By Laura Baverman
lbaverman@enquirer.com
It's never been so easy to satisfy hunger with a single $5 bill.
Subway started the trend in 2008 with its limited-time offer for a $5 foot-long sandwich. Now, Gold Star Chili sells $5 coney meals, and Tazza Mia offers $5 salads and paninis. Izzy's and Balboa's started recession menus, the cafeteria at Cincinnati State dropped prices, and Frisch's and LaRosa's introduced "Just Right" menus this year.
"We called it the $5 phenomenon," says Maria Caranfa, director of Mintel Menu Insights, a market research firm in Chicago. "Now, that's an understatement. Value has been a huge touchpoint with consumers this year."
With unemployment climbing, consumers are watching their spend more closely than ever. Nearly 4,000 readers responded to an online Enquirer poll last week, and two of every three said they choose restaurants where they know they can eat for $5 or less. Nearly the same number of people said they wouldn't normally dine at those places if it weren't for the low prices.
The National Restaurant Association calls 2009 the most challenging year for restaurant operators in decades. Sales grew a very weak 2 percent nationally through July this year, compared to the same period of 2008, says Hudson Riehle, the association's senior vice president of research and knowledge.
To compete in today's tough economy, restaurateurs have been pressured to trade a lower check average for increased traffic.
Linwood-based Gold Star Chili first launched its $5 foot-long coney-fries-and-drink promotion earlier this year after it noticed customers cutting out the drink, a typical first sign that they're reacting to a down economy. Sales grew in the first quarter.
"To make it work financially, we really have to be driving volume to offset what are some fairly steep discounts," says Charlie Howard, Gold Star's vice president of marketing. The $5 meal reduces menu prices of those items by about $1.50, he says.
Though sales have declined slightly since the spring, Gold Star expects to keep the promotions going through mid-next year.
"At least while times are tough for our customer, we're willing to take a bit of a hit to keep them coming in for their chili fix," Howard says.
Most local restaurants that have adjusted menus to appeal to cost-conscious customers have done so by shrinking the size of an existing item, or introducing something new. They fear that simply reducing prices will allow customers to get accustomed to paying less for an item. Customers may balk when the economy turns around and prices rise again.
"That's the tight rope you have to walk," says Izzy's CEO John Geisen. The deli chain offers about 10 items on a recession menu. The items are smaller sandwiches and don't include a side dish. They go for $4.99.
"It gives our customers an alternative. If they want to spend a little less and eat a good reuben, they can do so," Geisen says. And charging less for a smaller portion doesn't impact his margins.
Smaller portion, not profit
That's also the thought behind Frisch's new Just Right menu. The restaurant chain always offered items for less than $5, says Karen Maier, vice president of marketing. And it already had a fairly low check average of $6.74.
The Just Right menu was introduced to draw people in for a snack, Maier says. Frisch's simply shrunk the size of its Big Boy, fish and chicken sandwiches and hot fudge cake and offered them at $1.85 each.
Tthe timing was right.
"What we're hearing is the male baby boomers who couldn't decide between a fish and a Big Boy, they get both," she says. And the price? Less than $5.
LaRosa's decided on a Just Right menu for its dining-room visitors before the economy declined, but has since made it a permanent fixture on the carry-out and delivery menus.
Just Right hasn't cut into LaRosa's normal business, says Pete Buscani, executive vice president of marketing. Instead, it's helped attract new customers, he says.
Other casual, dine-in restaurants have tried to compete at lower price points, too.
Cincinnati State lowered prices on its cook-to-order station and started offering $1 items like mini-fish sandwiches and tacos.
"McDonalds, Burger King. They've really put us under pressure. So everything we did, we offered a value version of it," says Peter Wynne, director of food services at the Clifton-based community college's Midwest Culinary Institute. Sales grew 3 percent from 2008 to 2009.
TGI Fridays in April slashed prices on salads and sandwiches to $5 through the end of next May. Chili's introduced a $7 menu. Even upscale seafood eatery McCormick & Schmick advertises 10 options for less than $10 at its downtown restaurant.
"The fast food industry has definitely led this, but sit-downs and independents are being more versatile, too," Caranfa says.
'Other side of the craze'
The $5 meal isn't for everyone.
Penn Station argues that value isn't just about price, but food quality, taste and customer service. Rather than offer discounts or coupons, it has introduced items that go head-to-head with its competition in the sub category. Earlier this summer, it offered a cold option for many of its typically hot, toasted subs. Depending on size, subs range in price from $4.69 to $9.35.
The chain also will launch a marketing campaign this fall with the working title "the other side of the $5 craze," says Alex Lukondi, Penn Station's director of marketing. It'll show the quality and quantity of a Penn Station sub and fresh-cut fries at regular price compared to the competition's selections at a lesser price.
Buffalo Wings & Rings continues to offer daily specials, but sticks to its core menu - average checks are $8 for lunch and $12 for dinner. CEO Phillipe Schram says he's banking that customers will come in for the experience of dining there.
"We're a sports restaurant. We do games. We have 25 high-def televisions," he says. "Families appreciate that we're not just a place to eat."
It's true that value means more than just price, the restaurant association's Riehle says:
"Unless food quality and service, décor and atmosphere meets expectations, those consumers will be quite quick to vote with their feet."
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