The move comes as the restaurant industry continues to suffer from recessionary pangs. Unemployment and shrinking disposable income have made diners lose their appetites for outside food. A recent survey by Alix Partners show that diners are spending less on each meal and shopping for bargains and coupons before dropping cash at restaurants.
To survive, restaurants are being forced to get creative with their menus and pricing. Some are doling out value meals, others are offering limited-time menu specials, and yet others are venturing into newer territories, like expanding into brunch offerings. But value is the chief mantra in the industry these days. Taco Bell's latest offering beats it all, even the dollar menu offered by Goliath McDonald's.
"The news definitely shows that aggressive discounting continues across the board with restaurants and firms relying on it to drive traffic," said R.J. Hottovy, an analyst for Morningstar, Inc., an investment research firm.
Taco Bell didn't return calls seeking comment, but Taco Bell president Greg Creed told USA Today that the new deal would be
"a disruptor in the marketplace."
Britt Beemer, consumer behavior and founder of America's Research Group, agrees.
"There will be more and more value meals in the future," Beemer said in a phone interview. A yet-to-be-released survey by Beemer's group found that with gasoline prices shooting over $3, consumers are spending less in stores and restaurants.
"Restaurants will have to use all kinds of promotions to get people through their front doors," he said.
While these prices can get you salivating, be careful about how much you actually end up spending once you are at one of these places. Scott Testa, professor of business administration at Cabrini College, said in a phone interview that restaurants and stores often use items as loss leaders to ring up sales.
"They get you in with the $2 promotion and while people are there they hope they will spend money on other areas such as some extra guacamole and up-sell them on those products," he said.
Even so, he agrees that a price war in general always benefits the consumer.