McDonald's is testing ingredient changes and possibly higher prices for its popular $1 double cheeseburger as part of a reassessment of its Dollar Menu. It also is considering adding a slightly higher tiered menu of budget items.
The modifications come as the chain responds to rising ingredient prices.
In an interview with the Wall Street Journal, Don Thompson, president of McDonald's U.S. business, said the fast food chain has tested ways to make the double cheeseburger less expensive to produce. At some branches, double cheeseburgers are being sold with one slice of cheese instead of two, and renamed "double hamburger with cheese." Others are offering a double hamburger without cheese.
But some branches have already raised the price of the traditional double cheeseburger to $1.09 or $1.19. Moreover, the entire dollar menu - whose other products include a hot fudge sundae and a McChicken sandwich - are under review, as the fast food chain considers expanding the next tier of its menu, whose items are priced in a $1.30 to 2.00 range. The move appears to help McDonald's lift prices on some items but also offer a broader selection of value items to consumers. "We know customers are facing tough times in this economy," Mr. Thompson said.
Launched in 2003, the Dollar Menu has been a key driver of sales at McDonald's, and has helped the chain show gains in recent months despite the tough economy. But franchisees recently have complained that the menu has brought too much unprofitable traffic into their restaurants.
Higher cheese prices and an expected rise in beef prices are expected to put particular pressure on the double cheeseburger, the signature sandwich on the Dollar Menu. Mr. Thompson said if McDonald's moves the double cheeseburger off that menu, there would still be some type of $1 burger.
Last month, chief operating officer Ralph Alvarez admitted the menu looked set to change, saying: "What fits on that menu will look different than now because it has to be profitable. We've got to make sure we're pricing smart, not just pricing low. We'll make the move at some point."
Discussion Questions: Is it time to junk the Dollar Menu due to rising food costs? What do you think of the possible introduction of a new tier of $1.30 to $2.00 items? How do you think consumers will react to changes in the Dollar Menu and the new budget pricing tier?
McDonald's Tests Changes In $1 Burger As Costs Rise - The Wall Street Journal