McDonald's double cheeseburger may leave $1 menu
Rising costs may bump the double cheeseburger off McDonald's Corp.'s dollar menu.
The world's biggest restaurant chain might increase the price of the $1 double cheeseburger in an expansion of items selling for $1 and $2 to counter higher costs for beef and other ingredients, a Morgan Stanley analyst said today.
McDonald's is considering the first change to the six-year- old dollar menu, which contains some of the company's best-selling food, in response to pressure from U.S. franchisees coping with rising expenses. The chain is weighing whether it wants to risk losing customers drawn by its least-expensive foods, Chief Operating Officer Ralph Alvarez told analysts this week.
The double cheeseburger ``is a candidate to move to this mid-tier menu,'' John Glass, a Morgan Stanley analyst in Boston, wrote today in a note to clients. He drew the conclusion after meeting with McDonald's executives in suburban Chicago this month.
No McDonald's executive told Glass the company plans to remove the double cheeseburger from the dollar menu, William Whitman, a company spokesman, said today in a telephone interview.
``Our owner-operators are committed to the dollar menu, and we continue to explore options to keep it relevant for customers and profitable for our system,'' Chief Executive Officer Jim Skinner said on an Oct. 22 conference call with Alvarez. He said he expects a decision ``in the near future.''
McDonald's has more than tripled in New York trading since the dollar menu's introduction on Nov. 1, 2002. It fell $2.51, or 4.5 percent, to $53.07 at 2:51 p.m. in New York Stock Exchange composite trading, mirroring declines on the broader market.
Already Testing
McDonald's said it's testing various foods and prices on the discount menu, which it uses to lure new customers and step them up to more-expensive sandwiches and salads. Some restaurants are selling the double cheeseburger for $1.19 and $1.39 already, said Richard Adams, a former McDonald's franchisee in San Diego who's now a consultant to 300 operators.
In midtown Manhattan, the sandwich sold for $1.69.
A possible dollar menu replacement for the double cheeseburger, which contains two beef patties and two slices of cheese, is a double hamburger with a single slice of cheese, Adams said.
Whitman, the spokesman, said it's ``premature to speculate'' whether the double cheeseburger may sell for more than $1.
``We have not discussed, nor do we plan, to move the double cheeseburger to a mid-tier menu,'' Whitman said, referring to the Morgan Stanley report. ``More than ever, our customers are looking for ways to stretch a dollar. We believe the dollar menu continues to meet that need now and into the future.''
Skinner said he and Alvarez met with the chain's franchisee leaders last week as part of efforts to ``make that more relevant and continue to be profitable.''
As costs have risen, the double cheeseburger has become one of McDonald's ``most contentious'' items on the dollar menu, and it may join chicken snack wraps and other items priced between $1 and $2, Glass said.