Last summer, a photo of a McDonald’s Big Mac meal went viral—but not for a reason McDonald’s would have liked. Twitter user Sam Learner was shocked when the price board at a Connecticut rest stop listed the price of a burger, fries, and a drink as $17.59. According to Learner’s post, other McDonald’s meals cost even more. That photo, which McDonald’s later called “misleading,” made many consumers aware that fast food prices have risen even more dramatically than those at full-service restaurants. But it also seems to have awakened the business sense of executives at fast-food and fast-casual restaurants, who are now scrambling to offer consumers special deals. But how long can the price gouging last?

What is the difference between fast food and fast casual?

At fast-food restaurants, food is often prepared in advance and not packaged until it is ordered (think French fries and chicken nuggets). At fast-casual restaurants, food is often prepared to order and there is both counter service and pickup. The government groups fast-food and fast-casual restaurants under the umbrella term “limited-service restaurants.” Prices for both restaurants have increased 4.3% over the past year, according to July statistics from the Bureau of Labor Statistics (BLS).

By comparison, menu prices at full-service restaurants – where diners are seated and a waiter takes their order – have risen 3.9% over the past 12 months. These price increases come on top of the fact that consumers are also grappling with higher grocery prices, which have risen 25% since the pandemic began, according to the Federal Reserve. But the BLS’s findings show that price increases for fast food are nearly four times higher than those for food prepared at home, which have risen 1.1% over the past 12 months – making cooking at home all the more attractive to budget-conscious consumers.

Placer.ai, which tracks retail trends across the economy, says these price hikes mean that fast-casual restaurants, which are traditionally several dollars more expensive per meal than fast-food joints, seem to be the better deal for once — and that shift is leading to fierce competition that rivals the Fried Chicken Sandwich Wars of 2019.

Who will win the battle?

​​Placer.ai’s latest retail activity study, which it gastronomyshows that fast-casual restaurants are ahead of their fast-food competitors when it comes to customer acquisition.

From April to June, fast-casual restaurants saw a 3.9% increase in visits. In comparison, visits to fast-food restaurants increased by 2.2%. According to Placer.ai, visits to traditional restaurants fell by 1.1% in the second quarter.

However, the gains can be deceptive. Placer.ai says the growth is being driven by more restaurants opening – especially when you include cafes and categorize them as fast-casual destinations. Fast-food chains like Whataburger, Raising Cane’s and First Watch are also seeing higher customer traffic, according to Placer.ai.

The major fast-food chains have taken action because they are losing customers during one of the busiest times of the year. In recent months, McDonald’s, Taco Bell, Burger King and Wendy’s have launched limited-time specials, most notably the McDonald’s $5 meal, which includes a McDouble or McChicken, four Chicken McNuggets, a small portion of French fries and a small soft drink.

Even better deals can be found on the McDonald’s app, where users can find a wealth of special offers. Since I mostly cook at home (perhaps in part because there are so many better deals), I hadn’t eaten at McDonald’s in months, but I downloaded the app in Michigan to see what deals I could get.

One weekend in July, McDonald’s offered me the choice of a free Big Mac with a minimum purchase of $1, a breakfast sandwich for $1, a $6 meal deal consisting of a double cheeseburger, fries and a drink, medium fries for $1, 25% off any purchase of $5 or more, $1 off any size soft drink, and 30% off any purchase of $5 or more.

This is not the only step McD’s has taken. In the face of outrage over rising fast food prices, Joe Erlinger, president of McDonald’s USA, sent an open letter to American customers titled “We offer our fans meaningful value, with a dash of facts.”

Erlinger called last year’s price in Connecticut an isolated incident, claiming that the price of a Big Mac meal, including sandwich, fries and drink, was $9.29 nationwide. But he acknowledged that prices at McDonald’s have undeniably risen. Before the pandemic, the average Big Mac in the U.S. cost $4.39 in 2019. Now it costs $5.29, about 20 percent more. Medium fries, which cost $2.29 in 2019, now cost $3.29, a 44 percent increase. (It’s also important to note that prices are typically set by individual franchisees, not McDonald’s headquarters, which can lead to wild price fluctuations from store to store.)

Yet even with these deals, unless they are time-limited, consumers are likely to pay $10 or more for a fast-food meal including tax. (According to NetCredit, the highest prices for fast food are found in Alaska and Hawaii, where ingredients must be imported on a regular basis.) These higher prices present a huge opportunity for fast-casual restaurants to enter the market and meet this consumer need.

One example is fast-casual shop Buffalo Wild Wings, which offered unlimited boneless chicken wings for $19.99 every Monday and Wednesday. In the seven weeks after the offer was introduced, visits increased 45.6% on Monday and 49.3% on Wednesday, while overall visits to the BW chain increased 8.1%, according to Placer.ai.

At the end of April, Chili’s revamped its “3 for Me” menu. As the report notes, visitor numbers have “remained consistently higher – and there has been no decline yet” compared to last year.

While Starbucks isn’t necessarily considered fast food or fast casual, it’s a destination for people choosing whether to spend money outside of their home. In May, the company introduced a limited-time 50% Friday discount exclusively for app users and received an immediate response. On May 10, when the promotion launched, Friday visits increased 20% compared to the annual average.

It is not entirely without risk to make an offer that is too good.

Some brands have recognised the danger of giving things away too cheaply. In 2020, the deli Pret-A-Manger (a hybrid of fast food and fast casual, in that it makes coffee drinks like fast casual but also offers takeaway like a fast food chain) introduced Club Pret. For the equivalent of $38 a month at the current exchange rate, UK customers could grab up to five coffees a day and get 20 per cent off everything else. The chain hoped to boost business at a time when many offices were empty and staff were working from home.

According to the Times of London, the plan worked far too well: Pret had expected 2,000 new sign-ups on the first day, but got 16,500 instead. And when people returned to the office, even more came. Pret estimates it gave away 1.25 million drinks a day and lost millions of dollars on the plan. Now club members pay $12.82 a month, but only get 50 percent off five coffees a day and there are no special offers on food. And of course, there is the case of Red Lobster, which almost went bankrupt after its Ultimate Endless Shrimp deal.

But despite these potential pitfalls, the battle between fast food and fast casual seems to have only just begun.

In the U.S., new names are entering the fast-casual market, offering diners even more choice and posing stronger competition for established brands. QSR Magazine, which tracks the segment, recently listed its 40 hottest fast-casual startups that have fewer than 40 locations. They include every type of cuisine, from Vietnamese food to tacos, toasties, breakfast joints, bakeries and barbecue.

So the next time consumers decide, “Let’s go out tonight,” they’ll have a much wider choice of restaurants to choose from – and they may not have to spend too much money to do so.