McDonald's revisits Dollar Menu after first loss in 9 years

McDonald's revisits Dollar Menu after first loss in 9 years

By Stephanie Grimes | Posted - Nov. 9, 2012 at 11:56 a.m.



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SALT LAKE CITY — After seeing a decline in earnings for the first time in nine years, McDonald's is revisiting the idea of the Dollar Menu.

The restaurant chain is battling not only a struggling economy, but revamped competition from the likes of Taco Bell and Wendy's, which have made changes to their menus and pricing in an effort to keep customers coming back for more.

The restaurant's net income fell 3.5 percent during the third quarter — from $1.51 billion to $1.46 billion — as total sales fell by 0.2 percent to $7.15 billion.

"You have a scenario where the overall pie is shrinking, and companies are competing aggressively to take their piece of it," Sara Senatore, a Bernstein Research analyst, told The New York Times.

McDonald's has not helped itself by moving from promoting a Dollar Menu to focusing on a slightly more expensive Extra Value Menu as customers have pulled back from ordering more expensive menu items like Angus beef burgers or extras like drinks and desserts.

McDonald's revisits Dollar Menu after first loss in 9 years

"The pullback from dollar-menu marketing and lack of premium innovation left the chain vulnerable to increased couponing and innovation by its major competitors," David Palmer, an analyst at UBS Securities LLC, told Bloomberg.

Now, in an effort to remain competitive in the global marketplace as its competitors are making big changes to promote growth, the fast-food chain is refocusing its efforts on promoting its Dollar Menu.

CEO Don Thompson told the Wall Street Journal customers have not responded well to the Extra Value Menu.

"We're going back to talk of the Dollar Menu," he said.

McDonald's is the world's largest fast food chain. The U.S. is its second largest market, behind Europe, and sales here are expected to increase in the fourth quarter due to the reintroduction of the McRib into the U.S. market.

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Stephanie Grimes

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