The Value Equation

Rutters hopes its price is right for winning over QSR customers.

By
Kelly Kurt, Freelance writer

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McDonald’s lures value seekers with its Dollar Menu. Wendy’s woos with its Right Price Right Size option. Taco Bell has a value menu. Every frugal consumer asks and answers the question of “Why pay more?”

Last April, a new player joined the scramble in an attempt to win over costconscious diners: Rutter’s Farm Stores.

Its value menu, featuring 50 made-toorder items priced from 99 cents to $1.99, received such an enthusiastic response, Rutter’s was adding more items by June. “

Obviously there’s consumer demand for value products,” says Jerry Weiner, the York, Pa.-based retailer’s vice president of food service. “We felt we needed to have something to give that value shopper a place to go.”

Scott Hartman, Rutter’s president and CEO, says the addition of the value menu was a logical step for the 57-store chain and stemmed from its strategic planning discussions.“It has worked well for us,” Hartman says. “From a learning side, you’ve got to look around and see what other people are doing and try to understand them and make sure you can execute it. QSRs clearly had [value menus] and had success with them. It made sense for us to go try it.”

Rutter’s, already a leader in foodservice innovation and progressive use of technology, made its new menus accessible at the tap of a button on its kiosk ordering system. The value menu addresses three day-parts: breakfast, lunch/dinner and snacking.

Breakfast features the likes of sausage sliders, hash browns and a sausageand-egg snack wrap. Lunch and dinner selections include hamburger sliders, a soft taco, boneless chicken wings and soup. For snacking, there are mozzarella sticks, fried pickles, sweet corn bites and warm soft pretzels. Customers can add complimentary condiments to their orders. Cheese or extra meat can be added for a charge

“Everything is prepared to order,” Weiner says, “and everything is made fresh.”

Defining Value

Freshness and quality are precisely what consumers in a dawdling post-recession economy want from a value menu, says Bonnie Riggs, a restaurant industry analyst for The NPD Group, Port Washington, N.Y.

“That’s exactly how consumers defi ne value: good-tasting food, fresh food, quality food at reasonable and affordable prices,” she says.

Rutter’s menu addresses critical price points, day-part offers and portability, all of which can help the chain better integrate into consumers’ lifestyles, says Kevin Higar, director of research and consulting servicesfor Chicago-based Technomic Inc., and author of “Always Let the Chicken Lead,” a book on restaurant best practices.

“They’re very much hitting a lot of things that people say, ‘If I’m going to use you, c-store, you’ve got to hit on these elements,’ ” Higar says.

In the quick-service sector, value menus are as common as a side of fries. More than 80% of value menu orders, for example, are made at fast-food hamburger restaurants, Riggs says. C-stores claim only about 3% of the value-menu market.

Value menus do offer opportunities to draw consumers, Riggs says, especially considering that many Americans have yet to fi nd real recovery in the post-recession economy. Some QSRs that changed their value menus in recent years, however, learned the hard way that consumers intend to be the ones who defi ne value.

Sales from value menus at hamburger chains declined after they made changes. Riggs blames decisions by some major chains to remove popular items from their value menus and raise prices on others.

“It really confused consumers and also turned them off,” she says. “Beverages that were on the value menu were always small, so consumers stopped ordering beverages from the value menu. It just wasn’t a good deal. And they had to be careful of the quality of food on the value menu. Even if it’s only $1, if it doesn’t taste good, it’s not worth $1.”

Consumer demands for quality and new items has prompted many QSRs to revisit and re-emphasize their value menus, says Molly Harnischfeger, a director in the restaurant and foodservice practice of New York-based global consulting fi rm AlixPartners.

Consumers have shown they are unwilling to pay more for longstanding value menu items, but they will do so for new items that meet their defi nitions of quality, she says.

Finding the balance between affordability and quality, however, poses challenges to anyone in foodservice, especially at a time when food costs are high and there’s uncertainty over labor costs tied to the Affordable Care Act.

“It’s something that everyone is still trying to fi gure out,” Harnischfeger says. “Consumers are looking for value, but they’re really looking for quality. They want a quality item that they feel they are getting for the right price.”

She believes the perception of quality could be the differentiator in whether convenience stores find success with value menus.

“It’s a very discriminating, discerning customer right now. If [c-stores are] going to play in this area, they really need to focus on the quality,” she says.

