McDonald's tests $1 menu with higher price points

Bruce Horovitz | USA TODAY

The McDonald's Dollar Menu may be outgrowing its name — and its $1 price point.

The fast-food giant, struggling to keep sales up in an ultracompetitive environment, says it is testing a seriously different version of the Dollar Menu — dubbed Dollar Menu & More — that sells an array of items at $1, $2 and even $5 so-called shareable items such as 20-piece boxes of McNuggets.

A national relaunch of a revised Dollar Menu could come "later this year," says Neil Golden, chief marketing officer at McDonald's.

"While no official changes have been made to our current Dollar Menu, we continue to evaluate and test the best value options," says Golden.

New items on the expanded bargain menu, in test, include everything from new single burgers to double-patty and deluxe burgers and additional chicken options.

For McDonald's — and much of the fast-food industry — it's all about inventing ways to get cash-strapped consumers to reach deeper into their pockets and spend more.

Earlier this year, Wendy's changed its bargain menu and renamed it Right Price Right Size. The menu now has six items at 99 cents each and eight others below $2, says Wendy's spokesman Denny Lynch. Right now, Wendy's is promoting a limited-time Monterey Ranch Crispy chicken sandwich at 99 cents.

Meanwhile, Wendy's Pretzel Bacon Cheeseburger has been a huge hit, greatly helping to bump up sales this year.

But McDonald's has had an on-and-off year.

"That has a lot to do with the price-pressured consumer," says Steve West, restaurant analyst at ITG, "but also about lack of innovation at McDonald's. You just don't see McDonald's innovating."

At the same time, restaurants are no longer a beacon for spending discretionary income, says Ron Paul, president of Technomic, a restaurant research and consulting firm. While many consumers are currently willing to spend more on everything from homes to cars, they're just not spending like they were on eating out, he says.

Caught in the middle: McDonald's.

That's why it's conducted the Dollar Menu & More tests in Fresno; Albuquerque; Columbia, S.C.; Hartford, Conn.; Springfield, Mass.; and Memphis.

The original McDonald's Dollar Menu was introduced more than 10 years ago. "Over the years," says Golden, "as our customers and needs of the business have evolved, so has our Dollar Menu."

But pushing the Dollar Menu into the "multidollar" range may be a mistake, warns Paul, the consultant. "Just like the Dollar Store sells only things for a dollar," he says, "the Dollar Menu should mean dollar items."