Why McDonald’s, Burger King, and Pizza Hut Are Dropping Prices

McDonald’s McPick 2 (Photo: Hollis Johnson, Business Insider.com)

By Kate Taylor, Business Insider

The 2016 fast-food price wars are already blowing up.

On Tuesday, Burger King is debuting its new five for $4 deal. For $4, customers can buy a bacon cheeseburger, small french fries, four-piece chicken nuggets, a small drink and a chocolate chip cookie.

The deal is launching just one day after the debuts of two notable fast-food bargains from McDonald’s and Pizza Hut.

On Monday, McDonald’s rolled out the McPick 2, which allows customers to pay $2 for two of the following offerings: a McChicken, a McDouble, small fries, or mozzarella sticks. The same day, Pizza Hut debuted its limited-time $5 Flavor Menu, from which customers can order two of the seven items for $5 each.

The reason for the rise of the bargain combo menu is twofold. First, customers tend to want to save money in the new year, turning to quick-service chains for bargain meals. Second, fast-food companies are competing for the position of best value chain — while still turning a profit.

Two years ago, McDonald’s axed its Dollar Menu, replacing it with the Dollar Menu and More — an unsuccessful replacement that the company is now retiring. The Dollar Menu had been retired because single-item deals priced at $1 were no longer profitable for franchisees or the company.

In contrast, combination-centric deals, like the five for $4 at Burger King and McDonald’s McPick 2, allow for a mix of more and less profitable items while still offering customers the bargain needed to get them through the door. Ideally for the companies, these customers will then add on high-profit margin items (like soft drinks) to their orders and keep coming back to the restaurant for the deals in the future.

In the past year, Wendy’s and Burger King’s promotions have helped boost company sales, as McDonald’s has struggled to find value offerings that do the same. The McPick 2 is part of McDonald’s broader effort to restore more permanent national value platforms — a mission that, if it succeeds, would be major blow to the rest of the fast-food industry. With offerings like the five for $4, it’s clear Burger King isn’t going to fall behind in the fast-food price wars without a fight.

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