Are We Living Through the Last Days of the Dollar Menu?

Disruptions to the global economy by the COVID-19 pandemic have resulted in some of the highest levels of inflation America has seen in decades. Businesses can try to stave off the effects in the short term, but cost increases along the supply chain are continuing to make their way to consumers.

For restaurants, the profits across different items can vary, but, in theory, "value" items are where the margins may be the tightest. So, unsurprisingly, inflation appears to be hitting dollar menus and similar price-sensitive promotions especially hard.

Looking at pizza chains alone, in the past month, Little Caesars has raised the price of their Hot-N-Ready pizzas for the first time ever, and Domino's dropped two wings from its carryout chicken wing deal to maintain the same price. Even some of New York City's iconic "dollar" slice joints have had to start charging more than a dollar.

And that's just the tip of the iceberg. Yesterday, The Wall Street Journal covered a laundry list of iconic brands who have been tweaking value menus, reporting that McDonald's is allowing franchises to ax their "all drinks for $1" promotion, Denny's has done away with promoting their $2 to $8 value menu, and Burger King is looking at options like removing price caps on value menu items and cutting the number of nuggets in one deal from ten to eight.

These chains are not alone. The WSJ cites two industry-wide findings that point to a larger trend: First, Datassential found that U.S. restaurant chains were promoting less than half the number of combo and value meals last year compared to 2016, while, second, Technomic found that most categories of value-meals had increased in price over the past year, with breakfast and snacks being hit especially hard.

It's all part of price increases across the board. According to the U.S. Bureau of Labor Statistics' monthly Consumer Price Index Summary, in December, the cost of eating out saw its largest annual increase since January 1982 — and that was after November set a similar four-decade high. Along the way, plenty of chains have had to tighten the screws on pricing: Back in July, Business Insider cited a Gordon Haskett report showing that Taco Bell, McDonald's, Dunkin', and Chipotle had all raised their prices over the past year, with the average increase across the fast food chains analyzed landing at around 6 percent.

And so, even when "value" items persist, these menu options may look different than they have in the past. "You spend a lot more time thinking about bundled offers and different ways to still deliver value to the customer," McDonald's CEO Chris Kempczinski told the WSJ, "but also make sure that you're able to pass on the pricing."