McDonald's is revamping its Dollar Menu and renaming it Dollar Menu & More -- a move that will add pricier items to its value offering.
The company's CEO Don Thompson said on its third-quarter earnings call Monday morning that the menu will be rolled out nationally and supported by national advertising dollars. He did not supply details on when the menu would launch, but a spokeswoman confirmed that "all restaurants are selling the Dollar Menu & More on Nov. 4," with advertising launching Nov. 11. Omnicom's DDB Chicago is McDonald's lead creative agency.
Third-quarter same-store sales in the U.S. rose 0.7%. Global same-store sales were up 0.9%. Fourth-quarter same-store sales will be similar to recent quarterly trends and restaurant margin will contract, the company said. Revenue rose 2.4% to $7.32 billion, just missing analyst expectations. (The average of 23 analysts' estimates compiled by Bloomberg was $7.33 billion.)
The new menu will keep "some elements of the dollar menu, [while] adding two more tiers for our customers," said the spokeswoman. The Dollar Menu & More lineup includes sandwiches that range from $1 to $2. The third and priciest tier will see items like a 20-piece McNugget around the $5 mark.
The menu makes room for what the company calls "pricing flexibility" for items like the McDouble, a product that caused friction between franchisees and corporate. In 2008, McDonald's and franchisees were at odds over the double cheeseburger. Franchisees wanted it off the dollar menu in light of rising commodity costs and what they said was a decrease in profitability. In the end, the compromise was the McDouble, a burger with one slice of cheese (instead of two) and two patties.
The Dollar Menu & More will replace the Extra Value Menu, an attempt at a mid-tier value menu with items up to $2, which was introduced in 2012 and did not meet sales expectations. For the last year, McDonald's has been focusing much of its marketing dollars on value and the Dollar Menu, while working to balance that with promotions of pricier new items like the McWrap, its biggest product rollout of the year. The company late last year tweaked its 2013 marketing calendar to have an emphasis on value promotion in an effort to stave off declining sales.
The Dollar Menu & More was being tested in Columbia, S.C.; Albuquerque, New Mexico; Hartford, Conn.; Memphis, Tenn. and Fresno, Calif.
McDonald's isn't the only chain to overhaul its dollar menu. Rival Wendy's in January tweaked its value menu, formerly known as the 99 Cent Menu, calling the new one the Right Price Right Size menu. The items on the menu range from 99 cents to $1.99 and, like McDonald's, it allowed Wendy's to increase prices of some items. For instance, The Junior Cheeseburger Deluxe was increased to $1.19, instead of 99 cents.
McDonald's has tried to draw American diners with pumpkin-spice lattes, chicken wings and other fare as U.S. fast-food rivals fight to come up with the hottest new items amid falling consumer confidence. In the third quarter, the company rolled out pricier limited-time Mighty Wings in conjunction with the start of the NFL season. On the call Mr. Thompson noted that Mighty Wings sales were on the lower end of the company's expectations. "One dollar per wing was still not considered to be the most competitive in the current environment. The other thing we saw, and it's a very slight modification, the flavor profile is slightly spicy for some consumers." Despite slight disappointment, he said, "You will see wings again in the U.S." even after this limited-time promotion ends.
--Additional reporting from Bloomberg News