McDonald’s has had the popular one dollar menu since 2003, offering double cheeseburgers and other items for only a buck. But the company is now considering changing its dollar menu, and raising prices on many of its items to keep up with inflation and the rising cost of meat and produce in the US.
Currently, McDonald’s is testing different price points with the public, and company representatives have indicated that prices for items in the current dollar menu may need to be increased by as much as 20 to $.30 each. McDonald’s is also considering an expansion of its “middle tier” menu, with items priced up to two dollars.
McDonald representatives say that the dollar menu has been an important component of sales at their 14,000 plus restaurants in the United States, but recently, some individual McDonald’s franchises have begun to complain that the dollar menu is a drain on their profitability and brings in a high amount of “undesirable” traffic (read: teens that hang out at McDonald’s for hours whiling spending little or no money).
Higher wholesale prices on dairy products, beef and produce are increasing the pressure on McDonald’s to charge more for burgers and fries. The biggest question for the company is what to do about the cost of the double cheeseburger, which has long been the anchor and most popular item on the dollar menu.
One alternative the company is considering is to move the double cheeseburger completely off of the dollar menu, and replace it with a smaller sandwich. In any event, McDonald’s says there will continue to be some type of burger on the dollar menu, though exactly what it will be, no one can say for sure yet.
Besides the changes to its popular at dollar menu, McDonald’s is also rethinking its strategy concerning espresso based drinks and smoothies. The company began offering $2-$3 cappuccinos and other espresso drinks in 2005, though sales figures suggest these items have not been particularly profitable in most markets.
The problem is that most consumers who would purchase a cappuccino or other high-end coffee drink would be more likely to buy from Starbucks or other dedicated coffee bars. McDonald’s reputation as a “cheap and cheerful” fast food place doesn’t help matters; consumers of cappuccinos and other espresso based drinks generally prefer the atmosphere of a coffee bar, not a kid-friendly fast food outlet.
Despite the changes that must inevitably be made to McDonald’s menu, the company continues to be profitable, and is in fact the biggest fast food restaurant chain in the world. With some clever marketing, the company may just be able to “adjust” their dollar menu without alienating loyal customers, though it is clear that compromises will have to be made. The days of the one dollar double cheeseburger are likely coming to a close.
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