Taco Bell is testing a new value menu that could put it in more direct competition with the Dollar Menu at McDonald's.

The Mexican-fast-food chain is testing a "$1 Cravings Menu" in two markets that lists nine items, including three new offerings. If successful, it would replace the chain's current value menu, called "Why Pay More," with items priced at 89 cents and 99 cents. The $2 "meal deals" on "Why Pay More" are not offered on the new menu.

Chris Brandt, vice president of marketing for Taco Bell, said the tests began in October in Fresno, Calif., and Knoxville, Tenn., and will continue for at least another couple of months before a decision is made on whether to roll out the menu more widely. He said the idea for "$1 Cravings" came about after consumer research showed diners felt like they were "forced to eat off the value menu," rather than wanting the items it offered. So Taco Bell decided to split the "$1 Cravings" menu into what it considers to be five universal cravings: beefy, cheesy, spicy, crunchy and sweet.

Although $1 seems like pocket change, it reflects a slight price hike for Taco Bell compared with the "Why Pay More" menu, which was introduced in 2008.

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Wendy's, based in Dublin, Ohio, also revamped its value menu recently, replacing its 99-cent menu with a "Right Size Right Price" menu that charges up to $1.99. Under the new model, Wendy's has more flexibility in charging prices at a time when costs for ingredients like beef are climbing and squeezing profit margins. Last year McDonald's introduced an "Extra Value Menu" with items closer to $2.

Taco Bell's tinkering with the value menu comes amid a broader reinvention for the chain, which delivered strong results in the past year with the help of menu introductions such as Doritos Locos Tacos and higher quality Cantina Bell burritos and bowls. In coming weeks Taco Bell plans to begin marketing its "Happier Hour" featuring a menu of snacks like the recently introduced "Loaded Grillers."

The chain is turning out to be a bright spot for parent company Yum Brands Inc., which also owns KFC and Pizza Hut. Yum earlier this week warned that a key sales figure in China, its biggest market, is expected to fall 6 percent in the fourth quarter as a result of issues surrounding two of its small chicken suppliers. The U.S. only accounts for about a quarter of Yum's business and has historically underperformed. But analysts say that could change in coming years.

After nine years of declines, Yum achieved net new store openings in the U.S. last year. To spur new restaurant growth, Taco Bell is also offering franchisees better contract terms.

For now Brandt said Taco Bell wants to ensure the "$1 Cravings Menu" performs strongly before it's rolled out more widely. The menu could also be tweaked along the way, but currently includes three new items: a spicy chicken mini quesadilla, a spicy cheese roll up and a beefy cheesy burrito, which is smaller than Taco Bell's typical burritos.

The test by Taco Bell was reported earlier by the site BrandEating.com, which covers fast food news.

Taco bell typically tests new menu items on the West Coast and either on the East Coast or in the South. That's because perceptions about Taco Bell vary depending on location. While the Mexican food market is much more competitive on the West Coast, Brandt said "Taco Bell defines what Mexican food is" in some parts of the East Coast.

Janney Capital Markets analyst Mark Kalinowski noted the new value menu could be a smart move, given McDonald's recent return to emphasizing its Dollar Menu, after an attempt to tout the new "Extra Value Menu" flopped. Kalinowski noted that the promotion of the Dollar Menu helped boost sales in November for McDonald's.