Golden said there's been "an acceleration of testing" of new products in recent months for the entire menu, and also for dollar-priced items. McDonald's started with the Dollar Menu because it appeals particularly to its most loyal customers, who he said "love the McDouble and the McChicken" but were simultaneously wondering, "Is there something that would make me want to come more often?"
In December, McDonald's moved its limited-time grilled onion cheddar burger to the Dollar Menu and credited the burger's popularity with better-than expected sales. The product will remain in stores until early June.
This month, as part of a Dollar Menu 10th anniversary celebration, the chain will promote a Hot 'n Spicy McChicken sandwich as a limited-time offer for $1. also tested a burger called the McCruncher for the Dollar Menu; it features white cheddar, crunchy onions and a chipotle ranch sauce.
McDonald's chose the spicy sandwich because the chain found "a desire for experimentation" among its customers that was "not limited to specific age, gender, socioeconomic status or ethnicity."
"There's a growing interest in food with bolder flavor," Golden said. "We wanted to make sure we made it easily available to all of our customers. You'll see bolder flavors in a lot of other things we're doing as well."
Industry experts have backed McDonald's strategy.
"By focusing on the dollar menu, it is helping them drive traffic back into the restaurants," analyst Hottovy said of McDonald's fourth-quarter same-store sales, which just beat his expectation of flat performance.
McDonald's created its Dollar Menu as part of a turnaround plan, beginning in early 2003, after the chain had reported its first quarterly loss. Same-store sales were declining, and stock was trading in the low teens. More than nine years of nearly unfettered growth followed, as the company improved operations and cleaned up existing U.S. stores. It also rolled out premium items like grilled chicken salads, smoothies, frappes, and oatmeal with apples. Shares topped out at $102.22 early last year. McDonald's closed at $98.71 Friday, up 2 percent.
McDonald's, which constitutes nearly half of the $69 billion hamburger segment as measured by Technomic, is easily the biggest player in the dollar-menu category. However, after years of declining sales, Wendy's and Burger King have posted gains in the last year at McDonald's expense, which experts attribute to new products and an emphasis on low prices.
Wendy's is promoting a "Right Size, Right Price" menu, with a number of items at 99 cents at most locations, including a fried chicken sandwich, four-piece chicken nuggets, "value-sized" fries and "value-sized" drink. Most Burger King stores offer the same items for $1, a spokeswoman said.
Both chains have posted sales gains. In the fourth quarter, Burger King reported sales at stores open more than one year up 3.7 percent in the U.S. and Canada, while Wendy's North American same-store sales rose 1.6 percent. Both those chains were lapping year-earlier declines. By comparison, McDonald's reported same-store sales up 0.3 percent, against a 7.1 percent year-earlier increase.
Although value-menu purchases generally constitute less than 15 percent of total sales at the big chains, these companies say they can't afford to lose the frequent visitors who buy the lower-cost meals.
Darren Tristano, executive vice president of Technomic, described value menus as "a necessary evil" in today's competitive environment. The three big burger chains would have to collude to end burgers for $1, he said, because "if one stopped, the others would gain that business."
"There really is magic in the dollar price point," said one McDonald's franchisee who declined to be identified. "When you go away from it, it's harder to communicate, because it's no longer as simple as saying we've got Dollar Menu every day."
Before the Dollar Menu, the franchisee explained, restaurant operators organized limited-time promotions like two Big Macs for $5, which only confused customers. Aligning all the restaurants behind the Dollar Menu, and contributing to national advertising, got customers to stores.
Rodrick Johnson, 22 of Orland Hills, visits a McDonald's about once a week with girlfriend Ashanta McKenzie. Once daily customers, the couple cut back, in an effort to eat healthier.
Although he said he prefers the food at Wendy's, Johnson said he wouldn't stop coming to McDonald's if it didn't have a Dollar Menu.
"Just less often," he said. "Maybe every other week."
(c)2013 the Chicago Tribune
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