Is a tiered dollar menu the ticket for McDonald’s?
McDonald’s plans to bring back and expand its Dollar Menu with the introduction of a “$1 $2 $3 Dollar Menu,” a move expected to spark a price war in the fast-food space.
McD’s menu, available at participating restaurants beginning January 4, includes:
- $1: Sausage Burrito, McChicken Cheeseburger, Any Size Soft Drink
- $2: Sausage McGriddles, 2-piece Buttermilk Crispy Tenders, Bacon McDouble
Small McCafé Beverage
- $3: Sausage McMuffin with Egg, Classic Chicken Sandwich; Triple Cheeseburger, Happy Meal.
McDonald’s said the moves are designed to protect franchisee margins.
“We built this new menu with variety and value firmly in mind,” said Chris Kempczinski, president, McDonald’s USA.
The “Dollar Menu” was introduced with fanfare in late 2002, but phased out in 2013 as franchisees complained that margins were being affected by rising ingredient prices. McDonald’s soon introduced a “Dollar Menu & More” that included offerings up to $5.00, but discontinued it by 2015 as it failed to drive traffic.
McDonald’s has spent the last two years rolling out gourmet burgers to compete with newcomers like Shake Shack and Five Guys and removing preservatives from Chicken McNuggets as part of steps to upgrade offerings.
Recently, the offer of $1.00 for any-size sodas and its “McPick 2 for $5” menu that included pairings of classic items such as a Big Mac, 10-piece Chicken McNuggets and Filet-O-Fish has driven traffic and complemented purchases of higher-priced items. The McPick 2 and dollar drinks will complement the “$1 $2 $3 Dollar Menu.”
The rollout comes as competitors are increasing their value options. Examples include Taco Bell’s variety of $1.00 offerings, Dunkin’ Donuts $2.00 hot chocolate and Subway’s $2.99 half-subs.
Bob Goldin, co-founder of food industry strategy firm Pentallect, told Reuters that while dollar drinks and McPick 2 have boosted McDonald’s traffic, any increases in food and labor costs could lead to calls for higher prices.
“They are really stuck in a value trap,” Mr. Goldin said.
- McDonald’s Returns to Value with a Bold, New Menu – McDonald’s
- McDonald’s new ‘dollar’ menu to intensify price war in 2018 – Reuters
- No Matter How McDonald’s Tries To Go Upscale, The Dollar Menu Lures It Back – Forbes
DISCUSSION QUESTIONS: Will the “$1 $2 $3 Dollar Menu” work better than the “Dollar Menu” for McDonald’s? Can you come up with a value formula that would help McDonald’s boost traffic and preserve margins?