Panera debuts a value meal for cash-strapped customers

Times are tough, so the meal deal is super popular right now. Fast-food places are using them to draw customers back in. 

McDonald’s is doing it, Taco Bell is doing it — but it’s not just for traditional drive-throughs anymore. Fast-casual restaurant Panera Bread just released its first-ever value menu. It allows you to mix and match items for $10 total.

They call it the value wars, and it’s not going to stop with Panera.

Meal deals make sense at a classic drive-through, because those customers are looking for cheap, fast food.

Rich Shank, vice president of innovation at the foodservice industry analysis firm Technomic, said the fast-casual restaurant traditionally didn’t advertise cheap food, it advertised food that was higher quality.

“It was, ‘we're going to be better, we're going to be fast, and you're going to really enjoy it.’ And that's really carried that market for a decade or more,” he said.

But then there was inflation and rising prices on groceries and utilities and housing taking bigger bites out of our wallets.

“With this inflationary period sort of hitting its crescendo, that advantage is not fully there anymore for fast-casual brands,” Shank said.

Now Panera might pull some customers from traditional drive thrus, but their $10 value meal can’t compete with the price of the $5 value meal at McDonald’s.

But that’s not the point.

“Disposable income for a sizable group of their potential customers or existing customers is affected, and they're just trying to find ways to to bring them along,” said Alex Susskind, a professor of food and beverage management at Cornell University.

He said this is about helping customers who always came to Panera, but are having a tougher time affording it now that paychecks are getting stretched by all the other rising prices.

“Which may be beneficial later on, when things improve … When that happens and you enjoy Panera, then that gives Panera an opportunity to get you to move into other products,” Susskind said.

In other words, off the $10 value menu, and back onto that $14 sweet spot.

Getting customers to walk back in the door, though, is only half the battle.

Stephen Zagor, a professor of food entrepreneurship at Columbia Business School, said there are two more factors to Panera’s success.

“It has to be easy. We don't like a lot of decision making,” he said. “It's like, ‘Oh my gosh. Panera, just tell me what the best value is, and I'll figure it out.’”

And two: The cheaper food only works if it tastes good.

“We are really governed by how we feel, not by what we think,” Zagor said. “You taste it and you go, ‘wow, this is good.’ Or you look at the portions and you say, ‘This isn't bad. I'm feeling really good about it.’ Now, my brain has said you made a good choice, and your heart’s saying, thank you.”

Zagor called this value pricing a war, which means Panera won’t be the last to try it out. He expects other fast-casual restaurants — think Chipotle or Panda Express — to start doing the same thing.