Was Arby’s Value Menu a Big Mistake?

Cheaper eats have helped revive fast-food brands from McDonald's to Subway during this recession, so why not Arby’s? Why not, indeed. Turns out its $1 Value Menu hasn't proved to be quite the recession-buster the once-robust franchise hoped it would be.

The US eatery is suffering from financial performance that is “among the worst in modern restaurant history,” J.P. Morgan securities analyst John Ivankoe wrote in a note about Arby's owner, the Wendy’s/Arby’s Group.

He cites what he sees as Arby's lack of recession-savvy marketing, fiercer competition, and customers' confusion about its premium menu.

Even though Arby’s has the market cornered on fast-food roast beef, Brand Keys president Robert Passikoff told the New York Daily News it places last among major quick-serve chains in customer loyalty.

In their attempts to recover, it seems Arby’s leadership doesn’t quite know what they want to do to re-carve the brand’s identity even as they rolled out the new value menu in April, following a previous value offering of $5.01 combo meals last fall.

A national advertising campaign including the "kaboom!" spot above didn't help: during the value menu's first month, Arby’s same-store sales at company-operated restaurants fell more than 8% even though traffic was up 4% – indicating not only a missed opportunity but problems with profit margins even as volume rose.

For its next act, Arby’s will introduce a toasted steakhouse sub and a “prime cut” chicken sandwich this quarter. To position those new premium products successfully alongside Arby’s value meal, somehow, will require the type of deft marketing that appears to be in short supply at Arby’s these days.

Perhaps Arby’s new president, Hala Moddelmog, will have a clue about how to handle this. The fate of the brand may well rest on whether she does.