Not so happy meal: Fast food combos take a beating

August 1, 2012, 2:31 PM UTC

FORTUNE — Do you really want fries with that? A recent NPD Group study suggests that your answer is likely a weak maybe.

In the past five years, combo meal sales, a staple of the fast food menu, have decreased by 12% compared to the previous five-year period. Total combo meal orders declined by a billion over a five-year period ending in January 2012, from nine to eight billion orders.

The dip in orders is that rare piece of bad business news that companies may not be able to explain away by citing the struggling economy. While factors like higher unemployment certainly have played a role in the depressed sales — particularly among 18-34 year olds, a group that makes up the majority of combo meal patrons — it wasn’t the primary driver behind this shift.

“While economic pressures are apart of [the decrease in combo meal sales], it came out loud and clear that the customer wants more options in the combo meal,” says, Bonnie Riggs, NPD restaurant analyst and author of the report.

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Fast food restaurants could appease customers by offering salads and different types of drinks with their combo meals, Riggs says. Some chains like Wendy’s (WEN) are already experimenting with their combo meal menu, offering healthier options like a side salad and low fat yogurt in lieu of French fries for no difference in price. Burger King (BKW) changes its prices based on what sides you order. And McDonald’s (MCD) only offers swappable sides for their Happy Meals, and drink swaps are fairly rare and vary from franchise to franchise.

Indeed, 20 to 25% of Wendy’s combo meal customers opt for the customizable meals, according to company spokesperson Denny Lynch. Customer feedback has been positive, he says, although it’s not the only factor driving sales.

Wendy’s unique combo menu stems from the fact that their smaller, healthier sides are “legacy items” from the chain’s early days, says Raymond James analyst Bryan Elliot.

Expect Wendy’s rivals to implement similar strategies, within the bounds of tightening profit margins in the industry amid the rising cost of food sourcing and production.

WD Partners food industry consultant Dennis Lombardi thinks that the sag in combo meal sales has more to do with the economy than what the NPD reports suggests. Lombardi sees the drop as a part of a “barbell effect” that has taken hold since the 2008 recession. The idea is that in tough economic times, the most and least expensive products in an industry thrive. In the case of the fast food industry, the McDonalds’ Dollar Menu and fast casual restaurants like Buffalo Wild Wings have done well, while sales of offerings in between — like combo meals — have been squeezed, he says.

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Tough times for combo meals comes as especially unwelcome news for an already struggling fast food industry. McDonalds’ quarterly earnings recently undershot analyst’s expectations, and Yum Brand’s American KFC franchises have been contracting in the past year. The NPD group recently decreased its growth expectations for the fast food industry, predicting less than 1% growth in 2012 and contraction in 2013.

Combo meals are a staple in the restaurant industry, accounting for 47% of lunch and dinner visits to fast food hamburger joints. And they also represent an important source of revenue for sandwich shops like Subway and Arby’s, driving 16% of visits to these restaurants.

Combos aren’t the only fast food deal that has fallen on hard times. According to NPD data, kid’s meal sales saw a 6% drop in 2011.

Combo meals, however, are too valuable to restaurants for the dip in sales to send them into the fast food dustbin. “[Combo meals] aren’t going to go away; they’re so important,” Riggs says, “The question is, how do we stop them from declining and get them growing again?”