Rising costs and inflation are reshaping fast-food, forcing chains to cut portion sizes, eliminate deals, and hide the value menu

• Fast-food chains are grappling with inflation and rising costs.
• To cope with pricing pressures, many chains are increasing prices and eliminating deals.

Fast food isn't as affordable as it used to be, and value menus are another victim of inflation and the pandemic.

Chains have to consider raising prices thanks to new and costly challenges that have emerged, like inflation and growing labor costs, Kalinowski Equity Research CEO Mark Kalinowski told Insider. They "don't necessarily want to discount as heavily" as they did a few years ago, so low-cost value menus can be the easiest choice to go.

One way to quietly raise prices is by swapping in lower-cost ingredients or shrinking portion sizes to make the meal seem cheaper, David Henkes of Technomic told CNBC. Domino's is adopting this strategy by downsizing its $7.99 wing deal from 10 pieces to eight pieces, CEO Richard Allison said. The pizza chain also made the deal exclusive to online orders, which Allison said is cheaper to process and gives Domino's access to more valuable customer data.

Despite projections for between eight and 10% inflation in 2022, Allison explained on CNBC that the chain decided not to increase the price, which customers were already familiar with. Burger King made a similar move, reducing nuggets in one menu deal from ten pieces to eight.

Other chains have been more open about raising prices on menu items. McDonald's, for example, is allowing franchise operators to sell sodas for higher prices after they were kept at a dollar for several years as part of a nationwide promotion, The Wall Street Journal reported.

Then, some chains opted to eliminate some of the lower-priced deals. Burger King is eliminating paper coupons and making around a dozen changes to US menus to increase profits, the chain said, including raising prices on nuggets, french fries, and bacon cheeseburgers. Denny's is reducing promotions of low-priced menu items, and has stopped advertising its value menu of items starting at $2, CEO John Miller said.

Straight menu price increases are the most common way brands do this, Kalinowski said, though they ideally like to keep it quiet.

As brands eliminate or raise prices on lower price items, they shift to promoting combos or more expensive long-term offerings. Taco Bell, which once seemed to be the last refuge of dollar menus in fast food, has raised prices on staple menu items. The Mexican chain had raised prices by 10% between July 2020 and July 2021, an analysis by Gordon Haskett found.

Since then, Taco Bell has focused on combo meals exclusively available online, and higher-priced limited-time items. The chain brought back the Grilled Cheese Burrito in November, which helped boost profits the first time it was sold in July 2020. Taco Bell also recently promoted wings for just one week, which were priced at $5.99 for five wings. This is an example of a menu shift, where a chain rolls out more expensive offerings while quietly taking cheaper ones off menus, Kalinowski said.

Inflation has hit fast food, along with the rest of the economy, as ingredients and labor both become more expensive. US inflation was up 7% year-over-year in December according to the Bureau of Labor Statistics, the highest level since 1982.

Do you have a story to share about a retail or restaurant chain? Email this reporter at mmeisenzahl@businessinsider.com.