According to media reports,
) is trying to alter its famous "Dollar Menu" by including items
that cost more than a dollar. The new version of the menu named
"Dollar Menu & More" is expected to hit U.S. stores this
The decision came in the wake of shrinking profits. McDonald's
and other fast-food chains have been relying heavily on
promotions, value menu and low-priced options to strengthen their
position in a market where consumer confidence is faltering.
"Dollar Menu" is such an option. While these sales building
measures drive comps, they prove detrimental to margins if
exercised on a long-term basis.
The "Dollar Menu" program -- launched almost a decade ago and
accounting for around 13%--14% of total sales -- has been a
driving force in generating sales even in the time of recession.
Over the years, management has been trying to shore up this line.
In fact, in the recently-concluded second quarter, McDonald's
added the Grilled Onion Cheddar Sandwich, Hot 'n Spicy McChicken
and some limited time offer selections to help the product line
However, the products were not margin friendly, which is why the
world's biggest hamburger chain had to alter its menu options
over the years to adjust with rising food prices.
Presently, the revamped offering is in a test phase in five
markets across the country. As per CNBC reports, there are three
pricing points for the revamped menu, $1, $2 and $5, and it
comprises "shareable" items like 20-piece McNuggets. So far, the
response from the test markets has been encouraging.
The company tested another version of the menu with price points
of $1, $1.79 and $4.99. These comprise several chicken items and
burgers with an additional beef patty or bacon toppings. However,
the changes are yet to be finalized.
McDonald's has a Zacks Rank #4 (Sell). Other players in the
restaurant industry, which look attractive at current levels,
AFC Enterprises Inc.
Burger King Worldwide Inc.
), all with a Zacks Rank #2 (Buy).
AFC ENTERPRISES (AFCE): Free Stock Analysis
BURGER KING WWD (BKW): Free Stock Analysis
MCDONALDS CORP (MCD): Free Stock Analysis
WENDYS CO/THE (WEN): Free Stock Analysis
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