Taco Bell is gearing up for a price war. The country's largest Mexican food restaurant chain is rolling out a Dollar Cravings menu this week with 11 items all priced at a buck. The additions include mini chicken or beef quesadillas and a spicy potato soft taco.
Taco Bell parent company Yum Brands (YUM) knows that a lot of its core customers are cash-strapped Americans looking for a lot of food for a little dough. Many items on the new menu -- including cinnamon twists and cheese roll-ups -- were part of its even cheaper Why Pay More! lineup.
If Taco Bell setting up camp around the $1 price point sounds familiar, it's because the world's largest burger chain suffered by moving away from it. Once again, Taco Bell is trying to take a page out of the McDonald's (MCD) playbook.
The Buck Started Here
McDonald's rolled out the Dollar Menu in late 2002, stocking it with scaled-back burgers and sandwiches as well as sides and treats, including yogurt parfaits and cookies. It was a hit, and it's probably not a coincidence that McDonald's began a 10-year streak of positive same-store sales shortly thereafter.
It's probably also not a coincidence that McDonald's comps began to suffer last year when it became a Dollar Menu & More featuring other value items priced at more than a buck. The deals were still there, but the perception of McDonald's as a dollar store for rumbling bellies took a hit.
The battlefront for both niche leaders comes down to value. Taco Bell and McDonald's aren't winning over diners based on the quality of their food. Taco Bell is never going to be Chipotle Mexican Grill (CMG). McDonald's is never going to be Five Guys or In-N-Out. A recent Consumer Reports poll asked more than 32,000 readers to evaluate the taste of the signature items of the leading fast food chains. McDonald's and Taco Bell ranked dead last in the burger and burrito categories, respectively.
But when it comes to price, with McDonald's coming off of three straight quarters of negative comparable-store sales growth, and Taco Bell checking in with positive comps in nine of the past ten quarters, it's clear which one consumers are siding with.
The Dollar Cravings menu isn't the first time that Taco Bell has gone head-to-head with McDonald's this year. Back in March, Taco Bell took its breakfast menu nationwide. This is a fast-food category that McDonald's has dominated with its breakfast sandwiches and coffee. In a bold marketing move in April, Taco Bell hired folks around the country named Ronald McDonald to endorse Taco Bell's new breakfast line.
Now Taco Bell is taking aim at the $1 price point. McDonald's may well regret straying from that territory last year in a push to market fancier sandwiches and big $5 boxes of McNuggets.
A dollar still goes a long way in the fast-food industry. We'll have to see if McDonald's decides to fight back before Taco Bell wheels out a McRib-stuffed burrito or a McGriddle-like breakfast treat.
Motley Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends Chipotle Mexican Grill and McDonald's. The Motley Fool owns shares of Chipotle Mexican Grill. Try any Motley Fool newsletter service free for 30 days.
6 Little Changes You Can Make to Save Big Bucks
Taco Bell Goes After McDonald's (Again) with a Dollar Menu
Most of us spend a ton of time researching our options when we first sign up for a plan or policy, then forget all about it and make monthly payments like a robot. But this can cost you.
If you've been on the same cell phone plan for a while, or you haven't looked at the terms of your insurance policies (home, life, auto) since you got them, it's time to do a review. Your circumstances may have changed, and new plans or deductions may have come out since you first signed up. Call up customer service (or your agent) and have them walk you through your options if you're having trouble comparing things on your own.
One of the biggest budget sucks is our own forgetfulness. We miss payments and incur late fees because we've misplaced our statement or didn't manage to get our mail out in time. We fail to save as much as we'd like because we just never remember to do it.
The easiest way to save yourself some money (and hassle and stress) is to set it and forget it. Sign up for auto-pay so your monthly bills are automatically deducted from your checking account. Have a certain amount automatically transferred each month from your checking to your savings account. Remove the human error factor, and your budget will be better for it.
We charge so much nowadays -- whether on credit cards or debit cards -- that it's easy to spend a lot of money without really registering it. When you have a set amount of bills in your wallet, however, it's extremely easy to see how much you've spent so far this month and how much is left.
Take those budget categories of yours -- groceries, entertainment, etc. -- and turn them into real, physical envelopes. At the beginning of each month, put that month's allotment of cash into each envelope. When you're running low, you'll know you need to be careful with your purchases. When you're out, you're done spending on that category till next month.
If you're prone to impulse purchases, imposing a waiting period on yourself is an easy way to break the cycle.
For large purchases, a 30-day waiting list is best. Write down the item that's calling to you, then wait 30 days before allowing yourself to buy it. You may realize in that time that you don't need it after all. Or you may forget why it called to you in the first place.
For smaller impulse buys, like that fancy new product you spotted in the grocery aisle, follow a 10-second rule. Before the item can go into your cart, spend 10 full seconds asking yourself if you really need it and how you will use it. Simply analyzing why you're getting something can disrupt the siren call of a product.
It's all too easy to blow $5, $10, even $20 on something, whether it's an extra meal out or a coffee on the run. In the grand scheme of things, it "doesn't seem like much" to us. But if you start thinking of your money in terms of the time it took you to earn that money, suddenly you find yourself evaluating your spending choices a little closer.
Figure out what you make per hour if you're salaried (if you're hourly, this will be easy). Let's say you make $15 per hour. For every $15 you spend, you'll have to spend another hour of your time at work to pay for that item. A coffee a day for a week can cost you an hour or two. And bigger items, like that flat screen TV you're eyeing? You get the drift. Framing purchases in light of time spent can help you make sure something is worth it.
In the end, a budget is simply a means of making sure your money is working for you. It allows you to see how much you're brining in and allocate it towards the things that are most important to you. If you can hold those bigger goals in mind, everyday budgeting becomes easier.
If you're wondering whether or not to buy something, ask yourself if that money would be better spent towards your big goal. Put a visual reminder in your wallet to keep you on task-like a photo of a sandy beach if you're trying to save up money for a trip. Viewing your budget in terms of what it will allow you accomplish-not the things it won't allow you to buy, can revolutionize your spending.