The Enduring Appeal of the Value Menu

It’s 3:39 p.m. on a Tuesday afternoon and the Taco Bell on Northern Boulevard in Queens, NY is buzzing. A clique of seven middle school-aged students — maybe from the nearby private Garden School, or one of the public schools that’s within walking distance — is having trouble deciding what to order. “I always get the beefy Fritos burrito,” a student named Michelle says while scrolling through her phone. “It’s beyond perfect.”

According to a cashier, Taco Bell’s beefy Fritos burrito is the most popular item on the chain’s dollar menu. “We sell more of those than anything else,” a manager on duty notes, “though we also sell a lot of the shredded chicken mini quesadilla and the cinnamon twists.” Michelle’s meat- and corn chip-filled burrito came out to $1.08 with tax, which, for a teenager on an allowance, is a good deal.

Based on earnings reports and market research, Taco Bell’s dollar value menu — which it calls Dollar Cravings — is a runaway success, particularly as compared to value and dollar menus among the top national fast-food chains. This year, Taco Bell announced plans to add more options to its existing dollar menu, and as of last fall, introduced a dollar menu just for breakfast.

Taco Bell’s dollar menus can be traced back to America’s most famous burger chain: McDonald’s. The Golden Arches wasn’t the first chain to introduce a value menu at all of its locations, but it did pave the way with limited-time offers and the country’s first real “value meal” targeted at children.

The discounts help get customers in the door, but as Andrew F. Smith writes in Fast Food: The Good, the Bad and the Hungry, there’s a dark side to a good deal. “Research has shown that bundled meals encourage customers to purchase more than they might if they just selected individual items,” Smith writes, and this imperative to overbuy has impacted consumers’ wallets and waistlines for decades. Here’s how Taco Bell and McDonald’s have played off each other’s dollar-menu success over the years.

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McDonald’s didn’t invent the dollar menu, but it first offered combo meals or meal bundles — wherein a customer orders a meal by number and gets a main dish, side, and beverage for one set price (which is lower than if those three items had been purchased a la carte) — in 1958. The chain rejiggered its combo meal options often in the intervening decades. Specific value meals were usually introduced on a trial basis and offered regionally. McDonald’s legendary Happy Meal, targeted at children, launched nationwide in 1979.

But Ray Kroc’s iconic burger joint did not release a traditional value menu nationwide until 2002, a full 12 years after Taco Bell’s value menu hit the market — and 13 years after Wendy’s coined the phrase “Dollar Value Menu” in 1989.

Taco Bell has experimented with lower-priced items since 1988. The chain’s first official value menu launched in 1990 and was a combination of cheaper items and “the first three-tiered pricing strategy.” Back then, when I was a kid eating Taco Bell on a regular basis, that program offered tacos, bean burritos, and Mexican pizzas at 59 cents, 79 cents, and 99 cents, providing a lifeline to busy working parents across the country.

Taco Bell’s CMO, Marisa Thalberg, comes from a luxury-services background (she was a VP at Estée Lauder) and likes to compare its offerings to fast fashion. Like Zara and H&M, Taco Bell discovers what consumers want and then manufactures it quickly and at a lower price point than its competitors, serving items that are considered “interesting and fun,” as Thalberg says. The nuance is in the branding: “There’s a difference between shopping at a 99-cent store and fast fashion.”

Like fast-fashion brands, Taco Bell also doesn't have to emphasize quality — the company’s messaging is about value first. Quality, which in the food space generally refers to some vague combination of freshness, good nutrition, sourcing, and minimal processing, is not usually directly referenced at Taco Bell. Instead, at Taco Bell, value is quality. “Even at higher price points you have to make sure people feel they’re getting value,” Thalberg says. “What sets us apart is the fact that our food is craveable and we’re able to do it at price points that make it accessible for everyone. That’s what differentiates good value from something purely cheap.”

Taco Bell’s entire menu, not just its dollar offerings, falls in line with that messaging. With the exception of bundle meals, which are meant to serve more than one person, no single-serving menu item at Taco Bell costs more than $7. Most cost less than $3. The company told Eater that its dollar menu (both breakfast and all-day) and its $5 boxes (combo meals that include three tacos plus a drink) were “major sales drivers” in 2016. The $5 combos alone brought in $500 million in sales last year. Meanwhile, the chain recorded 240 million $1 item transactions; 75 million transactions were for tickets ranging between $3 and $6.

McDonald’s first national value menu, launched in 2002, was called the Dollar Menu and featured its newest item at the time, a burger called the Big N’ Tasty. Franchisees were not required to offer the menu, but the majority that did included eight items in addition to the Big N’ Tasty: a McChicken sandwich, McValue fries, a soft drink (small or medium depending upon the market), a Fruit ‘n Yogurt Parfait, a side salad, two baked apple pies, and a sundae. It’s likely that McDonald’s reason for introducing the menu had to do with the ongoing recession in the early aughts and the fact that its competitors were inching into its turf. That original Dollar Menu was a smash success, at least by one metric — it got people in the door.

