Whether you want to find McValue, fill up a Biggie Bag, or satisfy Luxe Cravings, diners have plenty of choices for affordable meals outside of the home these days. 

But are value meals and blanket discounts good for your business? Upside’s Kevin Hart hosted a webinar with Adam Klaers, the executive vice president of Roy Rogers Restaurants, to discuss the value craze and explore how Roy Rogers has been able to remain competitive without participating in the race to the bottom. 

Click here to watch the full conversation, or get a recap of their discussion below.

The pressure to offer value meals

In 2021 and 2022, steadily-rising inflation fueled an increase in restaurant operating costs, and in order to stay afloat, business owners passed those costs onto their customers. A recent Upside analysis of retail revenue showed menu prices increasing by 5% from October 2022 to September 2023. 

As a result, many customers began skipping meals at full-service restaurants (FSRs) in favor of quick-service restaurants (QSRs), which saw a 3% increase in year-over-year foot traffic. However, this surge was short-lived. Adam noticed a slow-down around the same time.

“A year ago, we started seeing a little bit of a transactional decline,” he said. “For us, it was right at the end of a year of continual pricing increases, just trying to keep up with commodity prices. The consumer just got tired of the higher prices.”

Roy Rogers isn’t alone in facing sluggish foot traffic. In Q2 2024, McDonald’s posted a decrease in global sales for the first time in over three years. Inflation-adjusted revenue for restaurants has also been declining — daily revenue in June 2024, adjusted for inflation, was 10% lower than two years prior.

In response to consumers trading down or out of the restaurant category, many brands turned to discounted value meals. While not profitable, the thinking was that these meals could help re-establish dining habits and drive higher spend over time. 

It was something Roy Rogers considered, but Adam said doing so would have meant serving customers smaller portions or lower-quality food. Those were out of the question, so Roy Rogers pursued another strategy.  

Roy Rogers takes a different approach

Adam said that the growth strategy for Roy Rogers was twofold: investing to improve the brick-and-mortar guest experience, and using the transaction data they were already collecting to offer targeted incentives for customers.

Guest experience over discounts

In the face of this industry headwind, Roy Rogers doubled down on the guest experience. Adam said that the brand has been investing in fresh, high-quality ingredients; a clean, welcoming atmosphere that diners enjoy visiting; and finding operational efficiencies to make every order as seamless as possible. For Adam and his team, these are the keys to building lasting loyalty — no excessive discounts required.

“We have to deliver a great guest experience, and that's how we're going to get our customers coming back more and more,” he said. “Our loyalty app is not going to make them loyal to Roy Rogers. We have to get them to fall in love with Roy Rogers without an app, and then the app just enhances that and rewards them for being a ‘Royalist.’”

Using data to drive personalized promotions

At the same time, Adam recognizes that certain customers — either brand-new to Roy Rogers, or a lapsed customer that hasn’t visited in a while — need an additional incentive to change their usual behavior. 

In order to incentivize those customers without cannibalizing expected profit from the brand’s regulars, Roy Rogers uses its data to offer promotions targeted to specific customer segments. For example, the brand can leverage the information it collects in its loyalty program to reach out to a frequent visitor for dinner, offering an incentive to return for breakfast. That’s a targeted promotion for a specific individual, which is something Roy Rogers has prioritized when it does decide to offer discounts. 

“We want it to be what we consider loyalty discounting, or relationship discounting, not just a blanket discount that applies to anybody and everybody,” Adam said.

To deepen their personalization efforts, Roy Rogers has teamed up with Upside. By leveraging our digital marketplace, they’re connecting with nearby consumers and driving more visits through targeted, profitable promotions.

This strategy enables Roy Rogers to outperform many of its competitors. Rather than relying solely on value meal discounts, they’re successfully attracting new and lapsed customers while maintaining profitability—a winning combination.

Roy Rogers’ focus on personalization underscores their understanding of the growing importance of adapting to customer behavior and evolving strategies in an ever-changing landscape.

Predictions and future trends

Are value meals here to stay? Adam says he expects the “value era” to run into Q1 at the least, but dissatisfied franchisees might force corporate offices to reconsider the strategy.

“I think we're going to start to see some more grumblings from franchise groups of all different brands who start to do a little more complaining as they finish out their fiscal year,” Adam said. “Yeah, transactions were up but my profits were down.”

Additionally, he believes that further decreases in interest rates would increase consumer confidence and lift purchasing power, helping restaurants grow transactions without the need to discount by mid-2025. 

Through it all, Roy Rogers will continue prioritizing guest experience and motivating uncommitted customers with personalized promotions, driving sustainable growth to connect with generations of diners to come.

Ready to evolve your strategy? Upside is here to help

If your business is ready to deliver value while protecting profitability, Upside can help. Connect with our team of industry experts to learn more.