McDonald's (NYSE:MCD) may be about to give up on its Dollar Menu. The chain is now testing a revamped "Dollar Menu & More" with items priced as high as $5, USA Today reported on Wednesday (Sept. 4).
The new menu, which is being tested in Fresno, Albuquerque, Memphis, Hartford, Springfield, Mass., and Columbia, S.C., includes sharable items such as a 20-piece order of McNuggets. While McDonald's says the test has been successful, at least 75 percent of the chain's 14,000 U.S. franchisees have to vote to adopt it for it to go chainwide.
A nationwide launch of the new cheaper-eats menu could come by the end of this year, according to McDonald's chief marketing officer Neil Golden. That would also mark the end of the Extra Value Menu, the original replacement for the Dollar Menu, which was rolled out in 2012 and included items up to $2. When sales faltered, the chain went back to promoting the Dollar Menu.
Part of the problem for McDonald's is inflation—having "dollar" in the name makes it harder to ease prices up into a higher range. Wendy's (NASDAQ:WEN), the second-largest U.S. burger chain, renamed its bargain menu to Right Price Right Size earlier this year.
But a bigger issue is getting customers to buy more expensive, higher-margin items. While Wendy's has had a big success with its Pretzel Bacon Cheeseburger, McDonald's hasn't been able to find a similar stunt sandwich. "You just don't see McDonald's innovating," ITG restaurant analyst Steve West told the newspaper.
As a result, raising the ceiling on its former Dollar Menu to include pricier, more profitable items is an attractive option. However, the menu will still include some 99-cent items, and if the more expensive additions don't sell well enough, the selection may have to fall back to just a Dollar Menu again.
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