select markets.
"To me it's a classic case of trying to defend market share and hoping that you can squeeze out a couple of more visits from customers who might potentially increase their loyalty," said John Moore, a former Starbucks marketer, who blogs at brandautopsy.com.
Still, loyalty isn't enough for some franchisees. With commodity costs continuing to rise, owner-operators are conscious of their margins. "More people are going to be moving from premium sandwiches or high-profit items to value-menu items," said Dick Adams, a former McDonald's franchisee turned consultant. "That may maintain same-store sales theoretically, but it's not good news to sell less Big Macs and quarter-pounders than double cheeseburgers for a dollar.
'We felt the pressure'
While Mr. Adams added that a few franchisees have experimented with taking the double cheeseburger off the value menu, the sandwich's position has proven very important to the parent company.
"McDonald's Dollar Menu provides our customers with consistent everyday value and variety that they appreciate," said company spokesman William Whitman. "While the company does not set menu prices for franchised restaurants, our franchisees overwhelmingly support the Dollar Menu as well as our overall value-menu strategy." Mr. Whitman added that there are no immediate plans to replace the double cheeseburger on the Dollar Menu.
Wendy's franchisees also have expressed concern over the marketer's decision to sell its Stack Attack double cheeseburger for 99¢. "We felt the pressure to focus on this younger crowd, and what they responded to was a $1.50 sandwich for 99¢," one franchisee said. "You can't stay in business doing that."
Nevertheless, Wendy's has a long history of value pricing. After years of McDonald's Dollar Menu marketing, consumers may have forgotten that Wendy's introduced its super value menu first, back in 1989. The chain splits the menu in two: Items such as its junior bacon cheeseburger and crispy-chicken sandwich for 99¢; healthier options such as baked potatoes, side salads and chili for $1.19.
But Brand Autopsy's Mr. Moore said Wendy's risks contradicting its own marketing. "They've been very much out there trying to promote that they've got higher-quality hamburgers," he said. "Talking high quality and low prices and higher quality -- it's a mixed message. That's very hard to pull off."
Wendy's is bolstering the Stack Attack launch with 15- and 30-second spots featuring 99 Lincoln look-alikes to underscore the low price, as well as the burger's quality. Wendy's agency is Saatchi & Saatchi. "The double cheeseburger goes head-to-head against our competition, and we think because our beef is fresh -- never frozen -- our hamburger tastes better," said Wendy's spokesman Bob Bertini.
McDonald's, meanwhile, is supporting the double cheeseburger with spots from DDB, Chicago. In one, office workers complain about the dollar's weakness until someone walks in with a double cheeseburger purchased for a dollar.