But it only lasted a decade. In 2013, McDonald’s started to move away from its dollar menu, because while it attracted customers, it wasn’t helping the company’s bottom line. Some analysts suggested it was a matter of simple economics: Thanks to inflation, it was no longer possible to make a profit on a $1 burger.

Five years ago McDonald’s announced it was replacing its Dollar Menu with a new variation on its Extra Value Menus: a series of combo meals all priced above $1. In 2016, the fast-food chain introduced another value menu: The McPick $2 effectively got consumers to spend more while making them believe they were spending less. Whether or not this has been a success in terms of profitability remains to be seen, but as CBS News pointed out, the burger giant “has steadily bled customers since dropping the Dollar Menu in 2012.”

A major difference in the success of each company’s value menu offerings has to do with their respective marketing strategies. Though Taco Bell has mentioned in advertising that it’s improved the quality of some its food, Yum Brands CEO Greg Creed said in an earnings call last year that “Easy beats better.” For Taco Bell, quality doesn’t need to be the priority when speed and value are working so well.

Meanwhile, in the transparency campaign McDonald’s launched in early 2015 — known as “Our food. Your questions.” — the burger company tried to convince skeptics that its food was, well, food. Because McDonald’s has otherwise not sought to actually improve the quality of its burgers — aside from testing fresh instead of frozen beef at some locations and switching to buns without high-fructose corn syrup — this messaging may not have worked to improve the attractiveness of its value menu offerings. Either way, McDonald’s isn’t seen as having the same sort of "value" as its taco-slinging competitor, even if its menu items literally cost the same price.

Like McDonald’s, Wendy’s value menu has evolved; the chain introduced its 99-cent Super Value Menu in 1989. That original menu offered nine different items, from burgers to drinks to fries. Wendy’s vice president of brand marketing, Liz Geraghty, says that one key item has always been available: the Jr. Bacon Cheeseburger. “That Jr. Bacon Cheeseburger is something our customers know and love and come back for,” Geraghty says. It’s no longer priced at 99 cents, but it’s still seen as a value by its fans in the same way Taco Bell’s beefy burrito is viewed as a value: It’s craveable.

Geraghty says value-menu items rotate based on consumer demand. In 2012 the company introduced Right Price, Right Size, meant to appeal to customers who wanted a specific item in a specific size (large, medium, or small) at a low price (relative to the size chosen). In 2015 the company launched its 4 for $4 bundled-value meal deal, which is a lot like McDonald’s McPick menus, and similar to one Jack in the Box recently announced. Geraghty says that Wendy’s 4 for $4 menu drew an “immediate positive consumer reaction,” based on an independent survey of consumers. In an earnings call in May 2016, Wendy’s cited its 4 for $4 as a reason its same-restaurant sales in North America climbed 3.6 percent.

Jon Hein, author of Fast Food Maniac: From Arby's to White Castle, One Man's Supersized Obsession with America's Favorite Food, believes value menus and dollar menus are the reason longtime fast-food fans keep going back. “I always get a No. 4 at McDonald’s,” Hein says. “It’s funny ... I’ve reached the point where I know my meal number but I don’t actually know what’s in it.” Hein notes that not knowing what’s in the meal but knowing that it’s your meal is what makes it great. “The marketing folks who decided to number their value menus — that itself is valuable. They just made it easier and easier for the consumer to get what they want.”

Hein appreciates that the industry continues to innovate. “I think in the ‘80s and ‘90s, when value meals first started appearing, it was something new, it gave you a new way to order. Now a lot of places do limited-time offers,” Hein notes. “They do this to keep people’s interest.” He’s not sure that such offers are always necessary. “If you just deliver good product and quality value meals, people will come back for it in bulk, and it will pay off in the long term.”

It’s hard to talk about value menus and fast food without addressing their wider impact on the global food economy, agriculture, and human health. Smith addresses this last point in his discussion on obesity in America. But Hein makes a clear distinction here, and it’s one many of my colleagues have noted in passing. “When you go to these places you know the bargain you’re making for yourself,” he says. “I like that fast-food places are trying to be concerned with health and nutrition, but it’s called fast food for a reason. I don’t think you’re going to walk into Burger King and order a salad. There are better or other places for that. It’s about variety.”

Truth seeker and Parts Unknown host Anthony Bourdain wasn’t talking about fast food when he wrote “Nothing else matters. Only deliciousness,” but for fans of fast food he may as well have been. If Taco Bell can keep coming up with new craveable options and keep prices low, it stands to reason that the chain will continue to see those dollar bills roll in.