What fast food chains are getting wrong about inflation

Wendy's (WEN) is debuting a $3 breakfast combination meal, which includes potatoes and a bacon or sausage egg and cheese sandwich. This move comes as fast food chains increasingly introduce value meals to combat weakened consumer spending. Salad and Go CEO Charlie Morrison joins Wealth! to discuss whether these value offerings are the right move.

"Providing access to consumers for a good value is absolutely always the right thing to do. The challenge we're dealing with right now is something that's quite cyclical. Chains are taking lots and lots of price when they feel like they can. And then when the consumer starts to push back, we go right back into the cycle of value orientation," Morrison explains. "What doesn't seem to be working is the idea of sustaining an everyday low price."

Morrison notes that in order to normalize value pricing over a sustained period of time, companies have to examine their supply chains thoroughly. He points to Salad and Go's vertical process in order to deliver consumers low prices as they seek to eat healthy on a budget.

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This post was written by Melanie Riehl

Video transcript

Wendy's is now offering a $3 breakfast combination meal.

The deal includes potatoes, your choice of either bacon or uh, bacon egg and cheese or English muffin or a sausage, egg and cheese.

English muffin all for three big ones.

And this isn't the first fast food giant to offer a value meal.

Mcdonald's and Taco Bell.

They are also been unveiling cheaper items so far this year, this comes as fast food chains are grappling with a more price conscious consumer between 2014 and 2024.

The average fast food menu has risen between 39% and 100% according to finance buzz to break down if this is the right move for fast food chains, Charlie Morrison, who is the salad and Go CEO is here with us, Charlie.

Great to see you.

Great to speak with you again here.

You know, as we think about these temporary value meals, are they the right strategy for some of these quick service restaurants out there?

Well, I think providing access to consumers for a good value is absolutely always the right thing to do.

The challenge we're dealing with right now is something that's quite cyclical um chains are taking lots and lots of price when they feel like they can and then when the consumer starts to push back, we go right back into the cycle of value orientation.

What doesn't seem to be working is the idea of sustaining an everyday low price and a price that consumers can afford for access to good food and healthy food at that.

And so what does normalizing fair and, and valued pricing look like over a sustained period of time?

Well, I think it all starts at the core of how businesses are built and the food systems that we have today.

Um There are a lot of people who are involved in the food chain all the way from the growers through the processors to the folks that bring the food to the chains and the chains themselves.

And so with so many people playing in this, it's really hard to get back to the core of what is most important, which is providing access to healthy food.

This inflation is not just the food itself, but it's everything on top of that.

Everything that goes into it and what we need to do is completely rethink the whole food system to make sure that we can provide value back to the consumer at our company.

That's what we do.

Um We've built the food chain from the bottom up.

We've gone straight to the growers to bring great value to a consumer without having to discount as a means to take a little bit of uh of the heat off from these really high prices.

What is the biggest delta that the food system needs in order to sustain value?

I mean, is it more farmers, is it more vertical farming?

What is the thing that and CEO S like yourself would like to see more of either on a regulatory perspective or even just from uh supply and production perspective.

Well, I've been in this business now for roughly 30 years and, uh, over that time, a good example, you brought up farming.

Um, the price of corn really hasn't changed, uh, over that entire period of time, it's highly subsidized, of course.

Um, but if you follow the consumer price index over those years, it should be much, much higher.

What we're doing is we're, the farmers are the ones that are struggling, quite frankly, they don't make a lot of money in this process where the real money is made is throughout the rest of the food system at our chain.

What we've done at salad and go is to start to really rebuild the process.

We start by going vertical.

We own all of the processes in between the farm to our fork and the salad that you eat.

And in doing that, we're able to return that back to the consumer in the form of a very low price.

We offer a 48 ounce bowl with salad and protein for under $7.

That's unheard of in today's economy, either in fast food or fast casual food, especially for a healthy option.

And so I think it can be done, but it's going to come us, it's gonna require us to retool everything to do it.

Right.

Are, are there considerable shifts that you're seeing right now in the consumer appetite?

And I, I know that you and I have, have talked collectively with our team here about GOP ones and the impact on tastes and appetites.

But if you're noticing anything among the people that are still coming in and buying lunches or buying dinner or, or buying breakfast, Steven where that largest shift is right now and how that kind of throws a wrench in the way that CEO S like yourself may have thought historically about this industry.

Well, I, yeah, we have talked about the G LP ones and other options.

I mean, pe people are looking for ways to, uh, adopt and, and, and sustain a much more health focused diet and lifestyle.

Uh, it's very expensive to do that.

Uh, today, people would probably have to pay somewhere around $100 a week just to have a fresh salad for lunch.

We think that's unacceptable.

But until we really rethink and retool the food system, we're gonna be plagued with this challenge and we're going to go through these cycles where we have high prices and price increases.

Um, consumers are willing to tolerate that followed by value orientation cycles.

Like we're going to go into right now.

I've seen it happen year on year in and year out.

It's, it's natural in this business.

We've got to break that cycle.

And I think the only way to do it is to really take a hold of the entire supply chain and rebuild it so that we can get consumers closer to the actual raw commodity itself.

The product and eliminate some of that unnecessary cost in the system and transfer that back to them in the form of something they can afford to eat and still eat nutritiously and healthy for a long time to come.

Just lastly while we have you here and just to pick up on what you just mentioned here because people here rebuilding the, the, the supply chain and that sounds very daunting.

Uh What does that look like if activated?

Well, it takes a lot of capital and today's investors is, is challenged by uh you know, the, the a significant capital investment to do that.

But if you're gonna do it right, rather than wait until your chain is scaled and very large, we're actually going against and disrupting the norm and building that capital investment into our chain in the early stages.

Um It's usually something that people will challenge, but quite frankly, we think it's the right way to build a business.

There are a lot of companies who have done this over the years.

The likes of Amazon and Costco and others provide an everyday great value to consumers, but they put a lot of capital investment to do it right.

And, uh, that's how we're approaching it here.

Charlie Morrison salad and go ceo great to see you again.

And thanks so much for hopping on with us.

Thank you.