Restaurants Bring Back the Discounts

After a summer of less-than-stellar sales, casual dining and QSR chains are vowing a return to value.

August 14, 2012

OAK BROOK, Ill. - The summer may be hot, but restaurant sales are not. McDonald??s, Starbucks and Chipotle Mexican Grill all posted lackluster sales thus far this summer, Reuters reports. That has pushed chains to refocus on value.

Last week, McDonald??s reported July sales remained flat at established restaurants worldwide, while Chipotle and Starbucks both experienced decelerated sales growth during the previous quarter. To boost sales, Starbucks is returning its "treat receipts" that give customers discounts when they come back in the afternoon, along with some product coupons. Chipotle will hold menu prices steady despite its food costs being more volatile.

Even the casual-dining segment is joining in the discounting. Darden Restaurants Inc. started more value promotions in June to increase customer counts at Red Lobster and Olive Garden. "It's not clear which is a greater risk to profits ?" slow (comparable sales) or discounting," said Sara Senator, an analyst with Sanford C. Bernstein & Co.

However, not all chains are going the discount route. Subway, which offered foot-long subs for $5 during the recession, has scaled back the number of sandwiches sold for $5. Upscale coffee drinks migrated from Starbucks to fast-food chains and convenience stores.

The National Restaurant Association predicts the downward trend to be short-lived. This year, the association forecasts total restaurant-industry sales to rise for the third consecutive year. "Total (U.S.) restaurant spending in the last couple months has been down a little bit. I think for the rest of the summer that's going to remain to be the case," said Todd Hooper, restaurant strategist at Kurt Salmon.

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