Creating Value

Rutter’s has garnered accolades—including Best of York honors from readers of the York Daily Record—for its proprietary foodservice program, which features pizzas, rotisserie chicken and fresh-made sandwiches.

When Weiner began looking for items that would fit the value menu’s price range, he was unwilling to sacrifi ce quality or portion size. He identifi ed existingitems as good fi ts for the value menu and then began adding others.

“It wasn’t as hard as I thought,” he says. “Once I got into it, it was relatively easy to find products that fit both the price point and still maintained our program of quality and fresh foods. And then, of course, anything I add to the program fi ts that same mode as well.”

The fact that Rutter’s already had a well-established reputation for quality and freshness helped, he says. “If you have an image of quality fresh food, I don’t think you’d be doing yourself any favors by going to a value menu and selecting products that don’t meet those standards,” he says.

While value menus offer c-stores the chance to boost traffic, not every retailer is ready to jump into the value offer, says Samuel Nahmias, chief operating officer for foodservice market research specialists StudyLogic, Long Island, N.Y. A c-store first needs to have a well-established foodservice program, he says.

“Not everybody can be a Wawa. Not everybody can be a Sheetz or a QuikTrip, either,” he says. “When they execute this, it has to be executed correctly. They shouldn’t rush into this. They should try and benchmark themselves to the ones that are succeeding.”

Higar suggests retailers first identify what their customers are looking for from them, and then focus on the products that they can execute consistently. Innovation can come in working with suppliers to identify seasonal items that fi t the value menu, he says.

“You don’t want to innovate beyond what the skill set is of the people you’re going to have in your unit who are creating these dishes,” he cautions.

He also suggests retailers look for inspiration not only among QSRs and other c-stores but also in the food-truck industry and even the bakeries and delis of supermarkets. The goal, he says, is to integrate into your target consumer’s lifestyle and to create habits.

“When you pull up and look at McDonald’s value menu, they’re doing all these things where they are covering multiple day-parts. They’re covering foods, beverages. They’re covering things that will probably more than likely be used as a snack,” Higar says. “They’re giving you the opportunity as a consumer to use them in so many different ways at so many different day-parts and ultimately end up at whatever check average you wanted to be at.”

Snack Times

The affordability of the value menu lends itself well to targeting snacking. That daypart is growing, as more Americans look for snacks to sustain them throughout the day, often as a meal replacement.

“Value plays well into that day-part,” says Harnischfeger, “because they tend to be more snack-focused items.”

Riggs says the defi nition of snacking has changed in a way that makes a value menu attractive. Specialty coffee beverages, for example, and smoothies are now popular afternoon snacks. “People are ordering a sandwich and calling it a snack,” she says. “They’re on the go and don’t want a full meal. Or they’re trying to control calories or having a craving for a particular menu item.”

A c-store value menu also may appeal to today’s time-strapped consumers who see a stop for gas and food as a way to consolidate their activities, Higar says. He suggests retailers consider selling snacking items for multiple day-parts at the same time.

“Someone may come in for some sort of breakfast snack item because they’re on their way to work. But at the same time, they go, ‘OK, I know I’m not going to be able to get out at lunch. So if you have some snacking items available that I can basically use at lunch as well, I’ll buy the breakfast one to consume now and I’ll buy the lunch one to consume later,’ ” he says.

Retailers might also want to create menus that feature snack-type items in every day-part.

“An appetizer-type item, entree, sidetype item, dessert, beverage: Literally, you’ve got room to hit snacking within any of those categories,” Higar says.

At Rutter’s, consumers have embraced the new value menu through all dayparts, Weiner says. And while the chain has seen success with snacking, it was not the main aim of creating the value menu.

“Some of the products on that list are defi nitely targeting snacking. That wasn’t part of the original thought but part of the ‘after gain,’ if you will, after we got into it,” he says.

QSRs already are homing in on the value snacking opportunity. Arby’s Restaurant Group, for example, tested its Snack ‘n Save menu last spring in some U.S. markets as a replacement for its value menu.

Harnischfeger, however, believes quick-service chains, occupied by their national competition, have overlooked the threat c-stores pose. She predicts that will change as c-stores work to attract the value-seeking consumer.

“There will be a moment in time in the somewhat near future,” she says, “where QSRs are going to start recognizing this threat at higher levels than they do now.” 

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