As they strive to regain customers, restaurant CEOs are increasingly focusing on the concept of value.

• After reporting lagging restaurant sales this quarter, CEOs are turning to value.
• Meal deals are being offered by chains such as McDonald's, Burger King, and Taco Bell in an attempt to attract customers back.
• Customers are increasingly value-driven, Dine Brands CEO John Peyton told CNBC.

While discussing their sales lagging this quarter and plans to increase traffic in the future, restaurant CEOs have become fixated on the term "value" to explain their performance to investors.

In the quarterly conference call held last month, executives emphasized the importance of "value" by using the word over 79 times, highlighting the fast-food giant's top priority.

McDonald's is not the only restaurant company to use the word "dozens" in their latest conference calls. Taco Bell owner and pizza chain also employed the term multiple times.

Josh Kobza, CEO of Burger King parent company, stated on Thursday that the word "value" has been frequently mentioned in recent months.

Since June 2019, the Bureau of Labor Statistics reports that food prices away from home have increased by 27.2%. As a result, restaurant traffic has decreased and sales are declining because consumers are no longer convinced that dining out is a good value.

Discounts and promotions, such as the $5 meal deals at McDonald's, Burger King, and Taco Bell, are being offered by many chains in an attempt to attract customers back.

Ravi Thanawala, Papa John's finance chief, stated on the company's call on Thursday that consumers are now more careful in managing their spending and are favoring brands that provide excellent value in this economic cycle.

Reputations for value

Many restaurant executives acknowledged their chains were falling short.

Recently, McDonald's CEO Chris Kempczinski stated that the company's reputation for value has diminished. In the second quarter, the burger giant reported a 0.7% decline in U.S. same-store sales year over year.

"Our underperformance was also influenced by factors within our control, particularly our value execution, as Kempczinski stated on the July 29 conference call. For 70 years, McDonald's has established itself as a leader in the industry by defining value, and we are taking proactive measures globally to maintain our position."

McDonald's $5 Meal Deal, which was launched a few days before the end of the second quarter, has been attracting low-income consumers and outperforming expectations. The chain is now extending the promotion through August in most markets and working with franchisees on a longer-term discounting strategy.

Despite criticism from some customers about shrinking portion sizes, Chipotle reported strong same-store sales growth and increasing traffic in its latest quarter.

Chipotle CEO Brian Niccol denied any corporate plan to reduce burrito bowl sizes, but he emphasized the importance of maintaining generous portions for employees. The chain's large portions have contributed to its reputation for offering good value.

Our consumer scores are improving and our value proposition remains strong, as stated by Niccol during the July 24 call.

It isn't just fast-food executives who are concentrating on value.

John Peyton, CEO of DineEquity, which owns Applebee's and IHOP, revealed that low-income consumers are cutting back on spending, according to CNBC.

Dine's restaurants are experiencing a decline in visits from customers who earn less than $75,000 annually, with many opting for the value menu instead. Similarly, Applebee's and IHOP reported a surprise same-store sales decline this quarter.

Peyton stated that the second half of the year would be challenging, and it would be a battle for market share for our customers who prioritize value.

Value for shareholders

While companies are not only focused on providing value to customers, they are also considering shareholder value. This year, restaurant stocks have been under pressure as investors express concerns about the industry's health. McDonald's and Restaurant Brands have both fallen 10% year to date, while Yum China has risen 11%.

The financial health of chains extends beyond their top line, encompassing profits, especially as companies focus on discounts. While discounts may attract customers, they can negatively impact the profitability of restaurants, ultimately affecting the earnings and financial well-being of franchisees.

The competition among chains to offer the best deals intensifies investors' concerns about a race to the bottom.

Although no results have been achieved yet, it's still early days. Currently, it seems that discussions about value and discounts are attracting some customers.

Burger King was one of the first chains to introduce a $5 value meal this summer. Despite its U.S. same-store sales remaining flat for the quarter, executives stated that the deal has been successful in attracting customers. As a result, Burger King has decided to continue offering the deal into October.

Despite its rivals matching its $5 discount deals, Restaurant Brands didn't experience any significant impact on its business.

"Restaurant Brands' Kobza stated to CNBC that there are positives to the industry's focus on value. He believes it can enhance the perception of value-for-money among guests, as more people discuss the incredible value offered by the sector. Kobza thinks this helps everyone."