> Is it really just too many food vendors thinking that the $1 happy meal is their competition?
Maybe if you're a Burger King, but most restaurants aren't really competing with fast food. It's more like the Italian place is competing with the Sushi place in the same price bracket (I'm guessing, but 3x-5x more than fast food).
A burger with a meal + a drink @ Wendys is like $8+. The price of fast food has risen quite a bit over the years.
I can get a burger and fries that's 10x better at Friendly's, Ruby Tuesday's or a half a dozen other franchises for about $10-12 and the only sacrifice I have to make is that I'll have to drink water instead of soda.
Ruby Tuesday burgers are $9.50 with fries. Add a soda, tip, tax, and it's $16. The multiple is still 3-4x.
Also if you're talking about dollar menu stuff or the stuff close to it, its about 1/3 the size of the burgers included in fast food meals. The burgers in the meals are comparable in size to what you would get at a sit down restaurant.